Blockbuster AI Token Merger Reshapes Crypto M&A
April 2024
Overview
Artificial Intelligence has been a key narrative in the crypto space this year, culminating in the monumental token merger announced by three of the biggest players in decentralized AI. Fetch.ai, SingularityNET, and Ocean Protocol will combine their tokens together to form a new entity called the Artificial Superintelligence Alliance, and create a new token called $ASI to coordinate efforts under the new organization. The goal of the alliance is to compete with centralized AI companies like OpenAI, Google, Facebook, and others to offer a decentralized and democratized AI platform for users to share their data and use AI-enabled products in a trusted manner. This push for a more open-source and decentralized technology stack for AI is in response to the frustrations voiced by both users and developers in recent years as centralized learning models have been plagued with bias, hallucinations, and other weaknesses caused by ‘walled garden’ data structures.
The new alliance will function similar to a joint venture, where the three individual protocols will still exist and operate independently of each other. However, there will be a governance council similar to a board of directors that will have leaders from each project participating in to help govern the $ASI token and community. The council will include Humayun Sheikh from Fetch.ai as Chairman, Ben Goertzel from SingularityNET as the CEO, and Trent McConaghy and Bruce Pon from Ocean Protocol.
The rationale for merging the three projects was based on the belief that their combined efforts would be more impactful than if they operated separately. All products and services offered by the three projects will be accessed and paid for through the new ASI token which unlocks unrealized synergies and cross-selling opportunities for all three communities. Additionally, the alliance can leverage each other’s resources and research to enhance its product suite and services provided.
Protocol Breakdown
The new alliance’s $ASI token will be created by converting all of Fetch.ai’s token ($FET) to $ASI at a 1:1 ratio. This means that if you currently own 100 $FET, it will be converted to 100 $ASI. Additionally, all SingularityNET and OCEAN tokens ($AGIX and $OCEAN respectively) will be converted to $ASI at a fixed rate of 0.433226 $ASI per $OCEAN and 0.433350 $ASI per $AGIX. The combined value of the ASI token is projected to be worth ~$7.5 billion with 2.631 billion total supply of tokens. To reach this new total supply of 2.631 billion tokens, there will be an additional 1.48 billion $ASI minted with 867 million $ASI allocated to $AGIX holders and 611 million $ASI allocated to $OCEAN token holders.
Although the total market capitalizations of the three projects fall approximately 16% below the $7.5 billion $ASI valuation projected in the press release, the tokens are currently trading in accordance with the proposed allocation of new $ASI tokens post-merger, as highlighted in the pie chart below.
The merger was approved by all three communities in April 2024 and the process of the new $ASI token distribution will start in the coming weeks. The token prices of all three tokens will likely continue to trade in lockstep as clever arbitrageurs will detect any price gaps between the tokens and exploit them to restore balance and stability in the exchange rates.
Potential Benefits
The alliance was created to draw on all three projects’ strengths to establish a vibrant decentralized AI platform and community that is more resourceful as a whole rather than separate entities. The merger combines Fetch.ai's sophisticated autonomous AI agents and blockchain framework, SingularityNET's extensive history of AI research and integration, and Ocean Protocol's capabilities in data sharing and monetization.
Fetch.ai has built a robust decentralized platform to share and utilize AI agents to create AI-enabled products and services. AI agents are designed to perform tasks autonomously, typically within a specific environment or domain. These agents are equipped with algorithms and rules that enable them to perceive their environment, make decisions, and take actions to achieve their goals. Businesses can easily discover relevant AI agents to optimize their business with less censoring and bias compared to centralized AI providers due to Fetch.ai’s decentralized nature.
SingularityNET has established a strong reputation in the AI space for its deep research in the realm of artificial general intelligence (AGI) and decentralized networks. Led by the well-known researcher Dr. Ben Goertzel, the community has released multiple papers and studies that helped advance decentralized AI, along with other products and services to help facilitate the discovery of AGI. Dr. Ben is also well-known for leading the software team for Sophia, the first functioning AI humanoid robot that is also integrated within the SingularityNET ecosystem.
The Ocean Protocol formulated a unique incentive structure through its blockchain network that encourages users to share and monetize their data. It provides a platform where data providers can tokenize and publish their data, while consumers can access and purchase these data assets using cryptographic tokens. Ocean Protocol’s scalable technology and tools are currently showcased on a large scale through the increased traction of its Predictoor product, which is used for crowd-funded prediction markets.
Through utilizing Fetch.ai’s network of AI agents, SingularityNET’s extensive research base, and Ocean Protocol’s secured data sharing products, the alliance is equipped to compete with other more centralized AI players and achieve its goal of decentralized AI. By merging its tokens together, it will create additional cross-selling opportunities into each others communities now that the single $ASI token can be used to access products and services from all three ecosystems. This combined effort is building towards one of the original goals of the ERC-20 token, which was to enable more collaboration, partnerships, and value between multiple economic actors while maintaining decentralization. The new $ASI token can be utilized across multiple decentralized apps (dApps) with added utility, liquidity, and interoperability to offer a more transparent and moral AI experience for its users.
The concept of creating alliances with your competitors may seem silly, but the strategy has shown to work in the past so much that the term “coopetition” was created. The coopetition strategy is frequently used by companies operating in up-in-coming industries that still have potential room to grow. In this scenario it’s better to partner with your competitors to grow the industry as a whole, similar to the “grow the pie” strategy. Artificial intelligence is positioned well for this strategy since the technology and companies in the industry are still young. Additionally, coopetition works even better for AI since the sharing of data and models only makes the product better. This is one of the competitive edges that decentralized AI has over centralized AI because the open-source model allows data to be shared more easily, allowing its products and services to have more training data and perform better in the long run.
While there are multiple synergies created by the three projects merging tokens, there are still significant hurdles and obstacles that the alliance must overcome in order to be successful.
Potential Obstacles
The biggest obstacle that the $ASI alliance faces is how it will execute the governance of the entity under its new structure. While there has been a council made up of leaders from all three projects established to lead the alliance, there is still some legal grey-areas that have not been fully addressed, despite the merger being approved by all three communities.
As highlighted in the legal paper “Three-Body Problem”, the token merger presents some challenges as the new alliance resembles a joint venture, but with the complexities inherent to decentralized structures. The governance process of all three projects vary slightly, and the decentralized nature of these decision mechanisms will delay execution of the alliance. This is the one weakness that decentralized AI has compared to its more centralized counterparts. While decentralization is widely valued, it slows down the governance process and can be detrimental to the alliance’s ability to react to dynamic changes within the AI market.
Additionally, the original token holders of $FET, $AGIX, and $OCEAN bought the tokens under drastically different circumstances and assumptions on how the protocols will operate. The new alliance council may have the incentive to act in the best interests of its community members, however under this new structure there is no fiduciary obligation that must be considered by the council. This may create a scenario where the community and executives have misaligned incentives, creating additional friction within the organization. Misaligned incentives can also arise if the three projects and the people leading them change the direction of their vision for AGI. This risk must be considered since the moral framework of artificial intelligence is still incomplete and will likely not be established until decades later in the future.
Crypto M&A
The $ASI token merger will be a great test to showcase how M&A can unlock more value in the crypto market. The supply of altcoins available in the liquid markets is extremely high compared to the actual number of people utilizing the coins. This situation is similar to the dot.com era in the late nineties where there were too many new websites trying to solve the same issues in a given industry. The solution to this market dynamic is strategic M&A and rollup transactions to consolidate the industry. Many investors are asking if there are “too many tokens”, but since there is no precedent on how a merger is conducted between decentralized protocols, there haven’t been many transactions in the space.
The only major token merger that took place was between Fei Protocol and Rari. Fei Protocol was an algorithmic stablecoin that joined Rari’s defi ecosystem through the merger. Unfortunately, the merger wasn’t successful as the Fei Protocol was mostly phased out in 2022. However this transaction was more of a “last breath” attempt by Fei, compared to the $ASI alliance which was formed after each project has outperformed the broader crypto market YTD.
If the $ASI token merger is successful, investors can expect a wave of consolidation within the liquid altcoin market as projects look to M&A to create additional value for their token holders. Consolidation is usually present in industries that have crossed the chasm and have reached more adoption and maturity. The crypto industry is entering this stage as more institutions and governments begin to adopt the technology. This development will be magnified further as many VC owned tokens from last cycle begin to unlock over the next few years and are released into the market.
Conclusion
The Artificial Superintelligence Alliance is currently the best opportunity for decentralized AI to compete with centralized competitors. The token merger between Fetch.ai, SingularityNET, and Ocean Protocol combines the strengths of each protocol to create a robust AI platform tailored to the needs of both developers and users. If the alliance achieves its goals, it will reshape the internet by enabling AGI in a decentralized framework. While decentralization is the alliance’s greatest strength, it also serves as its greatest weakness due to the additional friction created in a decentralized governance structure. There is also no legal precedent available for a merger like this which creates additional regulation risk for its stakeholders. This means the success of this transaction will dictate future M&A transaction in the crypto space, which is becoming ripe for a new wave of consolidation.
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