OKX Ventures Bi-monthly Investment Report (2024 Jan-Feb)

Unlocking the infinite potential of Crypto and AI: OKX Ventures' strategic investments in io.net, MyShell, and other cutting-edge projects

Over the past decade, widespread adoption of the Internet and the rapid pace of digitalization have resulted in an unparalleled abundance and utilization of vast volumes of data. On the other hand, technological advancements in cloud computing and distributed computing technologies have made it more accessible and cost-effective to handle massive amounts of data, thereby providing abundant resources for training and optimizing AI models.* These enabled the development of increasingly intelligent and sophisticated systems, and fueled advancements in the field of AI. Particularly in the domains of deep learning, natural language processing (NLP), and computer vision, these advancements continue to propel the growth of AI to new heights.

Under the leadership of industry giants like OpenAI and Nvidia, the AI industry has experienced an unprecedented explosion in the past year. ChatGPT achieved over 100 million monthly active users in just two months, making it the fastest-growing user application in the history of the Internet.** The recent text-to-video product (Sora) also garnered significant attention on the AI video application. Apart from that, Nvidia's recent financial success is a testament to the industry's growth, with a staggering 581% year-on-year increase in net income in 2023.*** This remarkable performance has driven Nvidia's stock price to soar from over $100 per share at the beginning of the year to more than $800 per share today, leading to a market cap growth of over a trillion dollars.**** The industry's momentum is further amplified by the ambitions of OpenAI's founder (Sam Altman), who seeks to raise $7 trillion for a project to increase global chip-building capacity.***** This influx of capital is driving the emergence of numerous new AI startup projects, indicating a vibrant and dynamic landscape for the industry's future prospects.

In light of this, the convergence of AI and the crypto industry has emerged as a prominent trend. OKX Ventures recognizes the synergy between AI and the crypto sector, highlighting the significance of crypto as a vital complement to AI in addressing challenges related to decentralized algorithms, data ownership, enhancing AI transparency, and advancing model training and reasoning techniques. As a result, the fusion of crypto and AI is rapidly evolving into one of the most captivating frontiers of innovation.

*Source: World Economic Forum, The Fourth Industrial Revolution

**Source: The Verge, Nov 7 2023

***Source: Nvidia, Feb 21 2024

****Source: Yahoo Finance, Mar 27 2024

*****Source: CNBC, Feb 9 2024

The vast application scenarios of Crypto x AI

Based on firsthand observations by OKX Ventures investors, a dynamic and vibrant global community of passionate developers and researchers is spearheading the development and application of AI technology. This talented pool fuels an atmosphere of perpetual innovation and progress within the AI field. Furthermore, their collective efforts have propelled the Crypto + AI track to the forefront, solidifying its position as the most remarkable Alpha track in the current industry cycle.

A primary and compelling use case for crypto for AI lies in its ability to facilitate the assetization of key components, such as AI agents, decentralized algorithms, and data. These areas present abundant opportunities for assetization, marked by the potential for rapid growth and expansion.

AI agent

OKX Ventures envisions three primary directions for future innovation in this component.

1. The intelligentization and agentization of assets, expanding their use cases and value by empowering them to operate and interact autonomously.

2. Fostering interoperability among agents, elevating the overall performance of the ecosystem by establishing standards and frameworks that enable smooth interaction and collaboration among diverse AI agents.

3. Building a brand new agent economy system merging AI and blockchain technology to unlock a novel economic model where AI agents play pivotal roles in content creation, financial services, and other domains.

A prime example of this is MyShell, a transformative platform that empowers users worldwide to train their personalized AI agents using game clips. This innovation gave rise to a pioneering on-chain Agent Economy, marking the emergence of a novel economic system where AI agents actively contribute to content creation, game interactions, and function as autonomous economic entities. This symbiotic relationship propels the progress of the creative economy and facilitates the seamless integration of AI within the realm of cryptocurrency.

Decentralize algorithm

To meet the significant demand for large-scale AI model training, various solutions such as secure multi-party computing, differential privacy, and federated learning have been developed. When it comes to addressing technical challenges and bottlenecks, decentralized algorithms show promising potential for deploying machine learning inference. io.net exemplifies the concept of reducing resource costs and ensuring economic efficiency through token incentives and hardware aggregation, providing machine learning teams with access to highly scalable GPU resources. The exploration of decentralized algorithm networks holds promise and could offer an effective solution for large-scale AI training and inference.

Data

The main components are decentralized AI data markets, data incentives, and privacy protection and data validation.

• Decentralized data marketplaces: ensure transparency, non-tampering, and traceability of data transactions while enhancing market efficiency through automated execution and revenue distribution via smart contracts.

• Data incentives: promote self-growth and prosperity of the ecosystem by rewarding participants for their contributed data and computing resources through tokenization.

• Privacy protection and data authentication: safeguard the privacy and ownership of user data through the implementation of technical measures like encryption algorithms and zero-knowledge proofs. These measures guarantee that users maintain control over their data, fostering a sense of security and trust in the data ecosystem.

These three components work in synergy to drive the progress and implementation of decentralized AI technology, shaping a digital economic environment that is more secure, efficient, and fair. In this context, 0xScope has fine-tuned the crypto industry model by leveraging on-chain data and blockchain industry data, resulting in the generation of practical and meaningful value.

To summarize, the combination of Crypto x AI gave rises to various segments, including model training, data, decentralized computing, and infrastructure-level hardware. At the model level, we have seen the emergence of AI agents, zero-knowledge machine learning (ZKML), and fully homomorphic encryption (FHE). At the application level, there are major progresses in metaverse, gaming, AI-generated content (AIGC), and Meme these areas. Additionally, blockchain-level innovations such as robot as a service (RaaS), prophecy machines, coprocessors, and universal basic income UBI have made significant contributions. Notably, projects focused on infrastructure and applications are currently experiencing rapid development. These projects include Io.net for computing power, FLock.io for base models, 0G Labs for blockchain infrastructure, MyShell for AI agents, and 0xScope for applications.

Source: Information gathered and researched by OKX Ventures from mentioned projects.

An overview of the AI projects backed by OKX Ventures

OKX Ventures has strategically invested in a wide range of projects within the Crypto x AI domain. Going beyond financial backing, OKX Ventures has played a pivotal role in providing extensive support in technology, community building, and resource integration to these projects.

0xscope

0xScope focuses on providing the AI Data layer in Web3. The company has created the first Web3 AI Data Layer with an established and complete set of standards for collecting, cleaning, and managing relevant on- and off-chain data specifically adapted for Web3 AI training to enhance Agent operations. With its exceptional data services, 0xScope has emerged as the preferred choice for industry-leading Web3 AI DAPPs.

Project highlights

• 0xScope has launched data analytics products like ScopeVC and ScopeScan, with a user base of over 50k.

• ScopeChat, a unique Web3AI Q&A Agent, has been introduced by leveraging the extensive database of 0xScope. It seamlessly integrates with OKX Wallet and has over 500,000 users, with a daily active user (DAU) count surpassing 10k (excluding sybil).

• Collaborations with Ritual, Flashbots, and Chainlink are underway to establish a decentralized Web3 AI Agent, addressing the challenges of Web3 adoption.

• Over the course of its development, 0xScope has gone through five stages of enhancement, covering data analysis tools, infrastructure, AI analysis, AI infrastructure, and generalized Agents. This progression has strengthened the company's position with a high-quality database. The team actively explores market opportunities and incorporates user needs and technological advancements, resulting in positive market feedback.

FLock.io

FLock is an end-to-end AI co-creation stack integrating decentralised machine learning on-chain. This innovative platform redefines AI model training, finetuning and inferencing, empowering the general public to contribute knowledge and enrich AI models while preserving privacy. FLock's vision is to democratize AI by bridging three foundation pillars: community-owned models, privacy-preserved data, and decentralized computing. By fostering the development of various AI models, from intelligent agents to advanced trading and confluence bots, FLock paves the way for effortless access to powerful AI tools in a new era.

Project highlights

• On top of the three foundation pillars, FLock.io employs cutting-edge technologies like federated learning, zkFL(zero-knowledge federated learning), homomorphic encryption, and secure multi-party computing (SMPC) to protect user data privacy and utilize decentralized computational power for AI model training and fine-tuning.

• FLock actively involves the community in extending and refining AI models through a co-creation platform. It upholds data privacy by providing developers with a federated learning client for decentralized model training and validation.

• By addressing issues like restricted access, model bias, and unfair compensation for data contributors, FLock enables decentralized machine learning. It achieves this through decentralized learning, secure local storage of user data, and additional privacy protection with its cutting-edge technologies. It also utilized blockchain-based governance to automate, transparently, and immutably manage the entire training process.

0G Labs

0G Labs is the first data availability system with a built-in general purpose storage layer that is super scalable and decentralized. The system achieves scalability by dividing the data availability workflow into a data distribution channel and a data storage channel. The data distribution channel utilizes a scalable storage layer with effective partitioning, enabling efficient bulk data transfers. The data storage channel ensures data availability through a consensus mechanism for data availability sampling, minimizing the need for extensive data flow through the consensus protocol. This approach allows for scalability while maintaining data availability and performance. The current product design consists of the data availability service layer (0G DA) and the storage layer (0G storage).

Project highlights

• 0G DA (data availability): The 0G Data Availability (DA) system is a scalable service layer that directly utilizes a decentralized storage system. It tackles scalability challenges by minimizing data transfers needed for broadcasting. This system's design allows it to support various data types and scenarios, including Layer 2 networks and decentralized AI infrastructures. 0G DA prioritizes highly secure and high-throughput data availability guarantees.

• 0G Storage (storage layer): The storage layer of 0G is characterized by incentive-based mining, where storage nodes actively participate in the mining process by providing proof of accessibility to specific data. This approach encourages network maintenance and scalability as nodes are rewarded based on their contributions. Partitioning and rewards further promote efficient data organization by incentivizing nodes to store related data in the same partition. Additionally, 0G's general-purpose storage design includes multiple layers for different data types, such as an append-only logging layer for unstructured data and a key-value layer for mutable and structured data. This enables reliable data indexing and broad usability in Layer 2 networks and AI scenarios.

MyShell

MyShell was created to address the issues with closed-source AI models. Its goal is to build a fair and open AI ecosystem where everyone can contribute and benefit. MyShell promotes the democratization of AI by supporting open-source models and providing incentives to drive innovation. It ensures that creators and users receive fair rewards for their data and creations. MyShell also emphasizes freedom of choice by offering a variety of AI models and the option for decentralized computing and storage.

Project highlights

• Focuses on supporting open-source models and an open-compatible development platform. It aims to foster the prosperity of AI technology by promoting the use of open-source models and facilitating the growth of the AI industry. Creators can easily utilize different models and external APIs using a unified approach, while third-party model and API providers can integrate their services into the platform, reducing barriers to innovation.

• To ensure fairness and value redistribution, MyShell implements transparent benefit allocation mechanisms. Creators and users receive fair rewards for their data and creations, while a transparent reward system ensures equitable distribution among ecosystem contributors, including model providers, application developers, users, and investors. Comprehensive incentives are designed to stimulate vitality and unlock the innovation potential of the entire ecosystem.

• MyShell also provides an application store that facilitates application creation and distribution. Creators can explore popular AI applications, monitor trends, and promote their own works through advertising.

• The platform emphasizes freedom of choice, allowing users and developers to select different AI models and leverage decentralized computing and storage. This prevents dependency on a single model or technology and avoids potential monopolies.

• Currently, MyShell's GitHub repository boasts 14.9k stars and 1.3k forks, with a peak daily activity exceeding 100k, making it one of the most active communities for creators and users in the AI + Crypto field.

io.net

io.net Cloud is a Solana-based decentralized computing network that offers machine learning engineers access to scalable distributed clusters at a fraction of the cost of centralized services. By aggregating over one million underutilized GPUs from independent data centers, io.net creates a Decentralized Physical Infrastructure Network (DePIN). This network provides engineers with a vast amount of computational power, making it highly efficient and easy to implement for various tasks, including preprocessing, distributed training, hyperparameter tuning, reinforcement learning, and model serving.

Project highlights

• Cost efficiency: io.net offers compute for up to 90% cheaper than traditional cloud providers, as they leverage underutilized sources like independent data centers, crypto miners and consumer GPUs

• Fast access and deployment: compared to traditional cloud providers, io.net users can access provisioning and deploy clusters in less than 90 seconds, without having to deal with cumbersome KYC processes or long-term contracts.

• Fexibility and control: io.net offers a high degree of flexibility and user control, supporting a large range of GPU and CPU options, including the NVIDIA RTX series, AMD Ryzen series, and the Apple M2 chip with its unrivaled neural engine.

• Optimized for machine learning: io.net is built on the ray.io machine learning framework and supports a wide range of machine learning workloads, from reinforcement learning to deep learning, tuning and model serving to meet the needs of machine learning engineers.

• Decentralized Physical Infrastructure Network (DePIN): As the first and only GPU DePIN, io.net provides a platform for connecting compute power providers and users for machine learning and all GPU use cases. io.net does this by aggregating the utilization of underutilized GPU resources from standalone datacenters, crypto miners, and crypto projects such as Filecoin and Render. underutilized GPU resources, solving this problem. These resources are combined in a Decentralized Physical Infrastructure Network (DePIN), giving engineers access to a large amount of computing power.

• io.net supports a wide range of tasks such as batch inference, model serving, parallel training, parallel hyperparameter tuning, reinforcement learning, and is designed to provide general-purpose computing services for Python workloads. Starting with Solana Hackathon February 2023 and Solana Austin Hacker House, io.net demonstrates its power and efficiency in providing machine learning teams with training and inference workflows on distributed GPU networks.

Source: Information gathered and researched by OKX Ventures from mentioned projects.

OKX Ventures is committed to empowering and continuing support for innovative Crypto x AI projects

Crypto x AI will play a crucial role in shaping the digital future by enhancing the intelligence of diverse services and products. It will drive digitization and intelligence across multiple fields, resulting in advancements in intelligent investment, risk management, anti-fraud systems, and more. These developments will elevate the intelligence of financial services, mitigate risks, and improve efficiency, ultimately bringing enhanced convenience and abundant opportunities to human society.

The rapid evolution of AI technology brings forth continuous technological innovations. New algorithms, models, and application scenarios emerge, unlocking significant market potential across various industries like healthcare, finance, retail, and manufacturing. Notably, the integration and innovation of Crypto x AI offers enhanced efficiency, security, and intelligence to the crypto industry. This synergy drives the advancement and application of cryptocurrency technology while presenting new opportunities for AI technology applications.

Being at the forefront of the crypto investment industry, OKX Ventures will maintain its focus on the innovation track that combines AI and Crypto. We will adopt a pragmatic and forward-looking strategy, actively participating in market development to support high-quality innovative projects and entrepreneurs.

Amid the recent rally in the valuation of certain AI tokens and projects, OKX Ventures remains committed to a long-term vision that transcends this stage. Our primary objective is to invest in projects that drive genuine technological innovations, tackle real challenges within the AI field, and exhibit sustainable growth in the market. We firmly believe that the path to true success and long-term viability lies in Crypto x AI projects that possess groundbreaking technology and offer substantial value propositions.