How AI-Crypto Will Lead to a Hyper-Financialized Future

We are moving into an era of hyper-financialization, in which anything that can become financialized will be. And it will culminate at the intersection of AI and crypto.

Through a wider use of markets, we are likely to see more seamless coordination across all aspects of society. The reason we can’t use markets in a broad set of society today is because there’s so much overhead in interacting with markets, which are valuable coordination mechanisms if the returns from interacting with it outweigh the expense and overhead.

Markets incentivize participation through potential financial gains, which makes them an effective system for coordinating economic activity. But if the cost of producing those incentives and executing on those incentives is greater than the return from those incentives, then an asset is essentially incompatible with markets, or the markets created for them are too inefficient to be viable.

Crypto has laid the groundwork for more autonomous, efficient financial markets, and enables us to codify critical market functions – like market making, settlement, debt creation, and more – such that the cost of leveraging markets with this infrastructure goes down. That significantly expands the universe of asset types compatible with markets.

This crypto market infrastructure gets us closer to the ultimate state of hyper-financialization.

Though crypto has introduced more efficient market infrastructure, inefficiencies still persist around human participation. Interacting with markets still requires manual effort, introduces individual biases, and relies on limited mental processing relative to AI capabilities. This friction increases the overhead of interacting with markets and leads to suboptimal coordination.

The final unlock to maximize market efficiency is AI: the most expressive technology we have. AI can act as highly capable, deflationary actors that reduce the inefficiencies of human actors in the market – capabilities like prediction, automation, and personalization at enormous scale and sophistication. This further chips away at the overhead of interacting with markets and slowly expands the scope of what markets can be used for.

The result of the convergence of these two technologies will be an explosion of novel financial markets for a wider range of societal…