a16z 2024 Industry Prediction: Blockchain to Enhance Security for AI, SNARK, and Account Abstraction

The crypto venture capital firm a16z has put forward seven future trends in the crypto industry for next year. The team predicts that blockchain will bring more security for AI, and technologies such as SNARK, modularity, and formal verification will become mainstream in the industry.

By predicting the possible developments in the crypto industry for the coming year at the end of this year, the a16z team helps readers quickly understand the industry dynamics and development status, preparing for market changes next year.

This article is compiled and organized. For any ambiguity, please refer to the original text.

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AI + Blockchain

Decentralized AI Resource Supply Network

a16z believes that decentralized blockchain serves as a counterbalance to centralized artificial intelligence. Currently, due to the high costs of computation and training data, AI models can only be trained and operated by a few tech giants.

However, with a decentralized network, a multilateral, global, permissionless resource market can be created, where anyone can contribute computing resources or datasets to the network and receive rewards, this long-tail resource model will make AI technology more accessible to the general public.

Blockchain Verification Network for Massive Information

The prevalence of deepfakes is facilitated by AI technology. a16z believes that the information verification issues caused by AI can also be addressed using encryption technology.

In addition to using blockchain to verify the authenticity of information, decentralized technologies can be used for democratic governance to ensure the maximum authenticity of information, ultimately making consumers more secure.

Decentralized Incentive Models for Controlling AI Operations

In the future, games and metaverse content are likely to be produced by artificial intelligence. Therefore, AI agents in games must ensure that they operate based on certain models and directions without compromising the integrity of the game. For example, AI disrupting the balance mechanism of the original game or introducing repetitive scenes and plots.

When artificial intelligence becomes the game developer, where stories, terrains, enemies, and logic are generated programmatically, people would want to know if the game developer can remain neutral and operate normally. Ideally, the game world should be guaranteed and not prone to random breakdowns.

a16z believes that decentralized networks and token economies can provide the aforementioned assurance mechanisms. For instance, in the event of AI issues, the tokens staked by AI agents can be withdrawn as a penalty, similar to the consensus mechanism in most decentralized networks. This is an application of incentive models, which is something the crypto industry excels at.

In the future, AI agents could potentially be integrated into decentralized network incentive models to control their behavior through economic incentives.

Reshaping User Experience

Since 2016, there hasn't been much change in the user experience in the crypto field. Mainstream crypto wallets still operate in the same way. The usage of crypto products remains too complex: managing private keys, connecting wallets to DApps, signing transactions, etc., which goes beyond what users can learn in a few minutes.

In recent years, developers have been actively improving UX-related features of crypto products, including:

• Passkeys: Simplify the process of cross-device login for users. Since the keys are automatically encrypted, they offer greater security compared to traditional user-set passwords.

• Smart Accounts: Make accounts programmable, allowing for more operations and easier user management.

• Embedded Wallets: Built into applications, allowing users to register and log in using conventional methods such as email registration, while simultaneously creating wallets on the chain, making the login process smoother.

• MPC Wallets: Make it easier for third parties to support signatures without hosting user keys.

• Advanced RPC Endpoints that can intelligently identify user intent requests and provide appropriate responses.

All these improvements not only help make Web3 more mainstream but also enhance user experience to be better and more secure than Web2.

Advantages of Modular Architecture Enhanced

The advantage of a single architecture blockchain lies in deep integration and optimization, leading to higher performance, but it still has its limitations.

However, open-source modular technology stacks have the greatest advantage in enabling permissionless innovation, allowing participants to specialize and incentivize more competition. It provides a more flexible and diverse way to enhance efficiency.

Continual Optimization of Chain Game Economic Models

In the past, play-to-earn (P2E) game designs typically rewarded players based on the time and effort they put into playing the game, but this trend is changing.

Games are not designed to be jobs, at least not for most players. What the market truly needs are games that are both fun and allow players to create value. Therefore, the a16z team believes that P2E games will gradually evolve into play-and-earn (R&E) games, where existing games will continue to iterate rapidly and optimize their economic models to draw a clearer line between gaming and work.

In the future, we can expect to see more chain games created using new economic models, perhaps even eliminating the concept of tokens.

Formal Verification Applied to Smart Contract Development

Formal verification is a development technique that uses mathematical and theoretical simulations to predict potential errors and issues in a product. While this technique is popular in hardware system designs like IC chips, its benefits are limited for software developers due to the ease of software iteration and the complexity of technical requirements.

However, the a16z team believes that formal verification techniques are gradually being used in the market for smart contract development. Smart contracts are different from regular software as they cannot be modified once deployed without backdoor code, especially for protocols that require a high level of decentralization. On the other hand, mainstream smart contracts handle funds amounting to billions of dollars and cannot afford any technical issues.

Therefore, formal verification and simulation technologies are starting to be used in the industry for smart contract development to predict potential contract issues, replacing traditional testing methods to enhance security.

In the past year, many similar tools have emerged in the market. For example, SMT solvers use the atomicity and determinism of smart contracts as a basis to identify errors that should not exist in contract logic.

With more developers and security experts adopting tools like formal methods, we can expect that future smart contract protocols will be more robust and less susceptible to hacker attacks.

NFTs Becoming Brand Assets

More and more renowned brands are introducing products and marketing campaigns to consumers in the form of NFTs. For example, Starbucks launched the Web3 loyalty program Starbucks Odyssey, allowing customers to earn additional products and NFT rewards while shopping.

In addition to Starbucks, Nike, Reddit, Coca-Cola, and Louis Vuitton LV have developed digital collectibles as NFTs and explicitly used them for sales to their audience.

However, a16z believes that NFTs can do more for brands than just selling low-cost NFTs as consumer products. For instance, NFTs can be used to represent customer identities and enhance community belonging; or they can be used with the most loyal brand fans to collaboratively create new products and experiences, increasing brand affinity.

SNARK Becoming Mainstream

Developers have traditionally used the following strategies to verify information:

• Re-running calculations on a trusted machine.
• Executing calculations on a machine specifically designed for the task, known as a trusted execution environment (TEE).
• Executing calculations on trusted infrastructure, such as a blockchain.

These methods have limitations in terms of cost or network scalability, leading many developers to turn to SNARK technology within zero-knowledge proofs (ZKP).

SNARK is a succinct and non-interactive zero-knowledge proof technology that provides an encrypted "receipt" for verification parties to verify information without interacting with the encryptor, significantly improving verification efficiency. Since the encryptor cannot forge "receipts," there are no trust assumption issues.

a16z specifically mentions that this technology is expected to grow next year due to a breakthrough in technical efficiency, with computation costs increasing nearly 1000 times. Therefore, SNARK may be the appropriate solution when the computing provider can bear the cost, and the client cannot rerun or store the initial data, such as in scenarios where IoT edge devices can verify upgrades or media editing software can embed content authenticity and edit history.

Predictions Continuing Hotspots in Technological Development This Year

The above predictions largely approach from a technical standpoint, providing insight into what values a16z team emphasizes. The mainstream narrative is still dominated by modularity, AI, zero-knowledge proofs, and account abstractions, continuing the hotspots in technology this year.

While less mentioned by the a16z team, product application innovation focuses on chain game economic models that are sure to be updated, and NFTs as brand assets are not new. Applications like liquidity staking, BRC20, and DePIN are not mentioned in terms of whether they will continue to develop in 2024.

Regardless of how Bitcoin prices are in 2024, there are many new things worth looking forward to. The Web3 industry is rapidly evolving, with nearly every prediction in rapidly developing areas, and next year will undoubtedly see many new emerging technologies and product areas not covered above.