DeepSeek is Paving the Way for Web3 AI
VeradiVerdict - Issue #323
DeepSeek started as a side project from the hedge fund High-Flyer, boot-strapped by a few thousand Nvidia GPUs. They shocked the world when DeepSeek R1, which took over a billion dollars, 2,000 Nvidia H800 GPUs, and over 55 days, beat benchmarks held by OpenAI’s o1 model which required hundreds of billions of dollars to develop along with over 16,000 advanced GPUs.
DeepSeek R1 has 671 billion parameters while GPT-4 has 1.76 trillion parameters. OpenAI’s large models likely require thousands of GPUs for training and high-end clusters for inference while DeepSeek 7B & 67B can be run on consumer-grade hardware (a few A100 or H100).
DeepSeek-R1 Versus the Competition
As a response, Nvidia’s stock price dropped 18% (loss of $600 billion in market value). The idea that AI models must be closed-source and have loss-leading computational costs to succeed is crumbling.
The Existing Decentralized AI Narrative
Demystifying the Crypto x AI stack
AI x Crypto projects believed that crowdsourced, public, decentralized AI would eventually create better models than their centralized counterparts.
This had thus far not been true, as the highest-performing models had come from closed-source companies like OpenAI and Anthropic. Crypto x AI companies have adapted to this by specializing in infrastructure rather than model-building.
For example, GPU marketplaces like Akash, Render, IoNet, and Exabits have developed sustainable revenues. Companies that allow users to share their network bandwidth like Grass and Gradient have found their niche in supplying services, like distributed web scraping, to web2 clients. Storage networks like Arweave, Filecoin, and Ocean have also done well by being the platforms on which these projects are built. Supply networks have flourished because of their ability to tailor their cheaper and more scalable services to off-chain customers.
Messari Report on DePin and AI x Crypto
Now that GPU and financial resources are no longer limitations to creating quality AI models, web3 AI companies can focus on replicating DeepSeek’s effectiveness while offering new benefits like modality, user ownership, censorship resistance, privacy, and more.
Pantera has funded companies like SaharaAI and Sentient that believe they could match or exceed the performance of traditional AI companies while being competitive by offering other services.
Sahara AI, for example, is building a platform where anyone can monetize AI models, data sets, and applications in a collaborative space. Users can permissionlessly train models manually, provide training data, and create tailored AI models with no-code tools. They are only able to cater to all these stakeholders (AI developers, users, resource providers) because everything is tied to their native Sahara blockchain. I wrote more about why we invested in them in a previous blog post here.
The Future of AI will be built with Web3 Infrastructure
DeepSeek has shown that performant AI models do not have to be built closed source with loss-leading computational costs. I am excited to see AI models developed with the full web3 AI stack in the coming year.
I believe that supply-side projects will continue to grow, while consumer-facing projects can begin competing with web2 competitors by taking advantage of their ability to build networks that invite community involvement. For example, users willingly sign up to train web3 models and actively experiment with them through hackathons and grant programs. Sahara AI and Sentient have begun setting up systems for users to train models based on the users’ expertise. These platforms will allow users to pick and choose the data and integrations to whatever they are applying the model towards. Sahara already has over 780,000 users on their waitlist while Sentient has over 1 million interactions.
In the near future, I believe that the most performant AI models will be built on-chain.
- Paul Veradittakit
DIGESTS
How To Fix Ethereum's Fragmentation Problem
With over 50 L2s and more in development, Ethereum has become a maze of isolated chains. Hart Lambur, Co-Founder of Risk Labs explains how a new standard, known as ERC-7683, could help make cross-chain actions easier.
The DeepSeek-R1 Effect and Web3-AI
Unlike most advancements in generative AI, the release of DeepSeek-R1 carries real implications and intriguing opportunities for Web3-AI.
BUSINESS
Ondo Finance Reveals Chain Launch Plans as Trump-Linked Project Buys a Bundle of Tokens
Ondo Finance revealed plans to launch a chain for tokenizing real-world assets, with Donald Trump Jr. appearing at its Thursday event.
Cboe Pushes for Four Fresh XRP ETFs as Crypto Market Cools
To address regulatory concerns, asset managers are proposing safeguards where they will source XRP from secondary markets.
REGULATION
Trump Crypto Agenda Could Speed Up Digital Euro: ECB Board Member
Donald Trump's dedication to "legitimate dollar-backed stablecoins" could speed up the ECB's progress on a digital euro, a board member said.
Crypto's Debanking Worries Hit Another Big Stage in U.S. House
The industry's U.S. banking crisis may be retreating as a second congressional committee sheds light on how crypto businesses have been treated by regulators.
NEW PRODUCTS AND HOT DEALS
Ethereum Card Game 'Gods Unchained' Launches Battle Pass Ahead of Next Expansion
Card-battler Gods Unchained on Ethereum network Immutable zkEVM has launched its first battle pass with optional premium rewards.
THIS WEEK AT PANTERA
Crypto Regulation under Trump
Pantera Chief Legal Officer Katrina Paglia shares her insights Bloomberg TV.
Why Venture Capital Money Is Necessary in Crypto
Mason Nystrom, Pantera Junior Partner explains the importance of fundraising for projects with Blockworks.
Ondo Conference 2025
Fireside chat with Dan Morehead and Mike Novogratz on the outlook for 2025, 2:45
LETS MEET UP
Singapore, February 17
Consensus, Hong Kong, February 18-21
Walks and coffee meetings in San Francisco throughout the year!
ABOUT ME
Hi, I’m Paul Veradittakit, a Managing Partner at Pantera Capital, one of the oldest and largest institutional investors focused on investing in blockchain companies and cryptocurrencies. I’ve been in the industry since 2014, and the firm invests in equity, early stage token projects, and liquid cryptocurrencies on exchanges. I focus on early-stage investments and share my thoughts on what’s going on in the industry in this weekly newsletter.