Driven by a demand for faster and more secure computing resources, investors are turning to decentralized AI startups as a novel solution. These companies, which use infrastructure like blockchain and cryptography to handle AI workloads, have seen a rapid rise in VC funding.
Decentralized AI startups have raised more money this year than the previous three years combined, according to PitchBook data. Investors have deployed $436 million this year, a nearly 200% increase from 2023.
Investment has been concentrated in startups trying to ease the burden of intense AI workloads by creating networks where unused computing resources can be rented out. These resources become tokens that can be purchased and used to host AI models.
Sentient reportedly raised $85 million in seed funding for its decentralized AI development platform from Peter Thiel’s Founders Fund in July. In August, Sahara AI raised $43 million in new funding for its AI blockchain platform from Pantera Capital and Binance Labs.
Investors are motivated by a belief that control of AI shouldn’t just rest in the hands of big tech companies like Microsoft or Alphabet. Hoolie Tejwani, head of ventures at cryptocurrency exchange Coinbase, said that the appeal of decentralized AI systems is more user control over their data.
“I don’t think anyone wants to live in a world where all our digital lives are controlled by a handful of mega tech corporations that have full access to all our most intimate data,” he said. “Applying decentralized systems, AI can be delivered in a way that’s more bottoms up, more grassroots, more user-centric.”
Tejwani said that decentralized AI companies can reduce costs and provide more security and privacy. But other crypto investors have been skeptical of whether AI models can run and perform well when spread out on various hardware nodes. Tejwani admitted that the capability to run large frontier models like OpenAI’s GPT or Anthropic’s Claude on decentralized networks is far away, but he remained optimistic for the future.
“AI is going to consume and be interwoven into everyone in our digital lives. Crypto and blockchain are no exception,” he said.
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