What happens when two major technological trends see an synergy or overlap in usage or co-development?
We have blockchain’s promise of near-frictionless value exchange and AI’s ability to conduct analysis of massive amounts of data. The joining of the two could mark the beginning of an entirely new paradigm. We can maximize security while remaining immutable by employing AI agents that govern the chain. With more companies and institutions adopting blockchain-based solutions, and more complex, potentially critical data stored in distributed ledgers, there’s a growing need for sophisticated analysis methods, which AI technology can provide.
The combination of AI and blockchain is fueling the onset of the “Fourth Industrial Revolution“ by reinventing economics and information exchange.
1. Precision medicine
Google DeepMind is developing an “auditing system for healthcare data”. Blockchain will enable the system to remain secure and shareable, while AI will allow medical staff to obtain analytics on medical predictions drawn from patient profiles.
2. Wealth and investment management
State Street is issuing blockchain-based indices. Data is stored and made secure using blockchain and analyzed using AI. It reports that 64% of wealth and asset managers polled expected their firms to adopt blockchain in the next five years. Further, 49% of firms said they expect to employ AI. As of 01.2017, State Street had 10 blockchain POC’s in the works.
3. Smart urbanity
To supply the energy, distributed blockchain technology is implemented for transparent and cost-effective transactions between producers and consumers, while machine learning algorithms can even hone in on transactions to estimate pricing. Green-friendly AI and blockchain help reduce energy waste and optimize energy trade. For example, an AI system governing a building can oversee energy use by counting in factors like the presence and number of residents, seasons, and traffic information.
4. Legal diamonds
IBM Watson is developing Everledger using blockchain technology to tackle fraud in the diamond industry, and deploying cognitive analytics to heavily “cross-check” regulations, records, supply-chain, and IoT data in the blockchain environment.
5. More efficient science
The “file-drawer problem“ in academia is when researchers don’t publish “non-result” experiments. Duplicate experiments and a lack of knowledge follow, trampling scientific discourse. To resolve this, experimental data can be stored in a publicly accessible blockchain. Data analytics could also help identifying elements like how many times the same experiment has happened or what the probable outcome of a certain experiment is.
There are forecasts that AI will play a big role in science once “smart contracts” transacted by blockchain require smarter “nodes” that function in a semi-autonomous way. Smart contracts (essentially, pieces of software) simulate, enforce and manage contractual agreements and can have wide-ranging applications when academics embrace the blockchain for knowledge transfer and development.
6. IP rights management
Digitalization has introduced complicated digital rights to IP management, and when AI learns the rules of the game, it can identify actors who break IP laws. As for IP contract management, for music (and other content) industry, blockchain enables immediate payment methods to artists and authors. One artist recently suggested the blockchain could help musicians simplify creative collaboration and making money. Ujo Music is making use of the Ethereum blockchain platform for song distribution.
7. Computational finance
Smart contracts could take center stage where transparent information is crucial for trust in financial services. Financial transactions may no longer rely on a human “clearing agent” as they automatized, performing better and faster. But since confidence in transactions remains dependent on people, AI can help monitor human emotions and predict the most optimal trading environment. Thus, “algotrading” can be powered by algorithms that trade based on investment patterns correlated with emotions.
8. Data and IoT management
Organizations are increasingly looking to adopt blockchain technologies for alternative data storage. And with heaps of data distributed across blockchain ledgers, the need for data analytics with AI is growing. IBM Watson merged blockchain with AI via the Watson IoT group. In this, an artificially intelligent blockchain lets joint parties collectively agree on the state of the device and make decisions on what to do based on language coded into a smart contract. Using blockchain tech, artificially intelligent software solutions are implemented autonomously. Risk management and self-diagnosis are other use cases being explored.
9. Blockchain-As-A-Service software
Microsoft is integrating “BaaS modules” (based on the public Ethereum) in its Azure that users can create test environments for. Blockchains are cheaper to create and test, and in Azure they come with reusable templates and artifacts.
10. Governance 3.0
Blockchain and AI could contribute to the development of direct democracy. They can transfer big hordes of data globally, tracing e-voting procedures and displaying them publicly so that citizens can engage in real-time. Democracy Earth Foundation aspires to “hack democracy“ by advocating open-source software, peer-to-peer networks, and smart contracts. The organization also aims to fight fake identities and reclaim individual accountability in the political sphere. IPDB is a planetary-scale blockchain database built on BigchainDB. It’s a ready-to-use public network with a focus on strong governance.

Nowadays, ‘artificial intelligence’ (AI) and ‘machine learning’ (ML) are cliches that people use to signal awareness about technological trends. Companies tout AI/ML as panaceas to their ills and competitive advantage over their peers. From flower recognition to an algorithm that won against Go champion to big financial institutions, including ETFs of the biggest hedge fund in the world are already or moving to the AI/ML era.
However, as with any new technological breakthroughs, discoveries and inventions, the path is laden with misconceptions, failures, political agendas, etc. Let’s start by an overview of basic methodologies of ML, the foundation of AI.
101 and limitations of AI/ML
The fundamental goal of ML is to generalise beyond specific examples/occurrences of data. ML research focuses on experimental evaluation on actual data for realistic problems. ML’s performance is then evaluated by training a system (algorithm, program) on a set of test examples and measuring its accuracy at predicting the novel test (or real-life) examples.
Most frequently used methods in ML are induction and deduction. Deduction goes from the general to the particular, and induction goes from the particular to the general. Deduction is to induction what probability is to statistics.
Let’s start with induction. Domino effect is perhaps the most famous instance of induction. Inductive reasoning consists in constructing the axioms (hypotheses, theories) from the observation of supposed consequences of these axioms.Induction alone is not that useful: the induction of a model (a general knowledge) is interesting only if you can use it, i.e. if you can apply it to new situations, by going somehow from the general to the particular. This is what scientists do: observing natural phenomena, they postulate the laws of Nature. However, there is a problem with induction. It’s impossible to prove that an inductive statement is correct. At most can one empirically observe that the deductions that can be made from this statement are not in contradiction with experiments. But one can never be sure that no future observation will contradict the statement. Black Swam theory is the most famous illustration of this problem.
Deductive reasoning consists in combining logical statements (axioms, hypothesis, theorem) according to certain agreed upon rules in order to obtain new statements. This is how mathematicians prove theorems from axioms. Proving a theorem is nothing but combining a small set of axioms with certain rules. Of course, this does not mean proving a theorem is a simple task, but it could theoretically be automated.
A problem with deduction is exemplified by Gödel’s theorem, which states that for a rich enough set of axioms, one can produce statements that can be neither proved nor disproved.
Two other kinds of reasoning exist, abduction and analogy, and neither is frequently used in AI/ML, which may explain many of current AI/ML failures/problems.
Like deduction, abduction relies on knowledge expressed through general rules. Like deduction, it goes from the general to the particular, but it does in an unusual manner since it infers causes from consequences. So, from “A implies B” and “B”, A can be inferred. For example, most of a doctor’s work is inferring diseases from symptoms, which is what abduction is about. “I know the general rule which states that flu implies fever. I’m observing fever, so there must be flu.” However, abduction is not able to build new general rules: induction must have been involved at some point to state that “flu implies fever”.
Lastly, analogy goes from the particular to the particular. The most basic form of analogy is based on the assumption that similar situations have similar properties. More complex analogy-based learning schemes, involving several situations and recombinations can also be considered. Many lawyers use analogical reasoning to analyse new problems based on previous cases. Analogy completely bypasses the model construction: instead of going from the particular to the general, and then from to the general to the particular, it goes directly from the particular to the particular.
Let’s next check some of conspicuous failures in AI/ML (in 2016) and corresponding AI/ML methodology that, in my view, was responsible for failure:
Microsoft’s chatbot Tay utters racist, sexist, homophobic slurs (mimicking/analogising failure)
In an attempt to form relationships with younger customers, Microsoft launched an AI-powered chatbot called “Tay.ai” on Twitter in 2016. “Tay,” modelled around a teenage girl, morphed into a “Hitler-loving, feminist-bashing troll“—within just a day of her debut online. Microsoft yanked Tay off the social media platform and announced it planned to make “adjustments” to its algorithm.
AI-judged beauty contest was racist (deduction failure)
In “The First International Beauty Contest Judged by Artificial Intelligence,” a robot panel judged faces, based on “algorithms that can accurately evaluate the criteria linked to perception of human beauty and health.” But by failing to supply the AI/ML with a diverse training set, the contest winners were all white.
Chinese facial recognition study predicted convicts but shows bias (induction/abduction failure)
Researchers in China’s published a study entitled “Automated Inference on Criminality using Face Images.” They “fed the faces of 1,856 people (half of which were convicted violent criminals) into a computer and set about analysing them.” The researchers concluded that there were some discriminating structural features for predicting criminality, such as lip curvature, eye inner corner distance, and the so-called nose-mouth angle. Many in the field questioned the results and the report’s ethics underpinnings.
Concluding remarks
The above examples must not discourage companies to incorporate AI/ML into their processes and products. Most AI/ML failures seem to stem from band-aid, superfluous way of embracing AI/ML. A better and more sustainable approach to incorporating AI/ML would be to initiate a mix of projects generating both quick-wins and long-term transformational products/services/process. For quick-wins, a company might focus on changing internal employee touchpoints, using recent advances in speech, vision, and language understanding, etc.
For long-term projects, a company might go beyond local/point optimisation, to rethinking business lines, products/services, end-to-end processes, which is the area in which companies are likely to see the greatest impact. Take Google. Google’s initial focus was on incorporating ML into a few of their products (spam detection in Gmail, Google Translate, etc), but now the company is using machine learning to replace entire sets of systems. Further, to increase organisational learning, the company is dispersing ML experts across product groups and training thousands of software engineers, across all Google products, in basic machine learning.