Artificial Intelligence and blockchain are two of the up-and-coming technologies that are redesigning the world as we know it with every passing day. As AI attracts the attention of tech communities and businesses worldwide, according to a report by Accenture, artificial intelligence can possibly add $957 billion, or 15% of India’s present gross value in 2035. Similarly, India has also witnessed increased rates of blockchain adoption in recent years, as the technology has had applications in different domains such as finance, cybersecurity, the pharma supply chain, and more.

Separately, blockchain and artificial intelligence each have their own sets of business implications. However, once combined, the two technologies hold the potential to bring radical changes to a broad assortment of industries — including the financial sector.

With this post, we intend to give you a good look at the different features of both blockchain and artificial intelligence that can complement each other, as well as address one another’s pain points, and how the convergence of the two benefits the financial industry in particular.

How Can Convergence with the Blockchain Technology Help AI?

Blockchain is, at the most basic level, a distributed ledger; and this particular characteristic of blockchains is of potential interest for artificial intelligence applications. To begin with, the decentralized nature of blockchains enables convenient sharing of data between AI devices.

In the past, sharing information using traditional databases has led to miscommunication and loss of data for AI models. But the transparency of blockchains, as well as its immutability and auditability make sure of secure data sharing, which in turn increases the developer and consumer’s faith in different AI devices. Additionally, blockchains might serve as a global registry for AI data and models, provided the necessary permissions.

And How Exactly Does Convergence With Artificial Intelligence Aid Blockchain?

While blockchain faces some technology-related trouble, most of its problems come from the fact that the majority of the general populace is used to the centralized structure of financial services, and seems to be suspicious of the transparent nature of blockchain. However, AI can help blockchain out with both kinds of limitations faced by the technology.

Firstly, the concept of mining (a mechanism that ensures a blockchain remains decentralized) is entwined with blockchain, but it requires a lot of computational energy, not all users can afford. However, AI can efficiently optimize the energy consumption, and lower the level of investment users have to make in mining hardware.

As for the privacy and security issues barring blockchain’s mainstream adoption, artificial intelligence might be able to introduce ML (machine learning) techniques such as federated learning, and new data-sharing systems to ensure the security of sensitive information on the blockchain. Indeed, the advancements made in machine learning in the past few years make AI suitable to guarantee the security of the blockchain.

Why Can the Combination of Blockchain and Artificial Intelligence Prove Advantageous for the Financial Industry?

Artificial intelligence coupled with blockchain technology can yield powerful results for the financial industry. Here are only a few reasons why the convergence of blockchain and AI can strengthen financial systems across the globe:

• Maximum Security to a Payment Network:

While blockchains are quite difficult to hack, as mentioned before, there are some security concerns prohibiting its global adoption. However, by leveraging the AI and ML technologies, payment networks based on a blockchain can root out any irregular activities happening in a blockchain account immediately, and alert the account owner. Plus, the implementation of AI devices can ensure that technologies like behavioral analysis and biometrics can extricate any sort of security weaknesses in payment networks.

• Automatic, Safe Financial Transactions:

Full automation of financial activities could pose threats to the financial sector if some calculated restrictions aren’t placed. So, to smoothly conduct a financial transaction while ensuring the protection of the fund being moved, a combination of blockchain and artificial intelligence is much needed. For instance, smart contracts on a blockchain can initiate an automatic transaction while AI devices look for any unexpected activities. Plus, merging blockchain-based smart contracts with artificial intelligence would also mean that AI instruments can verify the smart contracts themselves and sniff out any vulnerabilities that scamsters might exploit. Therefore, a combination of AI and blockchain would bring about an infrastructure that can enable transparent, swift, and secure financial transactions.

• Cost-Effective Systems:

It’s undeniable that a blockchain network is relatively costlier than traditional banking and financial services to maintain, majorly because of the investment in mining equipment. This is another of the reasons why merging AI with blockchain-based solutions is ultimately beneficial for financial service providers, since artificial intelligence can help reduce the cost of upkeeping a blockchain. Plus, combining both technologies would also maximize your returns, while also being profitable for the customers.

The convergence of blockchain and artificial intelligence would also bring about several challenges for developers to solve, like the fact that AI focuses on centralized intelligence on close data platforms, which directly tampers with blockchain’s decentralized nature. Additionally, blockchains are uneditable as of right now, so developers also must come up with solutions to ensure AI devices don’t have to work with data that is wrong or backdated. However, once we find a definitive way to get blockchain and artificial intelligence to work together, it’s safe to assume that the overall positive implications of the combination can and would be amplified in no time. At Giottus, we’re excited to be witnessing, and anticipating these times for cryptocurrencies, both in India and globally!