AI Tokens Explained: What Are AI Tokens and How Do They Work?

AI Tokens Definition

An AI token, or AI crypto token, is a token connected to or supporting an AI-related project, platform, or application.

Types of AI Tokens

AI tokens are used for three primary purposes. First, they can facilitate transactions for AI-powered or related platforms. Users might also pay for services, use them to access data, or participate in the platform or application’s services. 

Like other blockchain-based tokens, these tokens can be used to govern blockchain protocols. They allow users to participate in consensus mechanisms and network governance, influencing the project’s management and development.

Lastly, they can be used as an incentive for user participation in a project and paid as a reward when users contribute data, provide resources, participate in network development, or otherwise help progress the platform’s operation. 

Key Features of AI Tokens

The features of AI tokens will depend on the project or service. Tokens can be used for transactions, governance and reward or participation in a project. For example, Render (RNDR) tokens are utility tokens that allow users to participate in the Render Network. Render connects users who need additional computing power with users who provide the power and who receive RNDR tokens as payment. Another project, The Graph and its AI token GRT aim to address the problem of data overload in blockchain networks. It indexes data into subgraphs, making it easier for developers to access. Developers pay to query data with GRT. 

AI tokens are created and function in the same manner as other crypto tokens. Project developers create the token on a blockchain platform as well as its smart contracts. 

Tokens are usually issued during a token sale and start to circulate in the project’s ecosystem and on supporting exchanges. AI tokens can be bought and sold as digital assets and used as utility, reward, or governance tokens, as well as to access specific AI services, such as AI models, content, and data.

The Role of AI in Blockchain

Not only are AI tokens being used to support and develop AI-related platforms and services but AI technology can enhance blockchain technologies and networks and may have a key role in enabling networks to scale and overcome other challenges. 

Real-World Applications

In blockchain, AI can enhance network security, monitor transactions for anomalies, and prevent fraud or cyberattacks with analysis, threat detection, biometric authentication, and smart contract security. AI can also help detect malware and optimize or audit smart contracts, identifying and rectifying errors. AI bots are also being used to forecast trends and market behavior and for crypto trading.

Incentive and Reward

AI tokens may accumulate value like other cryptocurrencies. They are also used as an incentive or reward for a user’s participation in a project, network, or platform’s services. 

Monetization and Transactions

Like other crypto tokens, AI tokens are a means of exchange or payment in an application or platform. They allow projects to monetize services, which, in the case of AI, can be related to data or predictive modeling. 

Governance and Decision-making

When AI tokens are used as governance tokens, they allow users to have a say in network and project decisions and influence a project’s development and future success. 

Regulation and Volatility 

AI tokens carry the same risks as other cryptocurrencies. The sector is widely unregulated, and consumers have no recourse if something goes wrong. Cryptocurrency token prices can be highly volatile.

Scams and Attacks

The cryptocurrency sector is still plagued by scams, illicit actors, and attacks, and again, there is no protection for consumers who participate unwittingly in a sketchy scheme or whose assets are stolen from a platform or exchange. 

Project Success

Crypto tokens are volatile because of market supply and demand and influences on these elements but are also impacted by the potential and then the eventual success of a project. If an AI project flops, so will its token. 

AI Risks

AI tokens also carry risks associated with AI use and development, which will vary from project to project. AI regulation is also evolving as the technology develops and becomes more widely used. There are data privacy, ethical, bias, and accuracy issues for AI technologies. 

Render (RNDR) and The Graph (GRT) are notable AI tokens already mentioned. Injective (INJ), the token of the Injective Chain layer-2 decentralized exchange and trading platform, is also popular. The exchange uses AI for optimized order execution, strategizing, and analytics. Theta Token (THETA) is also known for Theta’s decentralized video delivery platform, which uses AI and machine learning. Theta users and nodes earn the token for sharing bandwidth. 

AI Tokens Innovations and Trends

AI tokens are being launched at a rapid pace to match quickly developing and emerging AI technologies, platforms, and services. As AI gains in popularity, it’s likely that more platforms, and hence tokens, will emerge matching appropriate real-world use cases. With the right regulatory environment and user patronage, some will thrive, but others will fall behind as the markets and consumer trends adjust. 

Predictions and Potential Impact

AI is a powerful tool for analytics, monitoring, cybersecurity, and much more. As well as AI tokens funding and advancing AI-focused projects, blockchain networks will leverage AI for new functionality, and efficiency to address the industry’s problem of scale and to achieve wider adoption. 

AI tokens can be bought in token sales or, once available, on supporting cryptocurrency exchanges. At CoinHint, we maintain that investors should apply the same due diligence as with cryptocurrency investing but also consider the risks of AI use and development. Investors should only ever invest what they can comfortably afford to lose. 

2024 has seen the emergence of many new AI tokens created to support and provide utility and governance for AI-related projects. Some tokens for crypto and blockchain projects that have been established for some time, are now dubbed AI tokens, as these projects now leverage AI to enhance their platforms and services. AI tokens are likely to grow in number and popularity as the use of the technology becomes more widespread; however, some projects will inevitably fail or disappear.