• Fri. Mar 1st, 2024

The Crypto-AI Intersection: CFTC Advisory and Vitalik Buterin’s Warnings

Walter Swift

ByWalter Swift

Feb 3, 2024
The Crypto-AI Intersection: CFTC Advisory and Vitalik Buterin's Warnings

Vitalik Buterin, the Russian computer programmer and Ethereum co-founder, has charged developers to ‘be careful’ when intersecting artificial intelligence technology with cryptocurrencies in a recent blog post titled: “The promise and challenges of crypto + AI applications.”

The blog post, dated January 30, 2024, was published on his website and explores the potential use cases of AI technology with crypto. In the article, Vitalik also examines the challenges and risks of AI with virtual currencies, echoing sentiments loosely similar to that of the CFTC in an earlier advisory.


AI Trading Robot

Recall that the CFTC Office of Customer Education and Outreach released an advisory on January 25, 2024, warning the public against crypto investment ‘AI’ scams. In the advisory, the commission warns of a recent surge of crypto-related scams promising users unrealistic returns using AI-assisted bots. While the blog post is targeted more at developers than the average member of the investing public, it remains essential to understand the risks of overlapping AI with payment-focused technologies like cryptocurrencies.

What Did the Blog Post Say?

Vitalik’s blog post was relatively lengthy, with the first section eyeballing major categories of AI interaction with cryptocurrency projects. The first category, classifying AI as a player in the game, involves most AI arbitrage bots traders use to exploit the flaws of trading platforms today.

“Any time you have a blockchain application that involves auctions or trading, you are going to have arbitrage bots,” the Ethereum co-founder wrote to showcase the commonness of AI-assisted crypto arbitrage bots today.

Also, in the same blog post, Vitalik classified AI bots as interfaces to, rules of, and objectives of game-like scenarios.

Vitalik Explores AI Use Cases, Potentials, Risks


AI Trading Robot

While exploring the potential use cases of AI in crypto systems, Vitalik Buterin suggested only complementing conventional interfaces rather than creating pure AI interfaces. He opined that an overreliance on AI technology will introduce new problems to the blockchain system, making pure AI interfaces unreliable for now.

However, the Ethereum co-founder imagines AI can participate in mechanisms like prediction markets that allow for a higher adjudicator, like humans. Using his proposal, these AIs should be able to answer simple probabilistic questions with great accuracy for practical use in determining stock prices, whether or not a post meets the terms of service of a social media platform, or whether the submission on a task marketplace is acceptable.

Discussing the risks of trusting AI models to govern crypto ecosystems, Vitalik opined open-source AI models are too vulnerable to adversarial attacks to risk such a thing. While closed-source AI models solve that problem somewhat, there’s also the issue of transparency; closed-source models technically make it impossible to detect bias in AI models, Buterin opined.

About The CFTC Crypto AI Advisory

Barely a week before the blog post, the US Commodities and Futures Trading Commission (CFTC) issued a customer advisory warning the investing public against crypto arbitrage scams claiming to use artificial intelligence algorithms. The advisory cited a few cases of scammers making away with money after promising unrealistic returns from AI-assisted cryptocurrency arbitrage. In one extreme case, a South African fraudster reportedly carted away $1.7 billion worth of Bitcoin from thousands of users after promising to trade their funds using an AI arbitrage algorithm.

As part of its advisory, the CFTC charged US investors to be warier of the investment opportunities they should spend their money on, recommending talking to a friend or expert before making investment decisions.

Should You Care?

Vitalik Buterin’s blog post tries to call developers’ attention to the potential risks of integrating AI technology into crypto and blockchain solutions. He also explores the short-term potential of the combination, offering his advice on the feasible use cases of artificial intelligence tech on a blockchain. If you’re not a developer, you should (probably) pay more attention to the January 25 CFTC advisory. With more Americans losing money to silly crypto arbitrage scams, the time to speak out against them is now.

Developers, however, may want to listen to what Vitalik Buterin has to say. If the co-founder of Ethereum is recommending a roadmap for AI integration in crypto, he likely knows what he’s saying.


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Walter Swift

Walter Swift

Walter Swift is an adept crypto writer, known for his deep insights into the decentralized world. His pieces artfully break down complex blockchain topics, making them accessible to a broad audience. With a passion for emerging technologies, Walter's articles are a beacon for crypto enthusiasts and novices alike.

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