Future Traders: AI Trading Bots Being Utilized in Blockchain

Artificial intelligence and blockchain are shaping the future of FinTech, and now they're teaming up.

AI bots are being used to execute trades in the digital assets market, a move that could make crypto more user friendly and help smooth out some of its infamous volatility.

Joining us to tell us more is Jack O'Halloran, CEO and co-founder of Scale Labs.

Good morning, Jack.

Thank you so much for joining us.

Well, first and foremost, to help our viewers understand better, can you explain the role that AI trading bots are playing in the digital asset market?

Yeah, it's a very interesting premise where you can actually have this intelligent bot, which before a few years ago, these bots we had were unintelligent.

Now you can tell when, hey, here's go, you know, take X amount of, of assets, go trade for me, deploy a strategy, make sure you are somewhat aggressive but somewhat conservative, and you can talk to it like it's a financial advisor.

Imagine if you're, you had a buddy who was, uh, You know, a hedge fund manager and they work for you full time.

Well, that's what these bots can do for any normal person, which really I think levels the playing field and brings up some new interesting features.

Yeah, and Jack, I understand that scale launch fair blockchain, the first L1 to eliminate MEV at consensus.

So tell us a little bit more about this and what's the goal here?

Yeah, well, I think the first thing to note is we look at blockchain today and in a lot of ways we're still in the early days.

We're in the stone ages, OK?

There's something called MEV which frankly is called maximal extractable value.

OK, that's the feature and what it is, it means that validators constantly are running bots that take money from individuals now.

If you're an individual and you just trade, you know, something twice a day or once a day, well, the vast, the amount, the full quantity of the manipulation or the value extracted is going to be low.

But if you're using an AI agent, that grows massively.

In addition, you know, with MEV, uh, we're limited in what features we can use in DFI.

In DFI, you can't even do limit orders.

You can't even do, you don't see any indexes, and that's because of MEVs.

So we're building fair.

Essentially to stop MEV and help DeFI come into the next stages and be able to utilize the gentech AI.

Yeah, and we all know that with opportunity comes risk.

So crypto traders can face an annual loss of up to $1 billion due to maximal extractable value across leading blockchains.

So can you weigh in on some of the risks here?

Yeah, well, you know, that's the thing.

There's already a risk any time you're trading, you're swapping assets, moving assets.

Well, throw in the fact that, you know, these, you know, validators could sandwich attack you.

You can be front run, you could be back run, and that's because validators get to see the transactions that come into the blockchain.

A blockchain is a transparent database, OK?

Now if you're trading on NYSE or NASDAQ, that doesn't exist.

No one can come in and see your trade in advance and And, and do something to take money from you.

Now you can do that in blockchain, but Bay because of its encryption, doesn't allow that to happen, which I think is pretty transformative.

And already billions of dollars are being taken from end users over the course of each year.

But on top of that, what's even more punishing is that we just can't utilize these features that you can utilize in, uh, traditional finance in DeFi.

So we're building this to help take DeFI to the next stage.

And speaking of which, can you weigh in on some of the technology that is underlying this because we hear about the intersection of blockchain and AI and how some of these bots actually work, but tell us about the technology.

Yeah, well, the beauty of blockchain is that it's this database that everybody who runs one of the servers gets to see all the information, OK?

And then the rest of us, if you're not running one of these servers or nodes, you can see clearly everything that's happening.

OK.

Now, with the technology that we're helping develop here, what it does is it actually encrypts that information so validators, the people who run these servers or nodes. can actually continue to do their job without being able to see information until it's public.

OK.

So it takes away the ability of people to have asymmetric information based off of what's coming into the chain, while at the same time, not hurting the piece of blockchain that works, that makes blockchain so great, which is the immutability, transparency, and coordinate decentralized nature of blockchains.

Yeah, and I want to hear about how the technology race is unfolding in the digital asset sector and where the technology actually goes from here.

Yeah, and I think it's so easy when you're in one of these nascent industries to think, oh wow, look how far we've come, and I worked in Mobil in the late 2000s and we thought we were there and There was a knee of curve growth that just was transformative.

You couldn't even use a mobile app in 2005 with any efficiency other than email.

2010, you have millions of people playing concurrent video games against each other on an iPhone, and I think we're at that moment where there's still a ton of growth left from an innovation perspective in blockchain.

And the current blockchains today literally could be made obsolete because all of them have MEV.

And I, you know, it's something that again it limits features and it takes money from end users and those things typically get washed out with tech technical advances, those types of bugs, if you look at historical examples in other industries.

Yeah, and finally, Jack, before I let you go, we all know that hindsight is 20/20.

So what does the next 5, 1015 years look like when we're talking about innovation here?

Well, when I look at blockchain, I think of, like, let's use a football analogy.

The lead blocker for us right now are stablecoins, OK?

And, and, and also I'll say Bitcoin.

Bitcoin's done a great job, but Bitcoin is a, an older technology that has a very clear value in terms of store value.

You go look at stablecoins, stablecoins are the lead blocker for smart contracts.

They're going to open up the market.

And smart contracts, I think, are going to transform the world.

This really means being able to program money based on logic, so you combine.

Blockchain technology like cryptocurrency and compute logic, and you can do amazing things.

Now, uh, stablecoins are going to lead the way.

We're going to have an exciting next couple of years, and I think, uh, stablecoins are not the end result.

Stablecoins will enable smart contract platforms to really come into existence.

Well Jack, we will have to leave it there, but thank you so much for simplifying this and throwing in a few analogies.

Thank you.