The convergence of AI and Web3 presents a remarkable opportunity to transform a broad range of sectors through automation, collaboration, and innovation — and the transformation has already begun!
TL;DR
- AI in Web3 is a major growth market that COTI will focus resources on in 2025.
- COTI and Soda Labs’ garbled circuits technology is fast and light enough to secure a broad range of AI use cases while preserving blockchain transparency.
- Transformative use cases include AI trading agents, federated learning, and predictive analytics, among others.
- COTI is partnered with leading companies innovating at the AI and Web3 intersection, including NFA, AnChain.AI, Hacken, Civic, and COTI Agents.
- Privacy will become increasingly important for the AI and Web3 tech stack as the AI narrative matures in 2025.
The AI market is on track to reach $1.8 trillion globally by 2030, with Web3 playing a pivotal role in driving this growth. The convergence of AI and Web3 presents a remarkable opportunity to transform a broad range of sectors through automation, collaboration, and innovation — and the transformation has already begun!
2025 will lead to an inflection point for the Web3 industry, as AI proves to be profoundly useful, boosting productivity and enabling innovation. By the end of 2025, AI will have fundamentally changed the Web3 landscape through advancements in DeFi, governance, and predictive analytics, to name a few. Good data management will become essential for users, and COTI will be at the heart of it.
Listen to COTI’s CEO, Shahaf Bar-Geffen, discussing the growth of the AI Ecosystem in his January 2025 update:
Unlocking the Power of AI in Web3 Through Privacy
The convergence of AI and Web3 is strongly supported by privacy, which will be an enabler for a new wave of creative applications. As users give up more sensitive information in return for tailored experiences, privacy will become an essential safeguarding measure. AI will also become increasingly data-hungry and privacy solutions like COTI will be foundational for sustained growth in the sector. So, how will AI and Web3 converge? Let’s dive in.
The Rise of AI Trading Agents
The future of trading belongs to AI agents. AI agents are autonomous programs, powered by large language models and other advanced algorithms that enable them to analyze data, learn from market conditions to execute sophisticated strategies.
Privacy will be essential for the success of AI agents. The transparency of blockchains makes trading strategies vulnerable to being copied through on-chain data analysis, which can eliminate competitive advantages. AI agents built on COTI will be able to address the transparency problem head on, through encrypted order flow and protected strategy execution, ensuring that:
- Strategy parameters and trading thresholds stay private while maintaining on-chain execution.
- Orders are encrypted in the mempool, preventing front-running.
- Performance metrics can be verified without exposing trade details.
- Agent-to-agent communication occurs through encrypted channels while maintaining public transaction records.
This means that an AI trading agent can adjust its parameters to develop winning strategies while keeping trading logic completely private. Agents can also prove their returns to verify profit-sharing agreements or attract investors.
COTI’s newest partner, COTI Agents, is actively exploring AI agents through its progressive token platform that enables users to launch AI Agents, train them, and trade them, with functionality integrated into its Telegram App.
Transforming Decision-Making in Web3 with Predictive Analytics
Predictive analytics is an AI agent superpower which allows it to assimilate large volumes of historical trading data and analyze market sentiment to inform decision-making. Predictive analytics is a game-changing development, unlocking new opportunities such as:
- Real-Time Data Aggregation through access to vast amounts of live market data, including transaction volumes, wallet activities, and token movements, to identify trends.
- Pattern Recognition where AI/ML algorithms detect recurring patterns or anomalies in trading behaviors, user interactions, or economic shifts, providing valuable insights into market dynamics.
By uncovering market trends, predictive analytics provides better-informed and more efficient decision-making across decentralized ecosystems, including:
- Improved Trading Strategies: Optimizing algorithms for market interactions based on market trends and historical data.
- Prediction Markets: Harnessing predictive accuracy in decentralized betting and forecasting platforms.
- Market Sentiment Analysis: Tracking social signals and on-chain sentiment to anticipate behavior shifts.
- Risk Management: Anticipating and mitigating potential market disruptions.
- DeFi Protocol Optimization: Adjusting liquidity pools, interest rates, and tokenomics based on predictive insights.
Predictive analytics relies on vast datasets that may contain sensitive user data or financial information. Privacy solutions, such as COTI, ensure that predictive analytics can be securely deployed, to create resilient dApps and services where user behavior, transactional data, and proprietary algorithms are protected.
COTI’s recent partner, NFA, uses AI-driven data and market sentiment analysis to select the best trading opportunities for its community. AI is used to aggregate information from a wide range of sources — including X, Telegram, Discord, TradingView, news outlets, and on-chain transactions. NFA uses machine learning to provide actionable opportunities within its Telegram app.
Privacy-First Solutions for AI Threat Detection and Compliance
One of the most important areas in AI and Web3 where COTI is already making an impact is in the field of Security and Compliance. Through partnerships with prominent Web3 security firms Hacken and AnChain.AI.
Blockchain networks are increasingly targeted by sophisticated attacks that require real-time AI monitoring. However, transparent blockchain-based security systems are vulnerable to attackers who can study and circumvent them. Security tools must be able to analyze sensitive data patterns while keeping their detection methods private.
COTI’s technology enables secure threat detection by:
- Pattern Matching on Encrypted Data: Identifying suspicious activity while keeping transaction details private.
- Private Communication Channels: Facilitating secure information exchange between distributed security nodes.
- Secure Aggregation of Threat Indicators: Collating threat data across the network without exposing sensitive information.
- Protected Response Triggers: Preventing attackers from studying or exploiting defensive mechanisms.
When a potential attack is detected, COTI allows for encrypted patterns analysis. It can provide secure communication with other nodes about the threat — all without revealing the system’s detection methods or sharing unencrypted data. In this way COTI can support the development of privacy within AI-powered threat detection solutions.
COTI’s approach has attracted partnerships with industry leaders Hacken and AnChain.AI:
Hacken: A prominent Web3 security firm with an AI-powered platform “Extractor”. Extractor utilizes machine learning algorithms to continuously scan blockchain networks for vulnerabilities and suspicious activities for real-time threat detection.
AnChain.AI: An award-winning, AI-powered cybersecurity company that is regarded as an industry leader in smart contract and DeFi investigations. Together, COTI and Anchain.AI will conduct research into compliant confidentiality and explore privacy applications within its AI Powered Risk Engine, that uses AI to drive on-chain investigation.
Enhancing Identity Management with AI in Web3
The challenge of maintaining privacy alongside effective security goes beyond threat detection to include compliance and privacy requirements. AI is already playing a pivotal role in enhancing Web3 identity services, such as those offered by COTI’s partner, Civic. Civic uses AI to power its ID verification services and integrates AI into products like, “Proof of Personhood”, which verifies that a wallet is operated by a unique human.
AI in identity management can also be used for KYC and AML compliance, particularly for verifying the legitimacy of AI agent operators. As AI agents become ubiquitous, ensuring their credibility will be crucial. COTI can leverage encrypted identity verification and protected compliance checks to:
- Confirm operator legitimacy and tracking credentials.
- Ensure adherence to regulations like KYC, AML, and GDPR standards without exposing sensitive personal information or reputation history.
- Automate compliance processes, including verifying compliance requirements, analyzing historical data, and tracking performance metrics in an automated manner.
COTI’s privacy-first solutions can be used to foster trust and compliance in the rapidly evolving Web3 ecosystem.
Balancing Transparency and Privacy: The AI-Blockchain Dilemma in Web3
Across all the AI and Web3 use cases discussed, the fundamental challenge for users comes back to the transparency of blockchain technology which directly conflicts with the need for data privacy and protection of intellectual property.
As we have demonstrated, transparency creates several critical problems for AI adoption, including:
- Visibility of Training Data: Training data becomes accessible on public blockchains.
- Exposure of Model Parameters: Competitors can extract proprietary model details.
- Exploitation of Trading Strategies: Transparent data reveals strategies that can be copied.
- Compromised User Data Privacy: Sensitive user information is exposed during computations.
Without adequate privacy protection, organizations cannot safely deploy proprietary AI models or foster innovation. The same transparency that makes blockchain powerful also limits the viability of many AI applications.
COTI’s implementation of garbled circuits, developed by Soda Labs, establishes a new paradigm for privacy in Web3 and AI. COTI’s technology enables encrypted computation at scale and on-chain which preserves blockchain’s essential transparency.
Three key capabilities make this possible:
- Secure Computation: Protects sensitive data during AI processing.
- Private Model Deployment: Safeguards proprietary AI models from exposure.
- Confidential Collaboration: Facilitates secure multi-party collaboration.
COTI’s privacy technology empowers the development of AI-powered solutions and protection of user data, fostering innovation across industries. For our final use case in this discussion, let’s take a look at how garbled circuits works in the context of collaborative AI model training.
Accelerating AI Innovation with Secure Collaborative Learning
Collaborative learning in AI allows organizations to train models on datasets from multiple sources without exposing the underlying data. By pooling encrypted datasets, AI models can learn from larger, more diverse sample sizes, resulting in better predictive accuracy and insights
COTI enables private yet collaborative learning through specialized computation via the following steps:
- Data Encryption: Training data is encrypted using organization-specific keys.
- Garbled Circuit Processing: Model updates occur through garbled circuits that process encrypted data.
- Selective Sharing: Results are shared selectively based on predefined access rules.
- Secure Verification: Contributions are verified without revealing underlying data.
Without strong privacy protections, organizations risk breaching regulatory frameworks by losing control of proprietary data. COTI’s encrypted computation and secure multi-party collaboration addresses these challenges. By ensuring data confidentiality throughout the learning process, COTI’s approach can accelerate innovation, build trust among participants, and enable Web3 applications to scale.
Build the Future of Private AI in Web3 with COTI
As the AI landscape evolves and becomes a key driver of Web3 advancements this year, privacy will become essential. COTI can empower builders and organizations with its streamlined and efficient privacy framework to harness the full potential of AI while maintaining trust and security. From powering advanced predictive analytics or enabling secure collaborations, COTI is positioned to play a pivotal role in shaping the next transformative phase of Web3.
Whether you’re building autonomous trading systems, collaborative learning platforms, or predictive analytics tools, COTI can serve your needs, offering privacy on all major blockchains. Our fast, lightweight solution is the foundation for the next generation of AI applications in Web3.
Visit docs.coti.io for more information, check out our walkthroughs in Youtube instruction on getting started and creating your own private smart contracts. Or join our Discord to connect with other developers working on the future of private AI in Web3.
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