The Web3 + AI Daily #69
VCs are piling into private AI, while government censorship of powerful AI is making the case for Decentralized AI.
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This is The Web3 + AI Daily, your definitive guide to the intersection of blockchain and AI! Today’s edition offers compelling evidence that even amid a dire bear market, interest in decentralized and private alternatives to major AI labs continues to grow. Moreover, the recent censorship and bans enacted by AI hyperscalers may have been the clearest vindication of Decentralized AI to date.
Thank you for being here! Let’s dive in.
What’s Hot in Web3 + AI?
Venice AI Raises $65M at $1B Valuation
I have often praised Erik Voorhees’ Venice.ai for being one of the very few alternatives to OpenAI‘s ChatGPT focused on privacy, and it seems, VCs have started to pay attention to it, too. The company raised $65M at a $1B valuation in a Series A led by crypto-focused venture firm Dragonfly and backed by Coinbase Ventures, North Island Ventures, and others.
Just two years in, the company already has more than 850,000 unique visitors to its website, and serves more than 3 million active users and an average of 1.7 million API calls per day.
At a time when hyperscalers like OpenAI and Anthropic are under intense pressure to monetize users’ personal data and bolster their valuations ahead of IPOs, Venice AI’s efforts to protect clients’ privacy pay off - “the company is already profitable, with annualized run-rate revenues of over $70 million.”
The startup hosts “uncensored,” open source models on its own data centers, and routes queries to closed-source models, such as those by OpenAI or Anthropic. All user input is encrypted and unencrypted client-side, and routed through an external proxy before it is processed and returned, with no data stored on Venice’s own systems. It also provides end-to-end encryption on some models, though you have to pay for a subscription to get that feature.
As a veteran crypto entrepreneur, Vorhees successfully introduced cryptoeconomic elements into Venice AI’s value proposition - a move that helped with attracting new users:
Web3 + AI Readings & Conversations
Decentralized AI Is Dangerous The Same Way Bitcoin Was in 2014
Brownstone Research‘s Ben Lilly has recently argued that the growing regulatory noose around open-source AI strongly resembles Bitcoin’s early struggle. Yet, similarly to how DeFi helped establish Bitcoin and crypto as a viable alternative to banks, Decentralized AI (DeAI) is helping open-source AI now. Let’s break this down.
Lilly reminds us of Anthropic‘s Dario Amodei, and may I add OpenAI‘s Sam Altman, condemning open-source AI as “dangerous” as early as 2023. And despite the historical evidence of open systems demonstrating more resilience than their closed counterparts, the policy response was to restrict the open while reinforcing the closed. That’s where we are right now and that’s also what Bitcoin faced for more than a decade - a battle for survival.
However, just as U.S. Securities and Exchange Commission‘s “regulation via enforcement” failed to break the Web3 ecosystem, current restrictions won’t choke off open-source AI. Rather, the recent censorship of Anthropic’s Fable 5 is actually a commercial for open alternatives.
Moreover, Lilly believes that DeAI can be the catalyst for this change by “making it easier for retail to “rent” their compute towards projects building open-source models.”
In a span of two years, decentralized training has gone from sub 1-billion parameter size to 100 billion.
This is significant because it shows that bigger models can be trained on distributed, retail hardware across the globe in a permissionless manner.
It’s a massive infrastructure unlock.
The same thesis was echoed by a panel organized by The Defiant:
While the most capable AI models remain under the control of a handful of US firms and the US government, DeAI’s value proposition consists in decentralized networks keeping AI running, private and beyond any single authority. Yet, it remains to be seen whether DeAI can match the performance of centralized labs.
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