THE ROLE OF AI IN BLOCKCHAIN TECHNOLOGY

No one can argue with the fact that in the present times, almost every industry is using, or has started to
explore, the usage of Blockchain and Artificial Intelligence (AI) to bring about innovation and
improvement in their business processes. A combined usage of blockchain and AI technologies is now
being envisioned as a harbinger of a major paradigm shift in technology. Within the course of this
article, the aim will be to get a basic understanding of how AI impacts blockchain technology.

What is blockchain technology and its advantages?

Blockchain is an online ledger that enables all transactions carried out using cryptocurrencies to be
recorded digitally and sequentially, and made available to the public for verification. Think of blockchain
as a global and incorruptible spreadsheet that is decentralized and viewable to anyone. However, it’s
important to understand that blockchain can record not only economic transactions, but anything of
value: licenses, educational degrees, financial accounts, votes, deeds, insurance claims, ownership titles,
etc. Hence, blockchain technology has the ability to create smart contracts, that are easily available for
public viewing and verifiable.

Advantages provided by blockchain include lower verification costs, lesser expenses in networking, and
the emergence of new and innovative marketplace models as a result of dynamic modernizations in the
market structures.

To summarize, blockchain is an underlying technology, the purpose of which is to “change the scope of
intermediation” (Catalini and Gans, 2017).

How AI influences blockchain

However prevailing a technology it may be, blockchain does have its restrictions as well.

Mining requires a large expenditure of energy and money. However, it has been observed that AI has a
played a big role in the reduction of energy utilized for cooling data centers used in industrial setups,
such as in Google. Machine learning systems such built by the British AI company called DeepLearning
has been extremely effective in use by Google for cooling their data centers and have enabled reduction
of energy consumption by 40 percent.

Latest advancements in AI include decentralized learning AI models such as “federated learning

systems.” These enable “blockchain pruning,” a term coined by blockchain inventor Satoshi, which
means deleting redundant data. As the bitcoin blockchain increases steadily at the rate of 10MB/sec, it
is currently 85 GB in size, and becomes larger every 10 minutes. Hence, data has to be “pruned” so as to
not allow the total blockchain to be contained on a single laptop for e.g.

Blockchain is not completely invulnerable from being hacked. Innovations in AI technology has also
enabled it to strengthen the blockchain security system. For financial organisations, the marriage of AI
and blockchain technologies would enable a slew of business apps that could detect fraud. An example
is Feedzai, a fraud detection application that utilizes Machine Learning (ML) to enhance security in
commerce. Such technology would play a big part in making online payments systems safer. According
to Paul Marques, CTO of Feedzai, “Blockchain cannot detect fraud by itself, no. Blockchain cannot
directly protect against things like account takeover, identity theft, or financial scams. It needs the help
of other machine learning capabilities, and that is where Feedzai’s technology comes into the equation.
Our machine learning algorithms work by detecting use and abuse behavior patterns, which are like
“commerce DNA” – it’s unique to each user. Feedzai’s machine learning software watches what is
happening, as it happens, and adjusts its knowledge accordingly.”

The use of AI in blockchain also includes “Homomorphic encryption” which (according to Wikipedia
https://en.wikipedia.org/wiki/Homomorphic_encryption) is “a form of encryption that
allows computation on ciphertexts. The purpose of homomorphic encryption is to allow computation on
encrypted data.” Hence, homomorphic encryption can be used to “securely chain together different
services without exposing sensitive data.”

AI is being further developed to integrate with mining hardware to reduce energy consumption.
Bitmain, the world’s largest Bitcoin mining hardware production company have already developed
products that enhance AI applications. These products utilize ASIC (Application Specific Integrated
Circuit) technology adjusted for training operations used for deep learning networks and a cutting-edge
fan-cooled module system, all included in a single package. Gadi Glikberg, VP International Sales &
Marketing at Bitmain said: “We are very proud to be part of the software development effort of the
Sophon products. Our AI researchers are focused on creating computer vision and NLP solutions that are
optimized for the Sophon platform.”