Decentralised AI Could Trade Up Lost Bitcoins (and Other Stories)

8 Jul 2024

How could decentralized AI enhance data security, transparency, and trust in the Bitcoin blockchain?

By tracking, monitoring, and narrating about lost bitcoins in a way that makes us retain hope even when all is lost.

If you think this isn’t worthwhile, check the above graphic. Look at all the money it is sucking from active BTC.

What is decentralized AI?

Decentralized AI is simply AI on the blockchain.

Now it doesn’t mean that any user of a blockchain will be somehow running a fully trained, Artifically Intelligent GPT with 1 billion parameters, on their Bitcoin node or wherever.

No. That is impossible. No matter what the Ethereum or the ICP White Papers say (something about infinite compute on the blockchain, ridiculing the simplistic “Bitcoin calculator”).

The AI remains on the cloud. Basically, Amazon servers and Microsoft servers. Like ChatGPT or Claude or Meta AI right now. But it is then fine-tuned for value creation after “errors” / losses on the blockchain.

Like if you accidentally send your bitcoins to 1111111111111111111114oLvT2.

What’s the deal with lost BTC?

Here is my hunch. It sounds grossly pessimistic, but here it is.

Bitcoin was invented to save us from inflationary boom and bust cycles, and coupled with AI, it looks like the sky is the limit.

Scrap that, the Moon.

But frankly, every technological system we humans have ever built resets and refreshes.


Because errors are accumulated in the system.

Every. Time.

Bitcoin, for one, is full of sus frog jpegs.

Bitcoin and even AI, as they have been set up today, will collapse from major failures to address the needs of most people. The people who need food and not virtual money or some smart box telling them smart stories about the world.

But it needn’t happen in a sort of regressive mode. That would be like saying during the change of governments, citizens have to redefine the meaning of government before electing their next leader.

To sort of upend the definition of that social contract?

Now, that would be humbug.

There will never be a perfect reset. No time t when Bitcoin or crypto as a thing will cease to exist, we try to think about it critically with our fine-tuned inner homo economicus, and then we reboot Bitcoin with version 2.0.

It will evolve. Stumbling forward with updates, forks, scams, rug pulls, et al.

How to add value to lost BTC

For example with the altcoin ecosystem e.g. on ICP, creative developers can quickly build a layer on top of the ICP to bring all manner of functionality to its tokens including its wrapped BTC token, ckBTC, when they get lost.



On the BTC blockchain, this would take forever (a longer time) because Bitcoin’s DevOps is like trying to run for President. Core developers, who are maxis, will reject changes to the blockchain that try to create anything cool but useless (unless it helps make BTC transactions faster and cheaper in the short term).

However, Bitcoiners need great stories about lost bitcoins, given the alarming frequency of BTC boating accidents.

Also, the idea of looking at buried/lost coins for 100 years without collectively doing something to dig them out sounds like a fairy tale to me.

I mean, timelocks exist, but nobody uses them.

Most people will thus lose their BTC, and if that is 1 billion people, there is no way they will not agree to hard fork BTC and restart the Bitcoin printer.

It will be like dialing back to the pre-2000 internet gold rush. Who wouldn’t agree to do that?

Here is the kicker. AI as it is today cannot do anything worthwhile with regards to comprehending and learning the nasty tricks of crypto criminals or human negligence, who facilitate these losses.

Why not?

It doesn’t know any better. The poor thing.

But with more and more data on lost coins and how to track them or predict losses, it will learn.

The thing I love about AI is that it learns.

100 years from today it will know more about lost BTC and crypto tokens than any human could ever do.

Which will be fantastic!

Because a lot of them will be lost. Trust the maths, not me.

The most important data

The most important pieces of data for decentralized AI dealing with lost crypto are;

  1. how many bitcoins/crypto tokens get lost every day,
  2. how do these get lost,
  3. and what do people want to know about it before and after coins are lost?

It may sound counterintuitive, but the future of the blockchain, any blockchain, is how well we can track the degeneracy of the blockchain.

Because the one big thing keeping Bitcoin from being worth $100k right now, is all the unimagined friction that is the ability to lose one’s coins forever with no hope of an insurance policy to back them up.

Why do people trust banks even if they are grossly inefficient?

There is an insurance policy guaranteed by the bank teller who serves you. You know they need to do their job well, which knowledge translates into insurance/ensuring that they do a good job helping you recover your PIN.

They hold your hand when you lose, so you come back.

How about the trustless, cold cryptography behind BTC and its pseudonymous transactions? Well, it works well to oppose currency debasement by big governments. But it works really badly when it comes to providing second chances after a scammer makes off with people’s crypto holdings.

(Just imagine there was no Fiat rail to insure the Japanese DMM Bitcoin after they had lost $305 million.

Would that be cool?

I don’t think so).

Storytelling time

The hero’s story is behind all successful narratives in movies, novels, and culture.

Here is a hero’s story template for crypto:

  1. Once upon a time, a young man on the brink of poverty invested his last savings in Bitcoin and crypto.

  2. The price shot up, and he couldn’t believe it.

  3. As he made to withdraw his earnings, his positions was liquidated by accidentally typing the wrong wallet address, and he lost it all.

  4. Nobody had scammed him. He had scammed himself.

  5. He got depressed and disillusioned, giving up on dreams of a house, a girlfriend, and marriage, in that order.

  6. But just before he quit, a new AI was invented. And it gave him hope to succeed where all was lost.

  7. No, it didn’t onboard him into some crypto scam. It helped him learn to build back real, tangible value for his community.

  8. Using his passion for digital money, he started earning well from wonderfully debating people on how crypto could be improved.

  9. A few years later, his coins were miraculously retrieved! “Wow, what a way to hold,” he said. Nice man.

This is one example. So many are possible.

The stories do not have to be hero’s stories or even be so directly positive.

They can be thrillers or comics ridiculing the very notion of thinking we can make something of value from lost BTC.

Here are some thought-provoking, cynical comic strips I made on the notion of lost bitcoins;

I have also written a 14-chapter thriller story about lost cryptocurrency called ‘Lost in Cyberspace.’ It is currently published on the Nuance blockchain under the pen name “loc8r”.

I made $14 in NUA tokens, tipped by the readers of those articles.

Yeah. Not easy.

But these are NUA tokens. Next to nobody has heard of them.

I bet I would’ve made more if I could link a PayPal wallet or a Bitcoin LN wallet.

My story suggests that in the far future, people will rally behind efforts to hard-fork BTC and redistribute its scarce coins. Why? Because they will have lost too much, it will all be ridiculous. It is a hard sell, but I try to make a good story on that front.

Bonus -- A cyborg human called Zero Balance is hell bent on burning all the BTC of “bad people” to facilitate not only a price increase, but a move towards a recovery hard fork.

Is Zero’s behavior ethical?


Why not?

I mean, it is uniting people towards a good cause.

We can play with real bitcoins in the meanwhile.

Starting 3 weeks ago, a crypto token project called Tapswap has had me tapping away on my phone like a child. I was hoping to accrue some good number of tap coins before their token launch on Monday July 1st 2024.

Well, July 1st came and went. The Tapswap team says they are still hashing out legalities, and I could do all these cool tasks and earn more virtual coins.

My heart isn’t into it anymore.

However, imagine a Bitcoiner game where people played not with virtual coins, but with real BTC???

Nope. Not a full BTC. Only one satoshi. And moreover, it never gets spent!

This idea came together into this game prototype I made for season 5 of night&weekends at buildspace. It features two quantum computers, perhaps connected to BTC nodes at the backend, playing pong with a bitcoin.

The idea of using quantum computers is older, and I wanted to teleport Bitcoin between two quantum computing nodes.

However, the bigger idea is the ability to bounce real bitcoins like a pong ball between two BTC nodes.

It hope it evolves into a kind of gamified UI where 2 peers can carry out their BTC transactions like it is a 3D market-place game.

Something I believe people would enjoy.

But we shall start with pong.

Especially if they have to run real BTC lightning network nodes to leverage the zero-fee trading characteristic of opening LN channels between nodes.

Whoever doesn’t run a node would see their pong ball lose some particles as it travels from Player 1 to Player 2 or vice versa.

After a couple of iterations, playing would be impossible. The BTC ball would be gone!!

One person on Twitter thought the game was cool -->

I’m so gonna build this game, fam.

Watch me.