After the AI Agent bubble bursts What is the real value of Web3 AI

Introduction

The AI agent sector experienced a meteoric rise in Q4 2023, surging from near-zero to a $20 billion market valuation before the bubble burst. Projects like @virtuals_io and @elizaOS gained traction, with the latter open-sourcing AI to empower developers. However, as hype faded, valuations plummeted from $20 billion to $4-6 billion, leaving only infrastructure and practical AI projects standing.

The Rise of Infrastructure and Web2 AI Acceleration

With Web2 AI models like Meta's Llama and OpenAI's GPT advancing rapidly, the focus has shifted to infrastructure and decentralized AI. Tools like Lovable, Bolt, and Cursor are enhancing developer efficiency, while consumer AI products are becoming more accessible and competitive.

Data Sovereignty Awakening

The growing use of centralized AI raises critical questions: Who owns user data? OpenAI's memory feature, which stores past conversations, highlights the risks of data control by platforms. This has sparked interest in data sovereignty, where users retain ownership of their information.

The Emergence of Decentralized AI (DeAI)

Decentralized AI is gaining traction as concerns over privacy and data ownership grow. Key trends include:

• Web2 AI VC Activity: Y Combinator and a16z are backing vertical AI agents and consumer AI products.
• Web3 AI Investment: VCs are betting on decentralized infrastructure, distributed training networks, and compute-sharing platforms.
• Retail Investor Interest: AI agents remain popular, but practical use cases are now prioritized.

Web2 vs. Web3 AI: Diverging Paths

Web2 AI focuses on niche solutions for businesses, while Web3 AI leverages blockchain for trustless, verifiable, and user-owned data. Projects like @AlloraNetwork and @opentensor (Bittensor) are bridging the gap by making DeAI accessible to retail investors.

Why Retail Investors Love AI Agents

Initially drawn to entertainment-focused AI, retail investors are now gravitating toward practical tools like @AskBillyBets and @thedkingdao. Bittensor's decentralized ecosystem, enhanced by @rayon_labs' user-friendly interfaces, exemplifies this shift. Its subnet model rewards useful projects, fostering innovation.

The Future of Web3 AI

The era of hype-driven valuations is over. Infrastructure, decentralized AI, and real-world applications are leading the next wave. Whether in Web2 optimization or Web3 participation, data sovereignty and user empowerment will define the future of AI.