Unlocking the Future: How Crypto Can Power Open-Source Generative AI

The rapid evolution of generative artificial intelligence (AI) and Web3 technologies has marked a significant milestone in the digital world. This intersection is currently one of the most active areas of research and development, aiming to leverage decentralized compute, zero-knowledge AI, smaller foundation models, decentralized data networks, and AI-first chains to enable Web3-native rails for AI workloads. However, the integration path between Web3 and AI may be more financial than technical. This article explores how crypto infrastructure could address one of the biggest challenges in open-source generative AI—funding.

The Need for Open-Source Generative AI to Succeed

Despite the advancements in decentralized generative AI, the gap between decentralized and centralized AI technologies is widening. Centralized AI platforms, backed by tech giants like OpenAI/Microsoft, Google, and Anthropic, continue to accelerate their development at an unprecedented pace. In contrast, decentralized AI platforms face monumental adoption challenges, such as the impracticality of decentralized compute for pretraining and fine-tuning workloads, the high costs of zero-knowledge ML, and the unresolved issues in decentralized data marketplaces.

The Role of Open-Source Generative AI

A healthy open-source generative AI ecosystem is crucial for the success of decentralized AI. However, the reality is that open-source generative AI is experiencing a massive funding crunch. The astronomical costs of building large frontier models, which can range from ten to a hundred million dollars for a single pre-training cycle, fall outside the budget of most university labs. This funding issue is exacerbated by the fact that many grants for AI university labs come from large tech incumbents, who are the immediate beneficiaries of the outputs.

The Funding Challenge

The funding challenge facing open-source generative AI is significant. While companies like Databricks, Snowflake, Meta, and well-funded startups like Mistral are making strides, the costs involved in developing large foundation models are prohibitive for most other labs. The traditional difficulty of monetizing open source is magnified in the context of AI due to the scale of computational requirements.

Current Funding Models

Current funding models for open-source projects are insufficient for the needs of generative AI. Traditional grants and venture capital are not viable solutions for the high costs involved in AI development. This has led to a situation where only a few well-funded entities can keep up with the performance of large closed models, while the majority of open-source efforts focus on complementary techniques rather than new models.

Crypto Capital for Open-Source Generative AI

Crypto infrastructure offers a promising alternative for addressing the funding crunch in generative AI. Throughout its history, crypto tokens have been a primary vehicle for capital formation for Web3 projects through both bull and bear market cycles. The programmable finance and capital formation capabilities of crypto could be harnessed to support open-source generative AI.

Gitcoin Quadratic Funding

One of the most successful examples of funding open-source innovation in Web3 is Gitcoin, which uses a quadratic funding mechanism. This mechanism could be applied directly to generative AI. For instance, a university AI lab needing to raise $10 million for pre-training a large language model (LLM) could leverage Gitcoin grants. Multiple DAOs and foundations could contribute to the grant, which would also be matched by grantors, creating a more efficient funding mechanism compared to current alternatives.

A New Open-Source Generative AI License

Another innovative funding mechanism is the establishment of a new open-source generative AI license. This license would require any commercial application using a model funded with Web3 tokens to contribute a portion of its revenue back to the original funding community, enforced via smart contracts. This approach ensures that the value created by open-source projects benefits the funding community, creating a sustainable funding model for generative AI.

Addressing Systemic Risks

The lack of proper funding channels for open-source generative AI poses a systemic risk to the entire space. If the funding gap is not addressed, the balance will shift entirely towards closed commercial platforms, stifling innovation and diversity in AI development. By leveraging the sophisticated and battle-tested channels for funding open-source innovation that crypto has established, we can mitigate this risk and foster a more balanced and inclusive AI ecosystem.


The intersection of generative AI and Web3 holds immense potential, but the financial integration of these technologies is crucial for their mutual success. By adopting crypto-based funding mechanisms such as Gitcoin quadratic funding and new open-source licenses, we can address the massive funding challenges facing open-source generative AI. This approach not only bridges the financial gap but also ensures the sustainable development of decentralized AI, ultimately benefiting the entire digital ecosystem.

Future Directions

Looking ahead, the continued collaboration between AI and crypto experts will be essential. Exploring additional crypto-based funding models, developing new decentralized compute solutions, and enhancing the efficiency of zero-knowledge AI will further solidify the role of Web3 in the AI landscape. The future of generative AI depends on our ability to innovate both technologically and financially, ensuring that open-source projects have the resources they need to thrive.

Call to Action

To support the development of open-source generative AI, stakeholders across the AI and crypto communities must come together to create robust funding mechanisms. By contributing to initiatives like Gitcoin grants and advocating for new licensing models, we can ensure a diverse and vibrant AI ecosystem that benefits all.

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