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Alethea AI: Fusing Intelligence into NFTs
By Micah Casella
Jun 6, 2022 ∙ Hub
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Key Insights
Alethea AI is an artificial intelligence (AI) company that utilizes blockchain
technology to enhance how AI and humans interact.
The protocol created the first intelligent NFT (iNFT) that sold on Sotheby’s for
$478,800 on June 10, 2021.
Alethea AI is building a metaverse powered by artificial intelligence.
Raising a total of $31.4 million through a private sale, strategic sale, and token
distribution auction, Alethea AI sold tokens to notable investors including Multicoin
Capital, Gemini, Galaxy Interactive, Dapper Labs, Binance, Mark Cuban, and
Meltem Demirors, among others.
Artificial intelligence (AI) and blockchain are two of today’s greatest technological
opportunities. However, running AI models requires hardware that the current
decentralized infrastructure can’t support. As a result, AI-crypto projects are always
centralized to some degree.
Alethea AI is bridging the gap. It keeps AI compute off-chain while utilizing smart
contracts on the Ethereum blockchain to support its protocol layer that will be used to
create iNFTs.
Alethea AI’s vision is to preserve and evolve the culture, stories, and collective
intelligence of the human species by combining AI personalities with NFTs to create
intelligent NFT avatars, called iNFTs. The AI-generated content will act to preserve the
culture that inspired its creation. In addition, people will gain a deeper understanding of
collective intelligence as they interact with these creative and independent iNFTs.
AI is Statistics, not the Terminator
Artificial Intelligence is a buzzword. It gets people excited, some scared, it facilitates
billions of dollars in investment, but most of all, it confuses people. This confusion
obfuscates what’s really happening on the back end and makes AI look more glamorous
than just some nerds coding away in a dimly lit room. Instead of hatching plans for a
robot revolution, they're stressing to find datasets large enough to make accurate
predictions.
It’s one of the most ground-breaking, misunderstood, and powerful technologies
shaping the next generation of culture and business (Sound familiar?). AI is being used
increasingly in fields ranging from visual perception and medical detection to linguistics
and problem-solving. The potential that comes from filling an AI model with quality data
is largely untapped. From 2019 to 2020, global corporate investment in AI jumped 39%,
from $49 billion to $68 billion.
The inflow of capital financing AI is exciting, but few understand how AI actually works.
Generally speaking, when developers build AI models and algorithms, they are
programming a machine to perform a certain task, or range of tasks, based on different
types of inputs called datasets to achieve a desired output. Like putting cash into a
vending machine for it to retrieve a snack, AI algorithms process datasets as currency to
perform a task.
It is believed — and empirically inferred — that more data tends to help an AI algorithm
learn to perform a task better. When feeding the AI data, the algorithm is being trained
to make more accurate predictions of how to act. If designed to interact based on simple
human commands via speech, text, or visual aid, AI systems can be capable of creating
seemingly original content. These creative actions are called “generative.”
Alethea AI uses large language models with few-shot capabilities. Once it has sufficiently
trained the models (which comes at a multi-million dollar cost), they require only a small
amount of data to generate consistent and coherent language output. In Alethea AI’s
virtual world called Noah’s Ark, AI-powered objects will live and be able to create
original content in media, code, and more with their generative abilities based on
seemingly small interactions with users and other AI-powered objects. These intelligent
objects will be built from NFTs and will interact in an ecosystem that incentivizes tasks for
money, unlocking new economic, creative, and social possibilities with NFTs.
The Alethea AI Stack
The structure of Alethea AI gives anyone the ability to build applications powered by AI
and blockchain. Via its iNFT protocol, artificially intelligent NFTs can be created that will
be used in applications that leverage the protocol layer. Alethea AI’s stack displays the
layers that compose this complex ecosystem allowing decentralization, artificial
intelligence, crypto, and creativity to intermingle.
Protocol Layer & iNFTs
The iNFT Protocol is a set of permissionless smart contracts that allows anyone to create
intelligent NFTs. It was deployed on Ethereum in October 2021. Since deployment,
Alethea AI has been building out and launching various features of the iNFT Protocol,
the most recent of which are the Fusion and Unfusion features with a targeted public
release date of June 6, 2022.
With the release of Fusion and Unfusion, the iNFT Protocol will allow anyone to turn an
NFT into an iNFT. Initially, the protocol will only support ten collections, a couple of
which include Bored Ape Yacht Club (BAYC) and Pudgy Penguins.
The process of creating an iNFT involves fusing a compatible NFT (like a Bored Ape)
with a Personality Pod NFT. Personality Pods are ERC-721 NFTs created by Alethea AI
that represent the personality and intelligence of the iNFT that users will be able to
create using the iNFT Protocol. Only the Personality Pod gets locked into smart
contracts, leaving the user’s underlying NFT untouched.
The anatomy of iNFTs represents humans with a Body, Soul, and Mind. The Body comes
from the underlying NFT that remains on chain at all times. The Soul of the iNFT is its
Personality Pod, which comprises various on-chain personality traits that shape its
abilities and evolution. The Mind represents all the capabilities of the iNFT based on the
intelligence level of the Personality Pod.
Locking up certain amounts of ALI raises the Personality Pod’s intelligence level, thus
maturing the Mind to be able to perform more AI actions or services. Once mature
enough, iNFTs may be able to offer AI services that encompass many creative activities.
Alethea AI forecasts that, eventually, it may be possible for a Leo Tolstoy or Shakespeare
Revenant NFT to write copy for a user’s website.
Because the iNFT Protocol only needs the metadata from the underlying NFT, the
underlying NFT never leaves the holder’s custody and is effectively unchanged. The iNFT
Protocol keeps an immutable registry of the fusions between NFTs and Personality Pods.
Newly created iNFTs can exist on the application layer in Noah’s Ark or any other app
that leverages the iNFT Protocol. If the holder trades the underlying NFT on a secondary
market, they lose access to their Personality Pod NFT and any staked ALI, effectively
trading those assets as well — even if the buyer is unaware.
The Application Layer
Alethea AI’s metaverse, Noah’s Ark, integrates Web3 concepts with AI services. As of
today, it is the only application built on the application layer. Other applications that
incorporate the iNFT Protocol will be able to integrate iNFTs like Noah’s Ark does.
The artificial intelligence that is manifested as iNFTs interacting and performing AI
services on the application layer is powered by the AI Engine. The AI Engine is a
collection of proprietary AI models developed by the Alethea AI team that provide AI
capabilities including real-time lip-sync for avatars with a neutral facial expression, audio
speech recognition, comprehension, speech synthesis/voice generation, and intelligent
response.
Interacting with iNFTs on Noah’s Ark shows the early progress of Alethea AI’s work in
combining artificial intelligence with non-fungible tokens. Any user can interact with the
AI on Noah’s Ark through an avatar that they choose based on Alethea AI’s Revenant
NFT collection or a limited number of NFTs from other compatible collections like BAYC
or Pudgy Penguins. With a targeted release date of June 6, 2022, for making Fusion and
Unfusion publicly accessible, Alethea AI’s Intelligent Debates product will also go live on
Noah’s Ark. Intelligent Debates will allow users to debate various iNFTs on a range of
topics, training the AI Engine.
Create-Train-Earn
Alethea AI will make it possible for anyone to become an AI developer without having to
acquire a deep knowledge of computer science and statistics. By creating iNFTs, training
the artificial intelligence that powers their abilities, and earning from their output, any
iNFT owner will have played a role in evolving the relationship between artificial
intelligence and humanity.
Create
The selling point for users that want to create iNFTs today is potential. Some may want
to create an AI companion that they fully own. Others may want a de facto content
machine that produces productive output that can be sold, adding another dimension of
value to the iNFT.
User-generated content like blogs changed journalism and media creation. What was
once scoffed at for its opinion-based perspective, the blogging style that prioritizes
opinions is now thoroughly reflected throughout established journalism outlets. A similar
shift in how content is created may occur via user-generated AI, where users create/own
AI objects and earn from their output. Alethea AI is building a future where it will be
possible to monetize user-generated AI.
Train
For an iNFT to eventually produce valuable content, the iNFT owner will have to train it.
Alethea AI notes that the process will be more analogous to training a somewhat
obedient dog rather than starting with a new puppy. Similar to how a dog’s genetic
makeup predisposes it to certain behavior, the iNFT’s on-chain personality traits give it a
predisposition to how it will evolve. However, in both cases, the iNFT and the dog can
learn from experiences and be trained.
The Intelligent Debates product that Alethea AI is giving access to alongside Fusion and
Unfusion will allow users to train the AI Engine powering iNFTs. After repeated
engagements of Intelligent Debates with an iNFT, Alethea AI expects that users will be
able to see the improvement in iNFT responses.
Earn
Because training an iNFT takes work, Alethea AI is building out ways for users to get
paid for it. According to the Alethea AI team, the project has already compensated users
roughly $2 million in ALI credits (which can be converted to tokens) for participating in
staking events that train Alethea AI’s artificial intelligence models. In the most recent
Intelligent Staking Event, users participated in debate battles that created conversational
datasets to improve the AI Engine. According to participants, it was evident that Alethea
AI’s Revenant iNFTs became more informed about the particular topics with time. As the
technology matures and the project trends toward decentralization, a mixture of
economic incentives and AI Services offered by iNFTs will facilitate virtual exchanges of
value.
With a planned marketplace, Noah’s Ark may potentially become a hub where AI
Services like copywriting or software development are traded among ALI token holders.
However, this future where an iNFT can produce rewards for its creator is somewhat
distant. Once Alethea AI implements a DAO that decides which services will encompass
higher intelligence levels, builds out more functionality through which iNFTs can interact,
and users start creating/training their iNFTs, the project will be better positioned to
service its user base through the create-train-earn paradigm.
Leadership and Backers
AltheaAlBackers
ArifKhan
Founder/CEO
Metapurse
Crypto.comCapital
LDCapital
Sfermion
Alameda
RavindraKumar
Multicoin
CMSHoldings
D1Ventures
DeFiAlliance
IDEOCo-Lab
Nascent
MarkCuban
BITKRAFT
FactorialVentures
GabbyDizon
SpartanGroup
lOSG
DefianceCapital
Whitestar
GalaxyInteractive
ChapterOneVentures
MeltemDemirors
MikeDudas'6thManVentures
HaseebQureshi
Serotonin
KidVC
FreeCo
DapperLabs
GeminiFrontierFund
Bitscale
SiddharthJain
GMoney
IgniteGroup
FuturePerfectVentures
GregoryWolfson
SandeepNailwal
DCInvestor
NGCVentures
DeFiDad
Source: Messari, Alethea AI
With executive leadership experience in the artificial intelligence (AI) space since 2017,
CEO Arif Khan founded Alethea AI to preserve and evolve the culture, stories, and
collective intelligence of the human species by combining AI with NFTs.
Before Alethea AI, Khan led product marketing at Grab, was an account director for
emerging markets at LinkedIn, and led business development and marketing as the
CMO (Chief Marketing Officer) at SingularityNET, a decentralized marketplace for AI
algorithms.
Backers
Raising a total of $31.4 million through a private sale, strategic sale, and token
distribution auction (TDA), Alethea AI sold tokens to many distinguished institutions and
individuals. Notable investors include Multicoin Capital, Gemini, Galaxy Interactive,
Dapper Labs, Binance, Mark Cuban, and Meltem Demirors, among others.
ALI Tokeneconomics and Utility
The Artificial Liquid Intelligence (ALI) token was launched on Ethereum as an ERC-20
token with a 10 billion maximum supply and 790 million ALI (7.9%) initially unlocked.
Alethea AI locked 200 million ERC-20 ALI (2% of the maximum ALI supply) from the
Ecosystem Development reserve to launch the ALI token on the Cronos Chain. Vesting
schedules and Ethereum addresses containing the ALI allocations shown in the graphic
above are listed in Alethea AI’s whitepaper.
The ALI token is used to exchange for off-chain ALI credits on Alethea AI’s metaverse
Noah’s Ark. All transactions and staking within the metaverse are conducted with ALI
credits off-chain, which saves users on gas but makes them reliant on Alethea AI to
provide robust infrastructure.
When staking Personality Pods, users can train the underlying AI to perform tasks
according to its intelligence level. The intelligence level is determined by the amount of
ALI credits staked to it. By staking ALI for more capabilities, ALI becomes a tokenized
manifestation of the total intelligence that is available in Noah's Ark.
Following the iNFT Protocol, when users fuse their Personality Pod and NFT together to
create an iNFT, the amount of ALI locked that determined the Personality Pod’s
intelligence level will then represent the intelligence level for the iNFT and, hence, the AI
Services available to it. As the iNFT performs activities at its intelligence level, users will
be able to see a tangible relationship between locking ALI and increasing their iNFT’s
access to AI resources.
ALI is also planned to be used as currency on the ecosystem’s application layer and
within Noah’s Ark. Ad-hoc entities building out apps on the application layer — and
utilizing the protocol layer to create iNFTs — will pay Alethea AI in ALI to access its AI
Engine. Within the metaverse, Alethea AI will launch a market allowing iNFTs and users
to trade iNFT-created content, Personality Pods, and portals (a digital asset that will
allow an iNFT to create its own metaverse — portals also have yet to launch).
Alethea AI also plans to use ALI as the platform's on-chain governance token, though
the project has yet to produce a plan for how it will administer a DAO (decentralized
autonomous organization). ALI plays an essential role in the protocol that allows
Personality Pods to access more bandwidth to intelligence from the AI Engine. And its
importance will only increase as Alethea AI develops a governance model and launches
more features within its ecosystem. It plans to add support for the CRC-20 version of the
ALI token, though has yet to announce an intended date of implementation.
Competitive Analysis
Alethea AI is an artificial intelligence company that utilizes blockchain technology to
achieve its goals. As it attempts to bridge the gap between AI and Web3, the project
faces competition from more-developed AI-avatar projects not utilizing blockchains at all
and projects similarly building with both technologies. The competition in the AI and
Web3 industry is fierce as many projects are well-capitalized with notable investors.
In the Web2 space, Alethea AI is threatened by Replika, Soul Machines, Inworld AI, and
Synthesia should they consider building products on Web3. More direct AI competition
with live NFTs as of June 2022 includes Botto, Nanopass, Voiceverse, and Altered State
Machine (ASM). Web3 competitors without NFTs or that have yet to launch their
collections include Irreverent Labs and AI Arena.
Web2
The graph above is not perfect and favors projects with less ambitious or simpler
roadmaps that have executed what they have proposed. Less complicated than Alethea
AI, most of its Web2 competition has live products, and half of them focus on selling to
enterprise clients. Soul Machines creates digital people powered by AI to outsource the
business side of customer experiences. Synthesia allows people and businesses to create
synthetic content with digital or human avatars that can be used for training videos,
explainers, or other corporate communications. With closed-source technology and an
enterprise business model, transitioning into Web3 would require Soul Machines to build
products that less-capitalized consumers could afford without jeopardizing the pricing of
clients within its enterprise business model. It would be a balancing act of providing a
product for the masses while keeping existing customers satisfied despite the alternative
product.
Consumer-focused AI competitor Replika hosts digital companions for people to talk to
and build relationships with. A transition to Web3 would likely satisfy Replika’s user base,
giving users the power to own the AI avatar they have built a relationship with. Because
Replika’s business model is subscription-based, it may be encouraged to build a
permissioned metaverse where only subscribers could enter and interact with their
digital avatars, maintaining the profitable part of its Web2 business model.
More aligned to Alethea AI, Inworld AI has built a developer platform for creating AIpowered virtual characters. The platform allows developers to create characters specific
to various immersive realities like metaverses, VR/AR, and games. Alethea AI will remain
unthreatened by its competitors unless they hatch plans to move products into Web3.
Synthesia’s and Soul Machines’ virtual content provides a live alternative product to
Alethea AI’s planned AI Services for iNFTs at high intelligence levels. Tokenizing Replika’s
avatars to be used in a permissioned metaverse (my idea), would add another intelligent
metaverse product into the fray, likely diverting some Alethea AI users, though not
prohibiting them from accessing both ecosystems. A Web3-integrated Inworld AI would
threaten Alethea AI the most with its customizable intelligent avatars that could be
composable across virtual systems. This would take from the novelty of creating iNFTs
that could be used across applications that utilize the iNFT Protocol. Again, however
much of a threat Web2 poses to Alethea AI, it will only be tangible upon Web3
implementation.
Web3
Of all of the Web3 competitors, only Botto and Altered State Machine have launched
tokens accompanying their AI-NFT projects. From the graphs, both Botto and ASM
exceed Alethea AI in ERC-20 token holders and transfers. Although transfers can
indicate network activity, Alethea AI’s product functionality is largely conducted off-chain
via ALI credits that can be redeemed for on-chain ALI tokens. Regarding holders, Botto
and ASM are both exclusive to Ethereum while Alethea AI also launched 2% (200 million
ALI) of its maximum ALI supply to the Cronos Chain. On Cronos, ALI’s transfers exceed
its Ethereum competition and its holders nearly match its ERC-20 counterpart.
Unlike Alethea AI, Nanopass, Voiceverse, and ASM, Botto is not planning to directly
integrate AI into its NFTs. Although the core components of the Botto project are live,
making it appear further along in development than Alethea AI, it is a simpler project
with a primary commitment to an interactive process for making art, not creating AIpowered metaverses at scale. Botto is a DAO that governs a decentralized autonomous
artist where BOTTO token holders vote on which creations get minted as NFTs. Alethea
AI is more complex and competitively aligned with projects that seek to imbue AI into
NFTs like Nanopass, Voiceverse, and ASM.
Nanopass and Voiceverse have yet to launch tokens but plan to do so. Although their
NFT collections can be found on OpenSea, they still have yet to launch their respective
protocols. Nanopass is planning a metaverse with intelligent avatars while Voiceverse is
focused on tokenizing audio that can be applied to NFTs and potentially implemented in
various metaverses like Sandbox or Decentraland. Of Alethea AI’s direct competition,
ASM is the furthest along and has the most replete documentation explaining its
protocol. Although ASM’s version of intelligent NFTs has a similar structure to Alethea
AI’s, the project differs in how it's implementing the AI training infrastructure.
ASM plans to launch a metaverse with different worlds for various purposes from finance
to chatbots to gaming. Its AI agents will be trained in metaverse “gyms,” and actions
learned from the training will be stored on IPFS (InterPlanetary File System), a distributed
file system for storing data. Because hardware infrastructure is required for training, and
these gyms can be located in multiple worlds within its metaverse, ASM is planning to
administer a de facto GPU cloud computing marketplace where providers will run
training algorithms for specific ASM applications (like bots for DeFi markets or an egame), and users will pay for training with the ASTO token.
Though still in the early stages of product development, many of Alethea AI’s
competitors are well-capitalized. Notable investors for ASM include Coinbase Ventures,
Animoca Brands, the Chernin Group, and Warner Music Group. AI Arena — of which
little is known — is backed by Paradigm. Irreverent Labs, which is building the AI-NFT
game Mecha Fight Club, is backed by a16z, Solana Ventures, Mantis VC (aka The
Chainsmokers), and other investors. Genies, which is focused on building social avatars
on Flow rather than integrating with AI, is funded by Bob Iger (ex-Disney CEO), Silver
Lake, and more, and has partnerships with Universal Music Group and Warner Music
Group. As Alethea AI makes Fusion, Unfusion, and Intelligent Debates publicly
accessible, it will further separate itself from its competitors; however, it will still be
threatened by the sneaky releases of peers with deep pockets and private roadmaps.
Critiques
Although Alethea AI is the most developed AI project crossing into Web3, it does not
escape the shadow of critiques cast by an observant eye. Many aspects of the protocol
run on centralized infrastructure, especially its AI Engine. Its project source code is
closed-source, and because of the permissionless nature of owning and training iNFTs,
Noah’s Ark has the potential to become an intelligent and generative virtual universe
with the values of 4chan.
Centralized
Alethea AI explains that its AI models are processed on centralized infrastructure
because no decentralized alternatives are available. After exchanging correspondence
with Greg Osuri, founder of the Akash Network, a decentralized cloud computing
protocol, he confirmed that there have yet to emerge decentralized infrastructure
options for handling the data-intensive workloads that artificial intelligence systems
require.
In addition to the inherent lack of centralization from AI processing, managing the
transaction activity of ALI credits on Noah’s Ark requires users to trust Alethea AI
systems. Although users connect with a non-custodial wallet to utilize Noah’s Ark, they
must deposit ALI tokens into the platform to receive the equivalent in ALI credits. So
when staking ALI to increase the intelligence level of a Personality Pod, one is staking
ALI credits, and a transaction is not recorded to Ethereum.
Artificial Uncertainty
An iNFT will only be as ethical as the dataset that trains it. Because Ethereum is
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