5 Ways to Use AI to Enhance Your Blockchain dApp

AI and blockchain

Artificial intelligence, or AI, often comes up in conversations among blockchain enthusiasts.

As this industry continues to grow and evolve, AI has the potential to change the way cryptocurrencies are managed, traded, and mined. The synergy between AI and blockchain boosts efficiency and trust and opens up a wide range of possibilities across various industries, from finance to healthcare and supply chain management. 

Learn how the powerful combination of blockchain with AI brings new value to businesses and see the practical use cases of how AI and blockchain work together. 

Understanding the Intersection of AI Framework and Blockchain in dApps

Needless to say, it is essential to keep your eye on the most recent trends so that your business stays ahead. And nobody will argue that AI is on hype.

Before delving into AI trends and how you can adopt them into your project, let’s go through some critical questions regarding the topic, starting with: What exactly is a decentralized AI model? 

AI is commonly referred to as the ability of a digital computer or computer-controlled robot to perform tasks associated with humans. This encompasses various technologies, including ML algorithms, natural language processing, computer vision, and neural networks.

The development of AI-powered dApps in blockchain is a relatively new thing. However, there are already trends we can track. According to 2023 stats, 35% of global companies already use AI in their processes. 

AI implementation statistics

Nevertheless, the intersection of AI and blockchain is a relatively new convergence of technologies. Each of them is strong, but together, they create a reliable technology-enabled decision-making system in the ever-evolving tech landscape of Web3

Let’s see how you can use AI in your blockchain product today.

1. Smart Contract Automation with AI

The basic premise of smart contracts is a self-executing code that runs on the blockchain and helps with exchanges in a transparent and conflict-free way. 

The Achilles heel of smart contracts is that they can execute only predefined rules. While influential in their primary mechanism, smart contracts encounter challenges regarding complex transactions involving multiple parties, intricate conditional logic, and real-world events that are not easily verifiable on a blockchain. In such scenarios, the limitations of smart contracts become evident.

The implementation of AI-powered smart contracts changes the game completely. AI can be a useful addition to smart contracts by introducing advanced analytical and predictive capabilities. It utilizes such adaptive systems as neural networks, neural graphs, logic, etc. 

How does the combination of smart contracts and AI work? 

Imagine fraudulent activities in which nefarious actors exploit vulnerabilities within smart contracts. They create opportunities for manipulative actions and theft of digital assets. 

The incorporation of decentralized AI adds an extra layer of security. By analyzing patterns and examining extensive datasets, AI could uncover potential threats that may impact the outcome of the contract. 

Looking to implement AI in your smart contracts? INC4 is here to help! Contact our AI developers today for expert guidance and support.

Benefits of using AI-driven oracles

One of the benefits of using AI in smart contracts is AI-driven oracles. These are specialized components within the blockchain system that act like bridges. In simple words, oracles help to transmit real-world data to the blockchain. 

AI-driven oracles play a pivotal role in enhancing the functionality and capabilities of smart contracts. They enable interaction with and response to real-world data and events more intelligently and automatically.

Here are the key advantages of using oracles:

1. Data Integration

AI oracles can collect and verify data from various sources. Such are, for example, social media, IoT devices, APIs, databases, and much more. Oracles analyze complex data like cryptocurrency prices, exchange rates, interest rates, or economic indicators. 

2. Data Validation & Processing

By using machine learning and other AI techniques to verify the accuracy and authenticity of the data, oracles can identify any anomalies or discrepancies that occur in smart contracts.
This helps to ensure that only trustworthy information is introduced to the blockchain. 

3. Real-time updates

AI-driven oracles can provide real-time updates and data feeds to smart contracts, allowing them to react dynamically to changing conditions or external events. This is especially valuable for applications requiring up-to-the-minute information.

4. Security measures

AI-driven oracles implement security measures to protect against data manipulation, cyberattacks, and malicious actors. They may use cryptographic techniques to secure data transmission and storage.

ai-driven oracle

2. Enhanced Security and Fraud Detection with AI

AI can significantly bolster the security of blockchain networks by providing enhanced threat detection, prevention, and response capabilities. 

By enabling crypto platforms to detect fraud more accurately and efficiently, AI-powered anomaly detection mechanisms help to preserve customer trust, protect financial assets, and safeguard the integrity of the whole crypto industry. 

AI fraud detection mechanisms are commonly used across various industries. For example, Mastercard has deployed AI to prevent card-related fraud. Other prominent enterprises like PayPal, American Express, and Bank of New York Mellon leverage the power of AI by extracting signals from IVR interactions, chat, or voice. 

Of course, crypto companies are also in the game. According to unofficial data, one of the most famous cryptocurrency players, Binance, has invested in advanced security technologies and utilized AI in its security infrastructure. 

How does this security thing work with AI?

To detect anomaly behavior, AI creates a baseline of normal behavior. When deviations from the established baseline exceed a certain threshold, the system triggers an alarm indicating an anomaly has been detected.

With real-time alerts, AI allows immediate intervention when suspicious activities are detected. Moreover, AI can detect fraud across various channels, ensuring comprehensive protection. 

If you are interested in the power of blockchain and artificial intelligence working together and would like to enhance your smart contracts, look at this comprehensive guide or apply for our best experts’ consultation.

3. Predictive AI Analytics for Token Markets

The ability to predict the future is the goal for many. Imagine you’ve “hacked the system” and know all the future fluctuations of BTC. You know where and when to invest and what strategic decisions would work best. 

Sounds like the dearest dream, huh? 

Possibly, that’s not the 100% case with BTC (for now), but that does not mean you can’t have a part of this superpower. Predictive AI analytics makes it possible to identify and understand market trends, including bullish or bearish trends, trading volumes, and sentiment shifts. This information can help with strategic decisions, such as when to launch new features or products.

The marriage of AI and cryptocurrency can help to identify peak usage times, predict transaction fees, and estimate future network congestion, assisting users in optimizing their transaction strategies. This is valuable for traders, investors, and blockchain projects wanting to make data-driven digital asset decisions.

4. Scalability and Consensus Optimization with AI

While the blockchain industry grows and develops, it faces two significant challenges. 

The first one is scalability. 

As more participants join, the number of transactions increases, leading to slow payments and higher fees. However, things are different with AI development. 

AI can predict network congestion and optimize transaction processing. AI can adapt and allocate resources more efficiently through machine learning algorithms, ensuring smoother operations even as the network grows.

At the same time, consensus optimization is a second challenge. The consensus mechanism, such as Proof of Work (PoW) or Proof of Stake (PoS), must balance security and efficiency to help prevent attacks and ensure the network’s stability. Achieving this balance is crucial to ensure blockchain networks’ long-term viability and trustworthiness.

In PoW and PoS systems, AI can adjust consensus parameters based on network conditions, ensuring that the consensus mechanism remains efficient and adaptive. Furthermore, AI can adjust the mining difficulty based on the network’s computational power, preventing issues like excessive block times or rapid block generation.

5. AI-Powered User Interfaces

While addressing the challenges of scalability and consensus optimization is vital for blockchain’s growth, it’s worth noting that AI’s transformative influence extends beyond this domain. AI-driven user interfaces are shaping the future of technology, offering more efficient and personalized experiences.

For example, have you ever found yourself confused with a website or app? Have you noticed that some user interfaces are misleading and some are just too complicated, making it hard to find what you want? 

We’ve got you. The good news is that the future where the user interface is tailored for each particular user is already knocking on the door!

To some extent, we can already see adaptive user interfaces when we change location. Some companies even design separate apps for different locales. All based on the differences in market preferences. For example, Chinese users prefer cluttered ‘super-apps,’ such as WeChat. At the same time, Western people use minimalist single-use case apps more often.

Without AI, the best we can do is create different app versions for large, distinct markets. It takes time and effort. However, with AI-powered interfaces and chatbots becoming increasingly sophisticated, user experiences are evolving to be more intuitive, personalized, and efficient. 

AI can automatically detect problematic areas in the design. Such are, for example, high navigation times or frequent error messages. Due to these valuable insights, designers can spot inconsistencies, fix them promptly, and focus on creating unique, innovative, and functional platforms that surpass user expectations.

How can you personify blockchain for users?

AI features in dApp
  • Dashboard Customization

Users can personalize their blockchain dashboard, arranging widgets and data according to their priorities.

  • Portfolio Tracking

Users may want to customize how they track their blockchain assets, setting alerts and notifications based on specific criteria.

  • Content Recommendations

Personalized content, such as news updates or educational materials, can be recommended based on a user’s blockchain interests and activities.

  • Chatbots

 Integration of chatbots can provide users with real-time assistance and answers to their blockchain-related queries, enhancing their overall experience and support.

AI Implementation Considerations

legal and ethical considerations in AI

Compliance with relevant regulations is highly essential and even non-negotiable. When implementing artificial intelligence (AI) solutions, it is crucial to adhere to different legal frameworks, depending on your geographic location and the nature of your application. 

Such is, for example, GDPR or General Data Protection Regulation. If your blockchain system handles the personal data of European Union citizens, GDPR compliance is essential. It requires transparent data handling, user consent, and the ability to erase user data upon request. 

Another example is HIPAA (Health Insurance Portability and Accountability Act). This federal law sets strict standards for protecting patient health information and applies to healthcare-related blockchain applications. 

It is also important to remember about the potential biases in AI algorithms. Bias takes root in various sources. Such are, for example, analysis, data collection, and processing methods. This can also be sampling errors, human prejudices, algorithmic assumptions, etc. 

Implement specific techniques to minimize this possibility. Check out bias indicators throughout development and implement bias auditing tools. 

You need a team of experts with competencies in blockchain development, machine learning technology, and data analytics to get the most out of the powerful combination of AI and blockchain.

If you want to find AI experts ready to take control of such a complicated task, then do not pass by. INC4 has expertise in AI and blockchain products like smart contracts, dApps, DeFi, and wallets.

Final thoughts

The integration of AI into blockchain is a game-changer in the technology industry. 

Whether it is about automating decision-making through smart contracts or ensuring data privacy, this synergy could help make your blockchain space more secure, user-friendly, and efficient, ultimately paving the way for widespread adoption and innovation in the blockchain ecosystem. 

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