Bankless - AI ROLLUP #16: Retail Vs Institutions, Who's Right? | New Frontier AI Model | Mind Blowing Image Generation

Episode Date: March 20, 2025

This week on the AI Rollup, we’re diving into hyper-realistic AI-generated podcast hosts, showcasing Hedera Studio’s cutting-edge character tech. Google drops Gemini 2.0 Flash, making AI image generation even more powerful with improved consistency and text integration. Meanwhile, China is pushing hard—Baidu’s latest model beats GPT-4.5 at half the cost, challenging OpenAI’s dominance. Plus, Sesame open-sources its voice model, and the crypto AI market sees brutal drawdowns. Despite the turbulence, teams like Virtuals and Bittensor keep building, while Pluralis raises $7.6M to decentralize AI model training. Where does AI Crypto go from here? Let’s find out.------📣 RONIN WALLET | YOUR WEB3 GAMING ECOSYSTEMhttps://bankless.cc/Ronin_Wallet------BANKLESS SPONSOR TOOLS:🪙FRAX | SELF SUFFICIENT DeFihttps://bankless.cc/Frax🦄UNISWAP | SWAP ON UNICHAINhttps://bankless.cc/unichain⚖️ARBITRUM | SCALING ETHEREUM⁠https://bankless.cc/Arbitrum🛞MANTLE | MODULAR LAYER 2 NETWORKhttps://bankless.cc/Mantle🌐CELO | BUILD TOGETHER AND PROSPERhttps://bankless.cc/Celo🏦INFINEX | THE CRYPTO-EVERYTHING APPhttps://bankless.cc/Infinex------ ✨ Mint the episode on Zora ✨https://zora.co/coin/base:0x9db2d5eb0c4af553fddda5da10777c1bcd82e3b6?referrer=0x077Fe9e96Aa9b20Bd36F1C6290f54F8717C5674E------TIMESTAMPS & RESOURCES00:00 Sentiment Check and Recap05:25 AI Podcast Hosts?https://x.com/hedra_labs/status/189769901063246646908:50 Google Gemini 2.0https://x.com/robertriachi/status/1899854394751070573https://x.com/goodside/status/1900349595718148455?s=46https://x.com/ilumine_ai/status/1900017235898622025https://x.com/halimalrasihi/status/1900667639086673962?s=46https://x.com/thatarrowsmith/status/1901203776746201556?s=4617:55 China's New Frontier Modelhttps://x.com/scobleizer/status/1901089727568281975?s=4627:21 AI Market Priceshttps://www.cookie.fun/https://www.coingecko.com/en/coins/ethereum32:55 Market Manipulation?https://x.com/solgojo/status/1901002388007514381https://x.com/0thTachi/status/190209067511120738038:11 Pockets Of Outperformershttps://x.com/S4mmyEth/status/190234804647978631543:09 Virtuals Updatehttps://x.com/smyyguy/status/1899181446126076283?s=46https://x.com/ethermage/status/1899494870152282511https://x.com/virtuals_io/status/190018591814706401549:48 AIXBT Hackedhttps://x.com/S4mmyEth/status/190202191451775827752:44 New AI Trading Subnethttps://x.com/thebittensorhub/status/1899810734374047799?s=4658:54 Pluralis Announcementhttps://x.com/PluralisHQ/status/1902367132597252177------Not financial or tax advice. See our investment disclosures here:https://www.bankless.com/disclosures⁠

Welcome Bankless Nation to the AI roll-up where we stay up to speed with the emerging trends and developments in the AI crypto space. I'm David Hoffman here with my co-host, Ajaz. How's your week? Week's been good, David. I'm kind of living a paradox of my life at the moment. Like, on one side, I'm like taken aback by the rate of innovation in AI. Like literally, it's becoming a weekly thing where a new model drops or a new app that I use just kind of blows my mind. It's incredible how consistent it's been. Yeah, yeah, it's crazy consistent. But then on the other hand, markets are crushed.

That includes like macro markets, so stock markets as well as crypto markets. And within crypto, especially the AI coins, right? So it seems like for now we're at like the whim of wider macro markets or in other words, whatever Trump says or whatever the Federal Reserve says. It's funny. Whilst we're recording this, there is currently the Form C meeting happening. So we'll see where the market turns by the end of this episode. And the other paradox I'm living is all the suits and government people that kind of like crypto was birthed on kind of opposing or doing the opposite of is more bullish on crypto now than the actual crypto people.

So it's a super weird state of affairs that I'm living. Yeah. Yeah. I think this has been the big cloud that has overhung everyone in crypto and even not just in crypto, but in markets broadly. I actually heard a really good take that I'm starting to really interpret. great into my knowledge about like why this is the case like why does retail feel bad and institutions feel good about crypto when it's usually the complete opposite and even not just not just that but in addition to that if you ask general consumers or general the general population about their opinion

of crypto it's terrible it's like yeah like it's a terrible industry it's our brand publicly is terrible but then nonetheless institutions are like oh yeah we're totally like we're going all in We're going all in right now. And then also our own retail, our own crypto consumers are like, oh, yeah, I'm actually just bearish crypto right now. I think what's going on is that, like, money is hard right now. Donald Trump is, like, doing whatever he's doing to, like, literally cause a recession. And we're having a high interest rate environment sustained for two and a half years now.

Crypto has never existed in a high interest rate environment. And what I'm starting to understand is, like, that has. fueled like this native Dgen casino speculation retail dopamine side of crypto for almost all of its existence. And the longer this high interest rate environment goes on, the more we are like actually purging the casino out of our system. And that is like a detox. It actually feels bad. We're in like, we are in rehab for like all the DGens are in rehab. They're all trying to go. They're all going to like gambling rehab. And that's also why institutions are like, I feel about crypto right now. It's because

they are also learning that this is now a safe foundation to build on. Yeah. Yeah. I mean the example I said to a friend the other day was the lights are now on at the nightclub. You can look around. You can see everyone. It's like oh my God, you know, what the hell are we doing here? It's 3 a.m.

It's time to go home and like, you know, saw our lives out. But yeah, man, it is crazy. I do think that this is, however, temporary pain for a long-term gain. And that sounds, you know, whatever, maybe like contrarian or whatever. But because a lot of people are like calling for like a, well, yeah, all cope.

It could also be code. But I think that I just don't see a way that the, that Trump's just going to let his presidency just like run into shambles for like his remaining term. I feel like he's going to have some kind of upswing, right? He's a business guy, right? So, and the reason why I mentioned that now on like this AI podcast is a lot of these markets are just, attuned to whatever the wider macro markets do, whatever the stock markets do. And we're going to get into, like, you know, how this is affecting our AI coins and where, you know, some of the

potential for investing might lie. Yeah. No, I think that's right. Well, while markets are doing, like, short-term acute dislocations because of this chaotic leadership that we have, who's for some reason interested in a recession. And like, we've done episodes on bank lists as to like what the strategy is with that. Go listen to our most recent and beyond. Franco conversation to kind of get a glimps as to what's going on over there. Nonetheless, like, AI innovation is just full steam ahead. So everything is just so crazy, so nuts. And the bet that we are making is, like, the way that AI, the innovation of AI gets

expressed as an investor gets expressed and gets monetized is going to be disproportionately on crypto tokens. As in, like, if you are interested in investing and growing wealth and gaining access, to wealth opportunities to AI. You want AI exposure. Sure, you can invest in the stock market. Sure, there's like, you know, Google, Facebook, not open AI, but like all the other, like, AI gargantrons out there.

But then also there's going to be a, like, explosion of one to $100 million market cap AI related project startups that are like, it's worth paying attention to. And that's what we're trying to cover here. Yep. Yep. Agreed. But actually speaking of that, you know, AI rate of innovation exposure. David, do you remember last week on the episode you threatened to fire me and replace me with an AI podcaster?

Yeah, an AI podcaster. Well, that time might be today. This new company called Hedera 3, or I think it's called their product is Character 3 audio, created this demo or released this demo of this girl who's like, you know, talking about like, you know, the kind of different rates of innovation of tech. and then I realized, oh shit, that's AI. So she is not real. And to be honest, if you're like looking for it, there are definitely some obvious tells and gives, especially the voice being the most obvious one.

But it's kind of crazy how, like, I was watching demos of, you know, fake podcasters or fake, you know, image to video generation tools before, like about a year ago. And they looked terrible, David. But the fact that this is like improved so quickly, means that, you know, I might not be the best looking person on this podcast anymore. You know, you might...

She's prettier than you. Yeah, I did. Yeah. It's a shame, but it's been a good run. So, you know, I'm appreciative of it. One crazy thing, by the way, is this female podcaster that you're watching right now was generated from a single image. Okay, so whoever made this, had an image, probably of an actual real human, and they uploaded this.

No, no, no. I generated human. Like they went on mid-jurney and they said, Hey, could you create a female podcaster that has a neon red light in the background? And they created that image and then fed it into this product, Hedera. And it generated this like, you know, her moving around, speaking into the mic, all that kind of stuff.

It's pretty insane. Yeah, look at this demo. Hey, well, not Hedera, the blockchain, Hedra, Labs. Sorry. Definitely. This demo is pretty cool. You can definitely get the tells where the eye movements and the way that they move their head is not how a human would do it. But it's definitely like, you know, you know the idea of the uncanny valley.

Yeah. Yeah. Like, so the uncanny valley is like there's this weird valley of space where like things that are attempting to look like humans. They're a little bit too close where they're not quite human, but they're really. close and so it's eerie, it's uncanny. And to me, this is like, actually we're coming out of the Uncanny Valley. We are no longer going into the Uncanny Valley. Like, we're thoroughly

progressed through the Cany Valley. We're not yet out there. You can still identify as AI, but it's becoming pretty good. David, can you give us an example of where the Uncanny Valley existed before AI? Or is this just an AI thing? The first time I think I really saw the Uncanny Valley was with robots. So there's like robots out there with like

synthetic rubber skin. And you look at it and you just know it's not real. But like it's real enough that it tricks your brain to like, you know, fire on its like, you know, facial recognition neurons even though you know that it's a robot. And we are, this is the earliest ages of the Uncanny Valley. We are definitely on the other side of the Uncanny Valley right now. Okay. But in major news this week, David, Google released their new AI model with a really cool editing

feature, which I actually think is going to change media generation kind of like forever. So it's called Gemini 2.0 Flash with native image generation editing. And the main thing that's getting people excited is the character consistency of images. So what I mean by that is, let's say you generated an image or you uploaded an image of like a person or an animal or a dog or whatever. You can now say, can you change the color of this dog's fur to golden? and it'll do it. And it looks like

crazily realistic, right? And so it's also able to like add text to images really easily, which was previously like a really, you might be surprised, but like a really tough feature for an LLM to add. And it kind of reminds me of the old mid-journey product days. But there's an array of like really cool examples

that put this to use, David. Like really effective economic changing things like lying to your boss, for example. right? So there's this tweet here where, you know, she's like late for work or whatever. So she takes a selfie at home. And then she says, show a selfie of this woman on the 14th Street platform of the N-Train at New York giving a thumbs up with teams of frustrated MTA workers standing in the background, servicing the tracks overhead. A small LED screen displays the date March 13th, 2025. She's making a fake

timestamp in the real world. Yeah. Yeah. So she makes like, it's kind of like a creative example to kind of demonstrate the text editing and all that kind of stuff. No more trips to Walmart, David. You can now basically take any image of yourself and say, hey, can you make a passport photo version of that? And you know, you can kind of like sort that out. So like all these like little gimmicky type situations that you can do. I think like the bankless graphic designer tested it out on you, didn't they? Yeah, okay, so this is actually the first time I ran into this.

The bakeless graphic designer, I don't think I've run into anyone who used AI more than Gordon. So on the top right corner, this photo right here is just a normal actual snapshot of me on a podcast. Great looking guy. Don't really need to do any AI to it. But then it really is helpful when, like, you make me do this open-mouth YouTube cringe, like thumbnail expression. And so he can turn me into a YouTube cringe thumbnail version of myself.

Oh, what do you think, David? Do you think that looks like you on the bottom? Well, there's obviously some stuff that's going wrong. But no, the answer is that when do I ever do this? I don't know. Could you give us some rediction now? I'm not going. Okay, okay, moving on to more serious edits or what this tool can do.

You can now create like really cool gameplay with this thing, right? So the example that's used here is, okay, they upload an image of like some kind of anime-looking character. And then it prompts and says, hey, can you put this character in a game where the image needs to be kind of like a typical screenshot of gameplay? And then the next screenshot that you see is, you know, this character. The character in the game, yeah. In the game, right? And so you might be thinking, okay, who cares? This is just like a still version of whatever.

But then, you know, you can see the sequence of prompts that they make, which is like, okay, can you make the character? move forward and then you literally see the character taking a step and then you could say can you move the character until it gets to like the building with the you know where the building is on the left side of of the image and so you can kind of like live action role play a bunch of these games yeah and i thought that that was like super cool because like imagine if you put this image david into that model that we just showed about that podcast and moving around and talking right some of you go from like uh i i generated image to moving video and maybe even a live footage game in like a couple of seconds, which is just frigging insane.

Another thing that I thought was pretty cool is I think like product demos or mockups are completely dead in terms of like human design. You can now just kind of like product photography, right? Product photography specifically. Yeah. Yeah. Well, I mean like so here what we're looking at right now is what starts off initially as a model posing.

And I don't know if that model was also AI generated. that's where things can get a little confusing. And then someone uploaded just a still stock image of like this jacket, you know, like an outerwear jacket, which, you know, has no association with the model and says, can you just let this model wear this jacket please? And literally the next image is super realistic of this model wearing the jacket, you know, the shadowing on it. It's, you know, it's now unzipped versus in the original stock image where it was zipped up.

So just some really cool tweaks. that we can see on the consumer side of things with AI with this new tool that I think is just like super super cool. I think for anyone who's listening to this on the podcast, they're probably like, yeah, like I've already like a soon. I've seen some versions of this. I've already known that this capacity,

this capability is here. It's kind of hard to articulate how good these images look, how realistic that these images look. Yeah, you've got to be watching this on the video. The visual quality of these things are like, we are, especially, this one, since it's not a video and I can just, it's just a still image,

still images are now basically at parody with like real, real pictures, I would say. And that is what this one looks like. Well, I'd actually disagree with your first point saying that, you know, or agreeing with people that like, you know, they were already around. I would say they were around,

but they were in, to use your term, the uncanny valley. They just weren't realistic at all. You know, mid-Journey was generating things that I didn't ask for and I had six-thumbed. for some reason. Do you know what I mean? So I'd say the rate of improvement is pretty nuts. You may have already heard about Infinex. Infinex has, in my opinion, the nicest cross-chain swap and bridge feature that you will find anywhere. It is called Swidge, Swap and Bridge, and we're going to

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I'm going to press that button and then Infinex is going to execute this order, this cross-chain order for me and now it is done. But actually, I'm not really feeling bearish anymore. So I'm going to go from Barra to Penguins. I'm going to buy Penguin on Salana. So I'm going from the Barra chain to Solana. See, no transaction signing, no gas to worry about. You just switch across whatever.

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This time, the Google of China, Baidu, releases a model that is now officially better than, then GBT 4.5, which is OpenAI's latest model, and 50% cheaper than DeepSeek R1. So if you guys... Which was the cheap one. It was the cheap one already. I think it reached like, I don't know, 10% of Open AIs then leading models cost. And now we've got another model coming out from the same country, but a different team, that is 50% cheaper than the cheap model.

So I just... My takeaway here is that I think it completely... obliterates Open AI's costs. China is competing on price extremely aggressively, but also innovation. Typically, China's only competed on like, you know, copycat kind of models, but now they're kind of like paving a new path forward.

And I just think Open AI's moat is no more, David. I don't know what you think, but like this whole idea of like commoditizing these different AI models is now here. As a, I, if I was given the opportunity to invest in any of these companies who have like these frontier models, I would actually not invest because it seems so cutthroat and they are just sucking up money

and just materially commoditizing all of their competitors products. There's so many of these. There's like 10. Which company wouldn't you invest in? And none of them. None of them. Okay. Yeah.

They're all, well, because they're all producing frontier models and they're like under, they're all undercutting their competitors. So what you're saying is you don't have a clear. insight into what the leading model is. So therefore, you wouldn't necessarily right now invest in a particular company. Yes, that's right. That is definitely right. And then it still begs the question like, okay, maybe, maybe God comes and whispers in my ear

and they tell me like, oh, it's actually, it's actually XAI, Elon Musk's AI or like, or it's bydo. They actually win the race. They make the best model. I actually still don't think I feel good about investing in. like the winner that I would already know, because all of them are commoditizing each other. They're all like just cutting through each other's moats. I don't understand how any of these companies are supposed to capture any value when there's

12 very strong competitive models out there. Well, it's a good question then. So let's take that the next step, right? Where do you think that would capture value, David? I have my thoughts, but I'm curious what you think. I, that's kind of why I'm much more into these like, you know, I think why there's going to be like one million different opportunities out there that are between one million and a hundred million dollar market cap stuff.

Like smaller individual led like one to four team person team led projects that are much smaller. And then like I do see the benefit of like even though for some reason like meta has apparently like dropped the ball and they're like pretty far behind in the race, at least they have like business opportunities and proprietary data with Instagram and Facebook and WhatsApp that they could actually like leverage but man I actually just don't know how these like almost trillion dollar like model companies grow any sort of like justify any of their market caps. Yeah. Yeah. So I think my view on it is kind of similar. I think what you're getting out there with like distribution and data is it's the app layer basically. It's whatever the product or service

layer ends up becoming that uses these AI models will like be the most valuable. mode, right? And therefore, I think whatever models are being used, whether it's kind of like proprietary or not, like you said, is commoditized at that layer. So it's whatever apps gets created, whatever distribution happens. There's actually a really interesting analogy to this, David. So I was reading something the other day where it was kind of talking about the price history of oil, right? Back in the day when it was just not a thing and it was like a new brand new commodity, there were monopolies that were forming, like one or two major, I forgot the name of the major one, right? And they were charging $5 a barrel, right?

And then obviously oil refineries became like a major big thing and it became, you know, global, worldwide, which drove the cost of that very same oil down, right? So what would you expect? You'd expect that monopoly probably lost its kind of like status to an extent or it wasn't really the most valuable thing, right? Like to use your kind of like words earlier, you probably wouldn't invest in any of these AI model companies. But what ended up happening was that same company still remained that top monopoly. The reason why is they had built out the leading distribution for their entire oil supply. Okay.

Yeah. So everyone basically relied on them. And they had economies of scale in many different ways that were separate or removed from the cost of oil per gallon. So I think the same thing is. go with that, which I think also probably happened is like, well, when, when like monopolies and economies of scale emerged around the oil industry, the next big thing that happened was the combustion engine probably got a ton of innovation and a ton of just like manufacturing. So there's a lot more combustion engines out there. So that means like oil was being consumed a lot more. And that's

where it actually became, even though that there were like a lot of competing businesses, demand was so incredibly high. Yeah. But, but like if we use that example, what you're describing Jevon's paradox, right? Yeah, I am. You would expect that the monopoly wouldn't have any kind of a moat. Who cares if the combustion engine was created? Why would I use, you know, that leading monopoly if I could just get the same price per gallon on another one?

It's because they've built up this entire distribution network. And I think that's exactly what we're going to see play out with AI models. Like, they're all going to be doing the same thing. But whoever has the best service layer, app player, which currently looks to be like the tech monopolies, will still win, in my opinion. Yeah, because that's not opening eye. What does the tech layer for these AI models even look like? Because, like, can't you just bump out a old model and bump and, like, plug in a new model as they update?

Like, why is the app layer beholden to the model that it's built on top of? It's not. Right. It's not. Yeah. I mean, like, the reason why you- So you're saying the value gets found in the app layer, not at the model layer. Yeah.

I think that's where the majority of the money is going to. I think we're going to fast track basically Web 2 infrastructure. structure trends, right? And we're going to go straight to like the Instagrams or the new Facebook's being created out of thin air. And to your point, David, I think it's going to take like a few people versus like many hundreds to create. And they're all going to be like between a hundred to two hundred million dollar market cap or whatever that might be. Yeah. Interesting. Okay. Well, yeah. What does the app layer for these models even look like, though? Like what are the apps? Because right now, the way that AI has impacted my life is I use

chat GBT to access knowledge and intelligence, just have intelligence at my fingertips. That's like 90% of it. And then I do some fun, very non-serious meme, joking image generation. And that's like 10%. Yeah. So I think it's going to materialize in a few ways. Number one is, you know how you use chat GBT to just get a bunch of information right now? You're going to be able to soon use it to do a bunch of stuff for you as well. well. This might be like, hey, can you just like, I've got to go to a doctor's appointment in the morning. Can you just handle all like my work emails and stuff and maybe like work out on like a framework of this like product document that I need to kind of create? Here's some of the context and here's like

access to like my Google Doc folder or whatever that might be where I've like written down some thoughts. And it would start like automating a bunch of your like work or daily habit type stuff for you. But isn't that just an assistant? That's a turning in a lot. into an assistant. Is that what the app player is? Yeah. Well, yeah. I think agents are inevitably going to end up being your assistant to start off with, right? They're going to end up enhancing whatever you do, David. That's what like the mobile phone did. That's what computers did. It basically made you kind of robotic in a way. It made you a superhuman kind of person. And I think that's what these AI models are going to end up doing.

That's what the app player, in my opinion, is going to look like. It's going to be agents. You're not going to be interacting with websites and mobile apps. You're not going to be downloading. Like, oh, like, should I download this editing software? Whatever? No, just like ask the agent to do it and it'll figure out what tool or program to use. And with that, I, Jaws. Let's get into the crypto side of this conversation.

Of course, we're going to have to talk about all these crypto tokens because that's where I'm going to do most of my actual investing in this space. Before we get there, though, a message from our friends and sponsors over at Ronan. Ronan used to be a permissioned blockchain. I don't know if most of you guys knew that, but all the games and apps on Ronin were curated by the Ronan team. They have since taken down their walls. They are now fully permissionless. So you can join the Ronan movement and experience the ecosystem with the Ronan wallet, which is tailored for gaming, trading, and exploring Ronan. Bankless.com

cc slash Ronan underscore wallet. There is a link in the show notes. Okay. Jaws. Prices. prices are down. Ether is above 2K for the first time in like 10 days or something. But other than that, prices, price is not great. Give me your takes. I mean, David, like, normally when ether's outperforming the entire market, that's typically a very bearish sale. Yeah, it's been brutal. Last week, we didn't really get much time to cover the crypto stuff, so we want to kind of like prioritize it on this week's episode. So let's take a look at the overall market, right? What we're looking at right now is Cookie Dot Fund's dashboard, which tracks a lot of the AI agent token specifically.

as you can see, we're sitting at about $6.1 billion market cap, total market cap of all AI agent tokens. Now, this is super painful to look at, given that this was at like, what, $25 to $30 billion at its peak, David? I remember 18 at the peak, but I could be wrong. I mean, that would make me feel much better if it's down just like 3x. But I think it did peak a lot higher than that. And another thing we've noticed is that agents in general just aren't being created as much. anymore. Now, this is like a double-edged sword because I think on the one hand, you know, we were definitely getting high on our own supply in a way. Like, you know, agents were being pushed out.

There were these crazy use cases being pitched and none of it really actually came to like, you know, real life, you know, they weren't really like impacting our ways in any kind of material way. So to see a reduction in that and a refocusing of teams or certain teams on creating actual valuable agents, super important. But I mean, look at this, David. One thing I've noticed that you pointed out earlier, actually, is it seems like the Ethereum ecosystem of agents is now higher than Solana. In terms of market cap, yeah. In terms of market cap.

And that's really interesting because Solana typically held the lead for the majority of AI agents' lifecycle, actually. Yeah, Solana is coming in at $1.8 billion in market cap of crypto agents, and Ethereum is over $2 billion base, not even on the chart. 1.5, if you have to look into it, but base is at $1.5 billion to Solana's $1.8. and then a very distant fourth BNB chain at three quarters of $1 billion. But Ethereum is what makes up this $2 billion market cap of Ethereum? That's got to be like 50% in virtuals, right?

Yeah, it is mainly virtuals. They kind of like put like a bunch of like the other ones on there, like Fartcoin and banker. I think Fartcoin is Falkoino or Salano base? Fartcoin is on Salon. It's on Salon. It's on Salon. I think it's largely virtuals that is making up a ton of that. But, you know, we've seen surging in prices from a bunch of... Well, Virtualos is on base.

There's this fetch. What's Fetch AI? Because that's coming in at $1.4 billion. And I've not heard of that. So Fetch AI is an OG Ethereum AI project. Like, we're talking like 2017 Ocean Protocol, like the original... Do you remember these, David? Yes, extremely vaguely.

Yeah. So what Fetch did was they merged with Ocean Protocol and one other to create a superintelligence token or something like that. But they didn't do anything with their old token. And for some reason, it is at like the highest FDV it's ever been. What's the ticker? Of the new one. Fetch AI.

Fetch AI, that's it. Yeah. It's not even showing up on C. FET. FET. Yeah. Oh, okay. Artificial super intelligence alliance.

Wow, that is an old-looking chart. All right. I regret even asking. Moving on. Yeah, moving on. Anyway, what I wanted to point out is, okay, right, so there's been a lot of heat being given towards the crypto AI sector, specifically agents, David,

because it's all crashed and everyone's like, well, what do you mean? Like, was none of this ever, like, made of anything? And that's part true, right? Because it got hyped up in typical crypto fashion. Everyone likes to hypergamble on random ideas and shit. But also, this is part of a broader market dump, a broader market drawdown. It's not just crypto AI. Everything's getting crushed, including

stocks. Like, if you pull up, like, the S&P 500 chart, you'll see that everything, you know, it's had like some of its lowest days for like the last 10 years, right? And this comes amidst the US government cracking down on their debt issues via Trump's tariffs, which is just generally cause a lot of fear in the stock market, right? And if the stock market, it's very rare that crypto outperforms the stock market, if they're all, invert. Inverture. correlates with the stock market rather. Another thing I want to say is that crypto always dumps the hardest, especially alts, and especially the newest alts.

And crypto AI definitely falls into that last bucket where it's new. It's largely unproven. And so it's most subject to huge speculative moves in price action, right? Couple that with the fact that it is the most polarizing sector in terms of sentiment. You know, a lot of people love it. A lot of people also hate it. and you end up with the craziest fluctuations in kind of like market volume and price. Low market caps and volumes especially tend to get a lot easier to manipulate in terms of price movement, right?

If you imagine if it's like a small market cap, it's easy to kind of like push that price up or down if liquidity is like low. And case in point, I'd say the token that best represented this this week, David, is arc. We've spoken about this team a lot before. their token has been absolutely getting hammered, right? So we're spoken about Arc in the series. They focus on a lot of product and progress for making contributions

towards the AI agent space. But despite this progress, their Arc token seems to have been one of the tokens that have been hit the hardest. And this tweet... They were the one... It was holding on for a real long time.

It had to, like, held on to its market. It was outperforming everything. Yeah. Yeah. And then it got hit the hardest. And this tweet kind of explains what's actually going on. right a potential theory being that winter mute a very well-known market maker in crypto is manipulating

the price action driving prices lower while shorting the token on an exchange so it like makes profit in that way it's it's hugely extractive um and despite whoa whoa hang out uh it is whenever that there is a vibrant community about a token i always hear that there is some large entity out there, some Goliath out there that is manipulating the price of their token doubt. How do we actually know that that is a big claim? How do we actually know this is true? Yeah, so if you look at what this guy claims,

he's basically tracking a bunch of wallets that are trading like the majority of volume for this token arc every day. And it's been labeled and pegged and this has been for a while as wintermeet wallets. But I thought I'd test this theory, right? I was like, okay, well, I'm just reading this on like Twitter. Like, could this be true?

So I ran a bunch of transactions on chain on Solana, like buying and selling Arc, and all my transactions, David, you know how typically it's like, oh, it's like spread across a number of different transactions because, you know, that's how Dexas typically work. It was one transaction field and it was sold to Wintermute or bought from Wintermute. So it is literally just trading through the Wintermute wallet at this point. They are market making the entire thing. It's pretty nuts. What is the significance of this?

Why is this a big deal? What does that mean? The big deal is you are now at the whim of whatever Wintermute's intentions are with that token. They are holding a bunch of that token. And obviously, market makers tend to not really lose. They make the most out of fees and also doing alternative trades if they see where a market certain token price is going up or down. Right. And so the suggestion here is winter mute. And I don't know if this has ever been proven, but they've been accused a number of different times in previous tokens,

in previous cycles, that they do the opposite of where they drive the price down for a particular token or up. So if they're driving it down, they're shorting it. If they're driving it up, they're longing it or whatever that might be. Take profit and then like, you know, take the opposite side of that trade. So they're playing on a lot of human sentiment. The reason why they can do this with ARC, I'm guessing, versus any other token, is because it's at a small enough market cap that they can like, you know, manipulate it.

And it's not too low a market cap that it's not worth their time, basically. Yeah. Okay. So it's not that they're suppressing the price because they are trying to buy low because they're bullish on the arc. They are just suppressing the price because they have a short on it. Is that the claim? Yeah, yeah, yeah.

That's the claim. Yeah. And it's not an uncommon. I'm surprised you haven't heard of this theory before. No, I've heard of this theory and like that market makers suppress the price. I hear this all the time. But I just don't know how to verify it for myself. Yeah.

And it also feels like very easy scapegoating of some like, nebulous third party. It's a very easy scapegoat to me, and I don't know how to verify it. And so I've just kind of discounted all of these. So for sure. I think another proof point to look at is Zerebro as well. Do you remember that token? Of course.

Which saw very similar price action. And I think there were similar claims coming up. So, yeah, you're right. It could all completely be cope. But I think there's a number of on-chain transactions and tools that you can use that tracks that it's actually winter mute wallets that are, you know, just pump-faking a of these different tokens. And they're all fitting under a certain market cap range that allow them to do it. Yeah. Okay. And so what's the takeaway here? I'm still kind of confused as to like what I

should know about that. Yeah. So the takeaway here is it's not specifically about ARC, but it's specifically about the crypto AI token, specifically the fact that they are low market cap that is leading to the most volatility that's coming through. And I'm not saying it's all to mute stuff. I'm just saying it is the most prone to volatility. And these tokens are taking a hammering despite all of these different things. So where do I think this is all going? Well, I think at this point, it's fair to say, David, that the sector has kind of like been blown up with hype at its beak.

You had chat bots valued at like billion dollar plus valuations. But I also think that this is just classic crypto, which is largely just sentiment driven versus fundamentals. We saw that, you know, mostly when Trump launched his meme coin and sent it to $80 billion market cap only to watch it fall off a cliff, right? The circus is now kind of like cooling off. People are tired of pretending 99% of tokens are worth their market cap. You know, meme coin mania is dead.

And the market now is currently very much dependent on macro, which means like the wider economy. And it's such a boring answer. But I do think it's true, David. Once we see signs of the economy, stocks and BTC that is back on the rise, we'll start to see a resurgence in alts. When this happens, I have no idea. But in the meantime, we are still seeing pockets of outperformance. Actually, if you pull up this thread from Sammy's recap today,

I don't know if you have access to it, David, you'll see that, you know, he highlights a bunch of web 2 AI stuff, which is amazing that we tend to do in these episodes as well. That is just kind of like fascinating. But then he talks about, you know, pockets of our performance in B&B chain, right? So CZ has been pretty vocal about a number of different AI coins that have launched on there. I think I'm trying to remember the name of the project that launched through Binance's launchpad. that basically, like, created, like, character AI, but for crypto.

So basically you could interact with, like, these different AI personalities of your favorite celebrities and interact with it. My shells? No, my shells. Yeah, yeah. My shells. My shells. Exactly. So they launched through B&B and they, like, had a really successful launch.

And their token's been, you know, kind of like been going up and being bought and doing really well in that Asian market. You've got, like, these new protocols like, Hey, Anon AI with integration to Venice Protocol. Venus rather protocol on B&B chain and then there's a few other things like we spoke about last week banker and clanker still seeing a number of different

like success in terms of like fee generation and stuff which caused their token to pump a bunch and then like retrace a bit but again because the broader market is kind of like having this really tough moment we're not seeing like sustained pumps right what's interesting for me David is

where I'm seeing the most activity for trading and volume are two particular categories. And it's two that we've spoken about a lot on this show before, which is token generation agents, which is like your banker or your clanker type situations or defy abstraction agents, if you like. And a lot of the core platform plays for agents that we're seeing.

So that could be Bitenser with a bunch of their agent subnets. That could be AI16Z with their new platform that they're going to launch soon. or virtual's announcing like stuff with ACP, which is their agent commerce protocol, which we're going to talk about later. So we're still kind of like playing around the same sectors, but very specific tokens only.

Yeah. I think maybe you can correct me if I'm wrong. Clanker, which is the token deployment on Farcaster and Banker, which is I think the same thing, but on Twitter for Twitter, kind of same ideas, but just different ecosystems. These are the only two coins that,

I think I've been materially holding on to, like, really solid market caps. Correct. Yeah, like, Banker is up 27% on the week. It's been bouncing around between, like, maybe a $15 million market cap to $40 million market cap. Wow, these are really low market caps. Yeah, that's what I'm saying. And then Clanker is at $66 million market cap. But at least it's held on.

Like, Clanker is towards some of its higher prices. Yeah. And these are the only charts that don't look completely ugly. Unless there's any others that, uh... No, no, you pretty much called it out. I mean, like, we should take a look at GROC, actually, David. Can you pull up the GROC chart? The GROC, the debt relief bot token?

The debt relief token. That's right. That one that we... Oh, that one's on the ground. Yeah. Coming in at a $7 million evaluation. But GROC, I think, has half a million dollars of this token in trading fees. A 700K.

700K. You know? So, so maybe fundamentals don't matter anymore, David. Or maybe they never matter. it. Maybe it was all sentiment. I definitely think they mattered. A lot of this stuff, like the virtual's price, I think is, the virtual's price, of course, is the virtual as the launch pad on base. I think I'm willing to bet that that is almost one-to-one correlated with the fees going through the virtual's ecosystem.

My God, look at that chart. That is insane. So in like September of 2024, virtuals was at a $50 million market cap. Oh, yeah. And then in January 1st, it was at a, call it $5 billion market cap, and now we're at a $500 million market cap. I think this all relates to fees. Like, fees are driving, if you are not a layer one asset or blockchain asset, I think your price is denominated by how much fees you have.

Yep. I think that's a really good point. And my take is fees were generated in the wrong way for a lot of these agent protocols. they were just focused on like agent creation, which in my opinion is not going to make it. Similar way that like you're saying like all these AI models, you're not going to invest in any of them because like they're all do the same thing.

That's what all these agent platforms do. I think it'll come down to like whether these apps are like really good or not, right? Whether these agents actually do something. I think that that point about like I'm scared to invest, I would be scared to invest in any LLM model is the same point about being scared to invest in any agent framework, whether it's virtuals, AI 16Z, ARC, Like, I all think they all kind of collapsed towards the same product.

I think so. I think so. Actually, like, speaking of virtual, should we dig into, like, what the latest is with them, David? I think we haven't spoken about them for a while. Okay. So let's get kind of like the ugly stuff out of the way or the obvious stuff out of the way, which is virtual's activity and revenue has pretty much fallen off a cliff here, right? Basically zero.

Yeah, basically zero. So if you pull up, I saw a tweet the other day, by the way, which was like, virtuals generated 500 bucks in like fee generation. from agent creation that day, right? So the point here is like this activity or the original notion of what made AI agents in crypto successful, like creating agents, is no more. And the only future that any of this stuff is going to happen is an actual like utility that comes from these agents, right?

Well, this latest update from Jansen, who is a co-founder of virtuals, we've had him on the show before, talks about a major update. which might suggest that they are focusing more on, you know, the quality of these agents, specifically their autonomous nature and how multi-agent they are. Now, if you remember a few weeks back, David, we highlighted something they launched called ACP or the agent commerce protocol, right? And the idea of this product was to enable real agents to talk and transact with each other autonomously.

But to be honest, I'm kind of tired of the talk of products. Like, what can it actually do? Well, this is what Jansson is speaking about here. he describes two phases that will start rolling out soon. Phase one is allowing clusters of these agents to run autonomously for four weeks, so for a month. And the goal by the end of the four weeks is that these agents must have produced something of net value to the economy that is greater than the sum, that is greater than each of these agents individually. So there's two ideas that he's pitching. Number one is an autonomous hedge fund.

So imagine a number of agents that are going to be taking in people's money. analyzing markets, analyzing market opportunities, investing in tokens, and their goal is to outperform the general broader market and outperform you as a singular investor, right? So they're creating an autonomous hedge fund basically made of different agents. And we've heard of this theory before, but it'll be cool to actually see these agents trade real money. The second is a media cluster. So it's something along the lines of a marketing or creation studio, which will design and create viral videos, which will be linked to, like, different social media apps. And I think what I'm most pumped about here is something that he mentions right at the

end of this thread, which is he talks about the levels of intelligence of these agents, David. Essentially, he calls most agents that exist encrypted today one to level one to two. So they're kind of like slot bots that don't really do anything autonomous. But for his new product, for these new, like, autonomous hedge funds, he'll only allow level three, which is basically like they have to be autonomous. They need to be self-governing and they need to actually be

like earning money or making money. This could be really bullish for virtuals, right? But again, it comes down to the execution. It comes down to the actual life product. But they seem to be taking this pretty seriously, David. Like to kick off this new kind of like phase for them, they've announced a $100,000 hackathon where they're inviting people to also come along

and build some of the best agents, right? Or businesses. And then another thing that I think is really interesting on the virtual side is they're officially updating their fee split. So they allocate not just swap fees to creators, but 50% of those swap fees goes to the agent itself. So this is cool, but like in my opinion,

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to find out what's next on your WebFree journey. Okay, so we're still figuring out how to get AI agents to actually grow money, accumulate fees. Our favorite AIXBT agent, who's still somewhat popular on CryptoT Twitter, He's actually learned a way to lose money this week. New feature update. New feature update from AIXPT loses money. What happened here? Okay, so Sammy kind of breaks it down really well in his post here.

There's a recent event that happened, literally I think yesterday or two days ago, where someone was able to trick AIXPT into tipping them $100,000 worth of ETH. We have a prompt engineering on Twitter. I didn't give him $100,000. Oh, yeah, yeah. They did this by remotely accessing its secure terminal, right? So, you know, the terminal. Oh, so it was a straight hack.

Okay, it wasn't just a prompt. Yeah, I would just, well, so the way that the, the unique part here was they cued up their own tweets to be a priority for the agent to respond to. So they basically manipulated the, that it's terminal, so that it would respond to its tweets. And then the hacker was like, okay, now I'm going to tweet to the agent to tell it to tip me, or to prompt to give it me, to recognize my tweet as like a good bit of advice of which it should tip,

and then decided to tip it $100,000 from its Simulacrum AI wallet. Now, this is a product actually that we mentioned before on the show, David, way back when agents exploded. And do you remember, like, bankless, the official Twitter account got tipped money? I think it was you as well, David.

Yeah. That was through this simulmonary. Samuel Acrum wallet, right? And it's important to know that the wallet itself didn't get hacked. It was the agent. Well, it operated as intended. Yeah. Yeah, correct.

The agent was just tricked to give a tip. Yeah, exactly. So, you know, it's important to know that this doesn't mean the agent's own wallet or keys were compromised, but more so the intermediary service provided by the Simulacrum wallet was, right, which was the agent's terminal, essentially. So, yeah, like, you know, first time that this. agent has lost like, you know, money of a significant amount. Yeah.

I think before we see agents that hold material amount of capital, we are going to see like commerce agents more than we are going to see investing agents. I don't, I would not trust an AI agent holding any, any material amount of my money. I would, I would, I'm happy for like, uh, banker bot to make transactions on my behalf. Yeah. But I guess if they have access, if they have permissible, if they have permissible. to my banker wallet, my privy wallet, then like they do hold that money. I just don't feel great about agents holding my money.

Okay. Well, how about agents trading your money, David? Boy, do I have a pitch for you coming up next? Oh, no. Okay, so there's this new subnet which launched on Bitenser. For those of you who don't have context, Bitenza is like an AI protocol that has a bunch of gaps that are built on it by different teams, and they incentivize these teams to build the best version.

of their app, right? And so this trading subnet got announced, which is on their BitSensor Network, and this new app was announced called Subnet 53, which focuses on AI-powered trading strategies for crypto options. So an option, for example, might be a long or short option, call puts, you know, tried by kind of things, which then moved on to, like, crypto instruments.

And it's been live since November. And it's deployed over 140 plus trading strategies for these options, David. And it's earned, yes, emphasis on the word earned and not lost, $22 million in cumulative trading profits since it was live. And since November? Since November, David, since November. Yeah. I don't know if you're impressed or not impressed by that. I'm extremely impressed by that.

I bought me like our Billy Betts bought, who's making bets on Polly Market. I looked at it right before he did this episode. He's down something like $20,000. This bot is up $22 million. Millian. With an annual trading profits. Yep, yep. Been live since November.

And it's awesome, in my opinion, because to date, most AI crypto trading apps or trading agents don't actually trade real money. They're just paper trade, right? What's more is they're actually profitable, right? So proving that the model works. But why this is cool is Subnet 53, team care a lot about having skin in the game,

apparently. so much so that they're forced the miners that are competing to propose like the best trading strategies for their subnet to have a large amount of active funds actually being traded on that strategy, right? So, you know, these miners that are submitting strategies have to have skin in the game in order to, you know, back their strategy or like for that subnet or creator to, you know, use that strategy for their agent or for their subnet.

The subnet has also earned $6 million in Tower Award. and Tao being the native token of Betenso for delivering a really good product, which emphasizes the design of Betenso is kind of somewhat working, right? It's incentivizing the best teams in AI to build actual useful crypto AI apps. And I think this is like a trend that I've noticed for Betencer in general, David. I think they got a lot of flak when they first launched because, you know, they were giving something crazy like $20 million worth of Tao incentives per month to random different teams. And then they went through a major upgrade, which we spoke about.

on this show a few weeks ago called Dynamic Tao. And the result of that is the quality of these teams are going up, which might make Tao a really good buy now, you know. One thing about this, a trading pot that made $22 million in cumulative trading profits. Like, my first question is, okay, how do I get, how do I get $22 million of trading profits? And I don't think that this model scales very well, because if everyone is allowed to invest in this bot, then the alpha goes away. like we just lose the arbitrage.

And so this seems like the $22 million is like proprietary and not open because if you have a secret trading strategy, the last thing that you do is you open source that secret. Who said it was open source? It is completely proprietary. Well, I want to get, how do I get rich off of this? So you go onto this subnet's website and you can deploy with them. Yeah. And I give them my capital. Yeah, exactly.

But then I'm going to have to start like sharing them. alpha with like other people? You mean sharing access to this product? Well, the way I think about this is like, imagine you invest in like a really good hedge fund or a fund and they make, you know, annual or quarterly or monthly returns for you. If you like it, I don't know, do you tell your friends about it, David? Maybe you don't. I might because I'm a good guy.

But, you know, you know. I'm just like, if everyone invests in the same agent doing the same strategy, then that $22 million dollars spreads out between like say there's 10 billion dollars of tvl because everyone's so hyped on this bot that then it spreads out over time yes but then the alpha then becomes okay if we know that the majority of the market's money is going in a certain direction it stops becoming the alpha and you can start going to find a new agent to invest in the new new alpha that's why we're terrible traders david that's why is this just like the first indication that there are the future of trading will be agents, not humans?

Yes. Humans are just going to get outgamed. Well, actually, I would take a step back from that and say, because like, you could slap an agent on top of this. You could slap multiple agents on top of this, right? But what I think is really being proven here is crypto incentives being used to design a trading mechanism. Okay. That's what's happening, right? Okay. So, like, this is a team that was like, Hey, I have a design for creating a hedge fund, basically, on chain. But I don't know which strategies to use, and I'm not an expert. But I will pay you Tao rewards if you give me good strategies that you already know.

And you might be a hedge fund in the centralized world that trades a bunch of crypto options. You could be a single solo D-Gen trader that also does this from his mom's basement. It could be any of you. As long as your strategy is good enough, and as long as you've proven that you're making returns, we'll use your strategy. And we'll trial it over a couple weeks period. And if it works and it earns ourselves money, good. If you're bad, you get knocked out and replaced by someone else with a better strategy. And the only reason why people are doing this is because they get paid in rewards.

Okay. Okay. So, okay. Cool. All right. I'm into it. Yeah? You're into it.

Would you give this money? Would you give this agent your money? Still now. Okay. Fair enough. But I'm happy that other people are making money. For sure, for sure. All right, heart of the press, David, a company or team called Pluralis Research just announced their $7.6 million seed round led by some pretty big, you know, heavyweights.

Union Square Ventures, coin fund. And their goal here is to make open source AI a reality. And that honestly sounds super vague. And I don't like that description. So I kind of want to give my own spit on it. The TLDR of this team is they're building out a decentralized network that is focused on training foundational AI models and monetizing them.

And it'll leverage things like compute and data, right? Now, if this concept sounds familiar to everyone listening, it's because on previous episodes, we've mentioned teams like News Research and Prime Intellect who are doing something similar. But Pluralis has a very important differentiator, which makes them stand out, in my opinion. Now, when someone trains a model,

on their network, the model itself is split across the different computers that are providing compute to train it. This is known as something called model parallelism. Parallism. My God, I can't say that word. Parallelism. Parallelism. Thank you, David. But something which has actually long been thought of as unsolvable. Everyone before this has been using or training models in a decentralized fashion via something called data parallelism. parallelism, which means you need to have a full copy of the model and its weights on every

computer that's providing compute, right? So you can kind of like, it's open source. It's design is, you know, copyable, basically, right? To your point just now, David, you're like, why on earth would I put money into this hedge fund thing if like the design is not proprietary? Well, what this network or team has cracked is they've made it proprietary. So why it's incredible? They found a way to shard up the model so that no one can steal it and run with it and commoditize it. Exactly. While still leveraging open source decentralized networks to train it, right? So why it's incredibly powerful is now as a model creator, you can leverage the power of decentralized compute to train their model without open sourcing the model weights,

which is the secret source, which means that you're effectively training proprietary models in an open source manner. So, you know, people, some people listen to this might say, well, why on earth would anyone provide their compute then, right? And the answer is the people who provide the compute, exactly. For money. Yeah, receive part ownership of it. And therefore, any kind of money spent to access the model. And by the way, the only way you can access the models that are trained on this network

is to pay for it via the network. I love this. Exactly. I like it. I like it. Amazing. It split between owners and they end up monetizing the model, right? So you get all the benefits of proprietary secret source models

whilst leveraging open source mechanisms to train and own them. Right. So this is a really innovative, new idea. I'm bullish on the idea, David. But to be honest, it all comes down to the team and whether they can execute it, right? I looked into the backgrounds of this team. They're actually pretty cracked.

So they all have somehow... I would imagine that this is very frontier technology. Yeah. Well, thankfully, their backgrounds demonstrate that. They pretty much all have PhDs. in AI and ML research. They've all authored leading research papers on training models, and they all used to work at the AI team at Amazon,

but they left to pioneer their own way of training models, which led to, you know, pluralist this company. So, you know, if anyone needs a reminder, I think that the necessity for having a decentralized network that trains AI models for us is because the current setup only allows for rich companies like Microsoft or Google to train their own for tens of millions of dollars. But now, let's say, David Wurk,

up tomorrow and had the most pioneering idea for a new AI LLM that could replace EJAS as his co-host. But he didn't have tens of millions of dollars to train that model. He could just come onto this network theoretically and split up ownership in return for training that model. And, you know, he gets paid for it. Okay. So we opened up this podcast with me talking about how I wouldn't want to invest in any model AI lab because of how it's just a commodity and they're all just going to commodity.

monetize each other and they're just going to eat each other's lunch and nothing's going to be left. And then you give me the perfect answer to that all the way at the other end of the podcast. You saved that's the best bit of information in this podcast. I think that we did this whole hour. I've got to make sure you're listening, David, for sure. Wow. This is really cool. I love this because it's like it's giving it that you're giving this model, the value of the model to this open source network.

That open source network owns is the operator of that model. no one else can have it. Not one single person can have it, but it's open ownership, since it's a decentralized protocol. I'm assuming it's something like a blockchain or some like decentralized network where ownership is also,

it comes in the form of a token in theory. And then it also just solves the earlier problem I talked about. I think that's great. That's really cool. Yeah, super cool. Well, Ejad is well done on leaving the best bit of alpha at the very end of the podcast for all the people who made it to the very end.

I really appreciate you guiding us through all the alpha, week my man no worries dude bankless nation you guys know the deal crypto is risky crypto a i even riskier you can lose what you put in but nonetheless we are headed west into the frontier stuff for everyone but we're glad you're with us on the bankless journey thanks a lot