a16z 2024 Industry Forecast: Blockchain Enhances Security for AI, SNARK, and Account Abstraction

Crypto Venture a16z Presents Seven Trends in the Future Development of the Crypto Industry

a16z predicts that blockchain will bring more security to AI, and that SNARK, modularization, and formal verification technologies will become mainstream in the industry.

The a16z team makes predictions about the future development of the crypto industry for the coming year, providing readers with a quick understanding of industry dynamics and development trends to prepare for market changes in the coming year.

This article is compiled and translated by Chain News. For any questions, please refer to the original article.

Table of Contents:
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AI + Blockchain
Decentralized AI Resource Supply Network
Blockchain Verification Network for Massive Information
Decentralized Incentive Model for Controlling AI Operations
Reshaping User Experience
Advantages of Modular Architecture Enhancement
Continued Optimization of Chain Game Economic Models
Formal Verification Applied in Smart Contract Development
NFT Becomes Brand Assets
SNARK Becomes Mainstream
Predictions on the Continuation of Technological Developments in the Current Year

a16z believes that decentralized blockchain is a balancing force for centralized artificial intelligence. Currently, due to the high cost of computation and training data, AI models can only be trained and operated by a few tech giants.

However, with a decentralized network, a multilateral global resource market that does not require permission can be created, allowing anyone to contribute computing resources or datasets to the network and receive rewards. This long-tail resource model will make AI technology more accessible to the general public.

AI technology has led to widespread deep fakes and fraud. a16z believes that the information verification problems caused by AI can also be addressed using encryption technology.

In addition to using blockchain records to verify the authenticity of information, decentralized technologies can be used for democratic management to ensure the maximum authenticity of information, ultimately making consumers safer.

Extended Reading:
BNB Chain Joins Adobe Content Authenticity Initiative (CAI) to Enhance Digital Content Traceability

In the future, game and metaverse content will likely be generated by artificial intelligence. Therefore, AI agents in games must ensure that they operate based on certain models and directions without damaging existing game content. For example, AI disrupting the balance mechanism of the game or introducing duplicated scenes and plots.

When AI becomes the rule-maker in the game, decentralized network consensus mechanisms provide guarantees.

When AI becomes the game creator, responsible for generating stories, terrains, enemies, and logic through programming, people would like to know if the game creator can remain neutral and operate normally. The best-case scenario is to ensure the integrity of the game world and prevent arbitrary collapse.

a16z believes that decentralized networks and token economics can provide the above-mentioned guarantees. For example, in case of AI issues, the tokens pledged by AI agents can be taken away as a punishment. This is similar to the consensus mechanisms of most decentralized networks, and it is what the crypto industry excels at—applying incentive models.

In the future, AI agents may be able to join the incentive models of decentralized networks to control their behavior through economic incentives.

User Experience

Since 2016, the user experience in the crypto field has not changed much (mainstream crypto wallets still look the same). The use of crypto products is still too complicated, such as managing private keys, connecting wallets to DApps, and signing transactions, which go beyond what users can learn in a few minutes.

In recent years, developers have been actively improving the UX-related features of crypto products, including:
– Passkeys: which can simplify the process of cross-device login for users and provide stronger security as the keys are automatically generated and encrypted.
– Smart Accounts: making the account itself programmable, allowing for more operations and easier management for users.
– Embedded Wallets: built into applications, allowing users to register and log in using traditional methods (such as email registration) while also creating wallets on the blockchain, making the login process smoother.
– MPC Wallets: making it easier for third parties to support signature without the need to host user keys.
– Advanced RPC Endpoints that can intelligently identify user intentions and provide appropriate responses.

Extended Reading:
Intent-Centric Design: Trends in Venture Capital NGC

All of these improvements not only contribute to the mainstream adoption of Web3 but also improve user experience and security compared to Web2.

Advantages of Modular Architecture Enhancement

The advantage of a single architecture blockchain lies in deep integration and optimization, resulting in higher performance. However, it still has its limits.

On the other hand, open-source modular technology stack has the greatest advantage in achieving permissionless innovation, enabling participants to specialize and incentivizing more competition. It also provides more flexibility and diversity to increase efficiency in various ways.

Extended Reading:
Celestia Mainnet Launch: Opportunities and Challenges of Modular Blockchains in the Future

In the past, play-to-earn (P2E) game design usually allowed players to earn money based on the time and effort they spent playing the game. However, this trend is changing.

Games are not designed to become work, at least not for most players. What the market really needs is games that are both fun and allow players to create value. Therefore, a16z believes that P2E games will gradually evolve into play and earn (R&E), and existing games will continue to iterate and optimize their economic models, creating a clearer distinction between games and work.

In the future, we will see more blockchain games created by new forms of economic models, and perhaps even the concept of tokens will disappear.

Formal verification is a development technique that uses mathematical and theoretical simulations to predict potential errors and issues in products. It is popular in the design of hardware systems such as IC chips, but it is not very beneficial for software developers (as software iteration and correction are relatively easy) and requires complex technical requirements.

However, a16z believes that formal verification techniques are gradually being used in the development of smart contracts. Smart contracts are different from general software as they cannot be modified without backdoor code, especially for protocols that require a higher level of decentralization. On the other hand, mainstream smart contracts handle funds up to billions of dollars and cannot afford any technical issues.

Therefore, simulation techniques such as formal verification are being used in the industry to predict potential problems in contracts and replace traditional testing methods to improve security.

In the past year, many similar tools have emerged in the market. For example, SMT solvers use the atomicity and determinism of smart contracts as a basis to identify errors in contract logic using algorithms.

With more developers and security experts adopting tools based on formal methods, it can be expected that future smart contract protocols will be more robust and less susceptible to hacker attacks.

NFT Becomes Brand Assets

More and more well-known brands are launching products and marketing campaigns in the form of NFTs for consumers. For example, Starbucks introduced the Web3 loyalty program called Starbucks Odyssey, allowing customers to earn additional merchandise and NFT rewards while shopping.

Extended Reading:
Starbucks Web3 Project Starbucks Odyssey Launches! Testing Platform Goes Live, Open to First Batch of Users

In addition to Starbucks, Nike, Reddit, Coca-Cola, and Louis Vuitton (LV) have all developed NFT-related digital collectibles and explicitly sold them to audiences.

However, a16z believes that NFTs can do more for brands than just selling low-cost NFTs as consumer goods. For example, NFTs can be used to represent customer identities and enhance community belonging. NFTs can also be used to co-create new products and experiences with the most loyal brand fans, increasing brand affinity.

SNARK Becomes Mainstream

In the past, developers mainly used the following strategies to verify information:
– Re-executing computations on trusted machines.
– Executing computations on dedicated machines for the task, also known as Trusted Execution Environments (TEEs).
– Executing computations on trusted infrastructures, such as blockchains.

These methods have limitations in terms of cost and network scalability. Therefore, many developers have now turned to SNARK technology in zero-knowledge proofs (ZKPs).

SNARK is a concise and non-interactive zero-knowledge proof technology that provides encrypted “receipts” for verification parties to verify information without interacting with the encryptor, greatly improving verification efficiency. Since the encryptor cannot forge the “receipts,” there is no trust assumption issue.

a16z specifically mentioned that this technology will grow in the coming year because the computational cost has been greatly reduced due to technological breakthroughs, with efficiency increased nearly 1000 times. Therefore, SNARK may be an appropriate solution when the computation provider can bear the cost, and the client cannot re-execute or store the initial data. For example, IoT devices can verify upgrades, and media editing software can embed content authenticity and editing history.

Most of the above predictions are approached from a technical perspective, providing insight into what a16z values. The dominant areas in their predictions for the next year are modularization, AI, zero-knowledge proofs, and account abstraction, continuing the technological trends of this year.

In addition to the technical perspective, a16z’s predictions mention less about product application innovations. The economic models of chain games will undoubtedly be updated, and the applications of liquidity staking, BRC20, and DePIN, which were not mentioned by the team, may continue to develop in 2024.

Regardless of the Bitcoin price in 2024, there are still many new things to look forward to. The Web3 industry is still iterating rapidly, and almost every prediction addresses rapidly developing areas. It is expected that there will be many new technologies and product areas emerging next year that were not covered in the above predictions.

Extended Reading:
Crypto Venture a16z Annual Report: 7 Key Points, More Active Users, DeFi and NFT Waves Return

a16z
AI
ZKP
Account Abstraction
Modularization
Zero-Knowledge Proofs

Further Reading:
Research: Infrastructure Attracts Attention, Crypto Industry 2023 Financing Report

Summary: a16z’s Techno-Optimism

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