Thursday links: Constraining AI, agent sandboxes, crypto incentives, investing in gold

The EF on AI

It’s easy to be cynical about “crypto x AI” announcements at this point; there have been so many, and so little has come of them.

But when the Ethereum Foundation — never known for being promotional — announces a mission to “make Ethereum the preferred settlement and coordination layer for AIs and the machine economy,” it’s worth paying attention. 

For all the promotional noise, there are still reasons to be optimistic about the intersection of crypto and AI.

For example, Balaji Srinivasan convincingly argues that the natural synergies between probabilistic AI and deterministic crypto will allow crypto to “constrain” AI.

Ben Horowitz makes a similar point, but more dramatically: “If we don't get to world class in crypto, AI has the potential to wreck society.” 

The Ethereum Foundation’s new initiative aims to make conceptual talking points more tangible.

Davide Crapis, who leads the effort, says “Ethereum makes AI more trustworthy” by “proving who an AI agent is and whether you can trust it” — and that a “decentralized AI stack” can ensure that the “future of AI doesn’t rely only on a handful of entities.”

I’m not sure the relatively slow and expensive Ethereum blockchain is where AI agents will choose to live.

But I do think the Ethereum Foundation is the right place to work out solutions to some of the innumerable problems this will create.

AI agents will have their own economy

A new study from Google DeepMind predicts the “spontaneous emergence of a vast and highly permeable AI agent economy” that will connect with the human economy in unpredictable ways.

The researchers warn that, left unchecked, this could pose significant risks to the real-world economy, including systemic economic instability and exacerbated inequality.

A “flash crash” in the AI economy might set off a domino effect that crashes the real economy, too.

“High-frequency negotiations” — the AI-agent equivalent of high-frequency trading — might exacerbate real-world income inequality. 

(Imagine your last-generation AI agent attempting to negotiate a deal with Sam Altman’s next-generation one).

“Agent traps” might scam your agent into handing over the login to your bank account. 

To preempt these dangers, the paper proposes a “sandbox economy,” where humans set the ground rules for agents to follow.

Much of this would be facilitated by crypto-related things.

Auction mechanisms could be used to fairly allocate resources among agents. “Decentralized identifiers” would act like passports for AIs. “Verifiable credentials” would provide cryptographic proof of personhood. Zero-knowledge proofs would ensure privacy. The “standardized, interpretable audit trails” they propose would almost certainly have to run on a blockchain.

Most crypto of all, they see a need to create “bespoke currencies” for AI agents.

I, however, have watched The Terminator too many times to believe AI agents won’t be able to break out of whatever “sandbox” we put them in.

The authors recognize the risk: “With permeable sandbox economies, there will always be some risk of contagion in which a crisis in the sandbox sparks a crisis in the real economy.”

But this is happening with or without a sandbox — and probably sooner rather than later. An unrelated group at Google announced this week that it’s developed a protocol to enable “agent-to-agent payments.”

Let’s hope they announce a sandbox soon, too.

Crypto incentives are changing the world

Crypto’s superpower is its ability to incentivize behavior: motivating people to mine bitcoin, validate Ethereum, share their WiFi, map roads, etc.

Now, though, crypto appears to be affecting behavior on a much larger scale. 

The New York Times reported this week that the UAE received US government approval to purchase Nvidia GPUs after it invested in the Trump family’s crypto project, World Liberty Financial.

Similarly, some attribute the Trump administration’s apparent preference for Pakistan over India — an odd reversal of the usual US stance — to be explained by “Pakistan's willingness to engage in business deals with the Trump family.”

(Specifically, the deal in which the Pakistani government hires World Liberty Financial to “integrate Pakistan into the future of global finance.”)

More concretely, Pump.fun has been paying significant “creator rewards” to attract streamers to its platform, and streamers have responded.

One earned $49,000 in rewards by provoking a well-known fitness influencer into slapping him, for example.

Worryingly, this appears to be a good business model, with Pump.fun recently earning about double what it pays out to creators.

For better or worse, crypto is escaping its sandbox.

The hidden cost of investing in gold

I’ve never wanted to invest in the absurdity of digging up gold in, say, South Africa, just to re-bury it in a bank vault in the US.

I’ve been regretting that decision financially as of late, but the historic gold rally is also exposing just how damaging it is to dig a store of value out of the ground.

The AP reports that the booming price of gold has caused a “mercury boom” in Mexico that’s poisoning both the local environment and the miners themselves.

Mercury is used in the kind of small-scale, illegal gold mining that’s become profitable only because investors have pushed the price of gold into the stratosphere.

“For the first time in their lives, mercury is worth something,” a medical researcher 

told the AP. “And the miners are saying: ‘It’s worth poisoning myself if I’m going to earn something.’”

Similarly, an academic study warns that "artisanal" gold mining in Brazil is rapidly destroying the carbon-rich peatlands that act as climate stabilizers by absorbing vast amounts of carbon dioxide.

Another study finds that forests in the Peruvian Amazon aren’t growing back after the land has been stripped of gold by small-scale miners. 

But it’s the personal stories from the AP report that really make the cost of investing in gold hit home.

It quotes a 75-year-old who’s been sick with mercury poisoning since he was 18, for example. And describes how miners cooking mercury at home have inadvertently sickened their children.

“This region isn’t just polluted,” a local researcher concludes. “It’s poisoned.”

Gold mining is sometimes said to be less environmentally damaging than Bitcoin, based on its lower carbon footprint.

But it’s impossible to read the recent reports on gold mining and think that’s still the case after all the environmental and health costs are considered.

Digging gold out of one hole to deposit it in another really is an absurd thing to do.

— Byron Gilliam

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