M31 Capital & SQD Network (SQD) form long-term partnership to scale global Web3 AI
we’re proud to back one of the most exciting and important projects in decentralized AI
M31 Capital is excited to formally announce our strategic partnership with SQD Network, to execute on our shared vision of driving global Web3 AI adoption. We have already been working closely together this year, and over the next 12-18 months will be advising and supporting SQD Network with the capital and resources necessary to position SQD as the foundational data layer that will bring Web3 AI to billions of users.
We published our initial investment thesis on SQD last month, but today we’ll focus specifically on Web3 AI, and why we decided to invest more than just capital in the hyperscale data platform. The coming intersection of blockchain and AI technologies will be broad, but SQD will play a particularly critical role enabling AI agents, data scalability, and enterprise LLM auditability.
M31 Capital has been extremely impressed with SQD’s technology and leadership team, and we’re proud to back one of the most exciting and important projects in the decentralized AI space.
Web3-Powered AI Agents
AI agents refer to autonomous software programs that can perform automated tasks and simulate human decision-making processes. In the realm of Web3, AI agents can enhance blockchain applications by improving data processing capabilities, enhancing user interaction experiences, and automating complex processes. Some promising use cases include:
DeFi Operations
Automated Trading and Arbitrage: Agents can perform high-frequency trading and exploit arbitrage opportunities across DEXs.
Yield Farming and Staking: Agents can manage assets in various DeFi protocols to maximize returns through yield farming and staking strategies.
Lending and Borrowing: Agents can automate the lending and borrowing process, optimizing interest rates and collateral management.
Smart Contract Automation
Contract Execution: Agents can autonomously execute smart contracts based on predefined conditions without human intervention.
Consolidating Primitives: Agents are well suited to service an intent leveraging multiple different protocols or smart contracts.
Chain Abstraction: Agents using distributed key storage enable users to sign transactions across multiple blockchains from a single wallet, providing a seamless multichain experience.
DAO Governance
Governance Participation: Agents can participate in DAO governance, voting on proposals based on predefined rules or learned preferences.
Proposal Generation: They can analyze data and generate proposals for DAOs, enhancing decision-making processes.
Data Analysis and Prediction
Market Analysis: Agents can analyze market trends and provide insights or predictions to investors and businesses.
Risk Assessment: They can assess risks in various domains, such as finance, healthcare, and logistics, and provide recommendations for mitigation.
Identity and Access Management
Self-Sovereign Identity: Agents can manage decentralized identities, ensuring secure and private authentication and authorization.
Access Control: They can autonomously control access to resources and data based on predefined rules and policies.
Useful Agents Require Context
Although AI agents have immense potential to transform how users interact with Web3 technologies, they won’t be very helpful unless they have context, i.e. information about their users (identification, financial, health, etc.). Using your data to train a personal LLM, or even to fine-tune an open-source model, is expensive, time consuming, and requires a high degree of technical expertise. Therefore, personalized AI agents can only practically scale through RAG (Retrieval-Augmented-Generation), a mechanism that allows users to supplement generalized LLMs with additional personal information when submitting their request.
…and Verifiability
The core tenant of Web3 is trustlessness - removing the middleman and not having to trust the platform or entity you are interacting with. This key characteristic is the reason blockchain-based systems are much more efficient and secure than traditional networks and is the foundational element that enables Web3’s novel and valuable composability. Blockchains themselves are verified through a variety of consensus mechanisms, but adding offchain data and LLMs into the mix introduces new trust assumptions. Can you really give autonomous agents access to your financial assets and sensitive personal information without proof they're being used appropriately and securely? Of course not! Therefore, in order to enjoy all the benefits of Web3 rails, these additional resources must be verified as well.
We’ve previously explained how coprocessors like Aizel Network facilitate LLM verifiability; SQD Network now introduces blockchain and RAG data verifiability to the Web3 AI tech stack. As outlined in its recently released product roadmap, SQD Network intends to offer developers multiple data query verification options, to optimize cost and security considerations across different workloads and use cases.
ZK proofs, for instance, are slower and more expensive than other options - but they’re fully trustless. This may be preferable for sending more valuable data straight to smart contracts. TEEs, on the other hand, are far cheaper but arguably less secure, and therefore may be chosen for use cases that don’t require such a high level of trustlessness. SQD’s first ZK and TEE implementations will be ready for beta testing in Q4 2024.
Web3 AI’s Bottleneck Isn’t Compute – Its Data Retrieval
We believe LLMs will commoditize over time, making onchain AI interactions cheap and ubiquitous, resulting in exponential growth in onchain data. Data retrieval likely won’t drop as much in price, forcing builders to focus on the most scalable and cost-effective solutions for data extraction.
SQD Network’s unique modular indexing architecture offers the industry's fastest, most scalable & most cost-effective bulk data extraction and filtering for more than 150 blockchains. Its highly flexible & customizable architecture, supported by its industry-leading developer tooling, can power any type of AI Agent or other future Web3 AI use case.
Enterprise LLMs Require Auditability
Blockchain-based data verification can be leveraged offchain as well, specifically when it comes to enterprise LLM adoption. When companies rush to use LLMs without proper checks, problems arise, evident in the many lawsuits that have recently been brought against major AI companies. Key issues include:
Data Sources: Were the training datasets legal and free of copyrighted content?
Privacy: Was sensitive data like personal information removed before training?
Trust: Can users trust third-party AI services not to manipulate responses?
IP Security: Have sensitive IPs been exposed accidentally?
To fix this, LLMs must leverage verifiable data platforms like SQD Network, to ensure trust by proving or replicating the processes behind their creation and use. This approach offers:
Credibility: Users and regulators can better verify and comprehend the sources and methodologies the model uses to generate its responses. This transparency enables enterprises to employ LLMs in new ways that were previously avoided due to trust issues.
Model Refinement: By understanding the model's reasoning, developers can make targeted improvements, aiding in debugging and performance enhancement.
Content Authenticity: Verifying that content is human-made or certified as authentic by a reputable source.
The Road Ahead
SQD Network has made tremendous strides since launching in 2021, but the roadmap planned for the next 12-18 months will transform the decentralized data lake into Web3’s premier hyperscale data layer for AI. M31 Capital is committed to supporting SQD’s next phase of growth, and we’re excited to witness the innovative, next-generation Web3 applications that will result. If you’re interested in learning more about our shared long-term vision or how you can get involved in the ecosystem, please reach out to either M31 Capital (contact@m31.capital) or SQD Network (info@sqd.dev).
About M31 Capital
M31 Capital is a global investment firm dedicated to crypto assets and blockchain technologies that support individual sovereignty.
Website: https://www.m31.capital/
Twitter: https://twitter.com/M31Capital