By Steven Waterhouse, Founder & GP of Nazaré Ventures
For years, crypto’s positioned itself as the next great technological revolution. But as we witness the explosive rise of AI, it's time for crypto to face the truth: the true technological revolution of our era is artificial intelligence, and crypto will play a supporting role rather than be the star.
This isn't about diminishing the industry’s importance or the quality of what it’s built. I helped pioneer institutional investing in Bitcoin, and I’ve operated and invested in numerous companies building on-chain. I also earned a Ph.D in AI. The simple truth is that building intelligent systems that solve real-world problems should be the mission, whether or not blockchain rails are included.
With respect to pure crypto, the only segment left standing is DeFi. Objectively a better version of TradFi, DeFi boasts better engineering, programmability, and composability. This is properly captured with the meme: Internet Capital Markets. Stablecoins and tokenization have shown exceptional product-market-fit, and they remain crypto’s truest (read: only) demonstration of real tangible value to date. As such, the institutions are coming, and for good reason. BlackRock, Robinhood, and even crypto-native stalwarts like Coinbase are building out crypto products in the expectation of imminent regulatory clarity. Moving instant global payments and settlement along with more complex financial instruments on-chain is a no-brainer.
Otherwise, there’s AI. There’s TradAI like the big labs, model builders, and LLM providers. There’s open-weight AI like DeepSeek and Mistral. There’s open-source AI like Nous. AI apps like Cursor and Lovable. Agents like Manus. Robotics. And even Decentralized AI or Crypto x AI (we’ll get to that in a minute…). In short, there's already more demand for AI products and services than there has ever been for pure crypto applications.
This is captured by another meme: if you’re in crypto, pivot to AI.
This shouldn't surprise us. While crypto has struggled to find mainstream use cases beyond speculation and gambling, AI is already improving productivity and working its way into transforming industries everywhere across the world.
What’s more? A sobering reality for crypto – further accentuated by recent memecoin activity and what’s been colloquially called “crime szn” – has been the disconnect between token values and actual technological utility. While decentralized technology itself is revolutionary, the value captured by tokens has historically been driven more by memetic appeal than by genuine technological value creation (there have been calls to get grounded in “fundamentals” as of late, but we’ll see if it has legs…). This isn't necessarily a criticism – meme value is real value in many ways – but it highlights a fundamental weakness of crypto as a standalone industry.
This doesn't mean crypto’s rekt. In fact, blockchain and crypto protocols may become essential components of a future AI tech stack. But they'll serve as infrastructure underlying AI-first products and services, rather than as standalone products.
Consider ways to Make AI Cheap Again: distributed computing power for training and inference, verifiable computation and data provenance, tokenized access to computational resources, decentralized storage of training data, and transparent reward mechanisms for contribution. Distributed computing and DePIN architectures as well as transparent verification systems have proven their utility. But – and this is crucial – they'll do so in service of AI products and services that solve real problems for mainstream users who neither know nor care about the underlying technical infrastructure.
We could envision protocols built using blockchains generating revenue through licensing or usage and being paid in other tokenized forms of value like stablecoins – a model in stark contrast to the token-as-the-product model currently a la mode.
For founders and teams currently focused on crypto-native applications, this represents both a challenge and an opportunity. The challenge is expanding beyond the comfortable but limited crypto ecosystem, represented primarily by Crypto Twitter and [Insert Your Favorite Conference Here]. The opportunity is participating in the genuine technological revolution that AI represents.
What does this mean in practice? First, teams need to start thinking bigger. Founders should be asking themselves how AI can transform their target market, and then consider how crypto technology might help enable that transformation. This means fundamentally changing how we approach building and marketing crypto products.
Instead of starting with tokenization, tokenomics, or even blockchains in general, begin with real-world problems that AI could solve. Only then should teams identify where decentralized systems could enhance the AI, and implement these pieces of the stack where they genuinely add value.
Leverage crypto where it makes sense, especially where it can mitigate costs or improve efficiency, but keep the focus squarely on delivering value through intelligence and automation.
For example, companies could use blockchains to create decentralized marketplaces for critical processes, making AI more accessible and cost-effective (Vast.ai, a Nazaré portfolio company, does this for GPUs, and Orchid has been re-defining the internet and privacy with decentralized markets for years).
Agents might also use cryptographic verification or privacy systems to safely and securely act on our behalf online using our login information, identities and credit cards, or even private keys and wallets on-chain.
In both cases, crypto serves the larger goal of making AI systems more effective and trustworthy.
The companies that will thrive in this new landscape are those that understand this dynamic. They will either build AI-first products that incorporate crypto where it adds genuine value, or they will build crypto services explicitly designed to improve AI-based products or services. The market won’t support teams running around wielding the hammer that is blockchains treating everything like a nail.
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