Bitcoin
We must protect crypto-AI from financial nihilism
Financial nihilism is a flawed philosophy.
It has been used to justify why memecoins and dynamic trading are equivalent to projects with a working product and paying customers. Investors who focus on fundamentals have been derided as foolish or out of touch with Web3 realities.
Everything is false, financial nihilism would say. The Federal Reserve is devaluing the dollar, it is said, which is in itself a hallucination. All money is rooted in nothing but belief. Stocks and public markets are “stones,” fooling people into thinking they own something real, when in fact they hold the right to a field of view in custodial software. Stories and narratives are the only things that matter.
Lex Sokolin is managing partner and co-founder of Generative Ventures, a venture capital fund investing in the machine economy. He is one speaker at AI Stage at the Consensus 2024 in Austin, Texas, May 29-31.
There is an elegance to memecoin. Unlike many ICOs, or various DeFi mats, or vaporware L2 roll-ups, memecoins do not claim to have anything other than the animal spirits of history and sentiment. They are an honest product, doing exactly as advertised. It is these other projects, those that promise the world but fail, that deceive investors.
But there is also a profound misunderstanding in this view. The anarchist rebel thinks it’s cool to say that nothing matters and that everything should be demolished. The builder understands that once the rebellion has exposed orthodoxy for its weakness, new systems of meaning and value will have to be constructed to replace them. Nothingness is not a goal.
Cryptography is intended to be a positive-sum game, not a dog-eat-dog nightmare. Just because some things are meaningless doesn’t mean all things are meaningless. We’re here to build new things using deep tools that were unlocked for us by brilliant technologists. Those who see nothing but opportunism and financial games can become richer on paper. But as a result, they made the entire space poorer.
My concern currently is with the evolution of the crypto-AI sector. Generative AI will bring enormous economic growth to the world in a natively digital form. It exposes privacy, property and financial issues that Web3 is uniquely positioned to resolve. The AI will test the economic infrastructure that blockchain has built over the last 15 years and whether its promises of self-sovereignty are truly true. As a result, AI gives us a path to move Web3 away from over-reliance on being a casino as its core value proposition – a casino that has often not been honest about being a casino.
But the usual failure mode is emerging. We see large AI-themed projects being launched as bridges to nowhere, using the AI narrative to create marketing that masks the underlying reality – which is vaporware rushed with tokenomics that entices investors to invest, bet or sell. Raising money alone should not be a sufficient goal for an entrepreneur. Designing financial incentives that attract investors to an AI-themed casino does a disservice to the important role that Web3 will have to play in the next century of economic activity.
Throw away financial nihilism! We shouldn’t undermine one of the greatest opportunities by treating it like a costume to wear on fundraising day. Instead, fall back on the classic advice given to people starting companies: find real customers who want to buy products and services to solve real problems, and design protocols and open networks to deliver those products and services better than centralized technology companies.
We can use the power of the crowd, marketing and community engagement, and ownership of tokenized protocols to win the competition between walled gardens and software cathedrals. The Internet and Linux have done this before us, and we can do it again by building the techno-economic architecture for the AI era. Wasting this opportunity in pursuit of quick returns in a unique market cycle would be a profound mistake.