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We must protect crypto-AI from financial nihilism
Financial nihilism is a flawed philosophy.
It has been used to justify why memecoins and momentum trading are equivalent to projects with a working product and paying customers. Investors who focus on fundamentals have been ridiculed as foolish or out of touch with the realities of Web3.
Everything is false, financial nihilism would say. The Federal Reserve is said to be devaluing the dollar, which in itself is a hallucination. All money is rooted in nothing other than faith. Stocks and public markets are “stonks,” in that they deceive people into thinking they own something real, when in reality they are entitled to a field of view in the custodial software. Stories and narratives are the only things that matter.
Lex Sokolin is the managing partner and co-founder of Generative Ventures, a venture capital fund investing in the machine economy. He’s a speaker on the AI stage TO Consensus 2024 in Austin, Texas, May 29-31.
There is an elegance to memecoin. Unlike many ICOs, or various DeFi rugs or L2 roll-ups of vaporware, memecoins do not pretend to have anything other than the animal spirits of story and sentiment. They are an honest product, they do exactly as advertised. It is the other projects, those that promise the world but fail, that deceive investors.
But there is also a deep misunderstanding in this point of view. The anarchist rebel thinks it’s cool to say that nothing matters and that everything should be demolished. The builder understands that once rebellion has exposed the weakness of orthodoxy, new systems of meaning and value must be built to replace them. Nothingness is not a goal.
Cryptocurrencies are meant 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 unlocked for us by brilliant technologists. Those who see nothing but opportunism and financial games could become richer on paper. But as a result they made the entire space poorer.
My concern these days is the evolution of the crypto-AI sector. Generative AI will bring massive economic growth to the world in a natively digital form. It highlights privacy, property and financial issues that Web3 is uniquely positioned to solve. AI will test the economic infrastructure that blockchain has built over the past 15 years and whether its promises of self-sovereignty are actually true. As a result, AI offers us a path to move Web3 away from overreliance 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 rearing its head. We see large AI-themed projects launched as bridges to nowhere, using the AI narrative to create marketing that masks the underlying reality – which is rushed vaporware with tokenomics that tricks investors into investing, staking or selling. Raising money in itself 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 Web3 will have to play in the next century of economic activity.
Throw away financial nihilism! We must not undermine one of the greatest opportunities by treating it like a costume to wear on fundraising day. Look instead at the classic advice given to people starting a business: Find real customers who want to buy products and services to solve real problems, and design open protocols and 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 the ownership of tokenized protocols to overcome the walled gardens and cathedrals of software. The Internet and Linux did it before us, and we can do it again by building the techno-economic architecture for the age of artificial intelligence. Challenging this opportunity for quick returns in a single market cycle would be a grave mistake.