Working for an AI centered algorithmic trading company has allowed me to gain insight on the two most disruptive industries of modern day: AI and finance. This precise positioning in the middle of so many up and coming industries has given me a unique perspective regarding the future of artificial intelligence and crypto trading.
What Is the Hype Cycle?
Great picture explaining the hype cycle from Wikipedia
To begin to understand the opportunities associated with these two technologies, we first must comprehend the hype behind them. Gartner, a prominent IT research firm, spearheaded the hype cycle concept, outlining 5 key phases that a trend goes through. This theory has been proven to work, as there are many examples of trends that have fallen into this established pattern. Not everything is the same, of course, but you can use the patterns this cycle to predict where a particular trend will go. A fascinating part of this trend is that in order to join the mainstream hype, a technology needs to experience both an upward peak and a downward trend of disillusionment, exhibiting an oscillating volatile nature.
The Hype Cycle In Action: The DotCom Bubble a.k.a. Internet
One of the best parts of living in Silicon Valley is that you can hear the real, raw stories about the historical moments that have taken place in technology. I have several friends who experienced the notorious DotCom bubble hype.
The crazy uptrend started in the 90’s where people, especially in the tech space, started to claim there would be the new type of economy within the digital world, one characterized not by tangible products and profit rather an idea of a new way of doing business. Some people compare it with today’s ICO hype, as many of the current ICO projects don’t have real products yet manage to raise considerable amounts of money.
It took roughly 20 years for the Nasdaq index to reach its previous peak in 2017. During that time period, companies like Google, Apple, Amazon and Facebook grew and flourished, and our entire lifestyle was transformed by the Internet. Let me emphasize this again. It took a full 20 years for the original vision of the internet to come to fruition, even with super-smart, hard-working innovators.
How did Crypto Start?
Now let’s turn to crypto. 2017 was a great year for the crypto space, as bitcoin prices not only soared 1,000%, but more importantly, the philosophy behind the bitcoin and blockchain technology traveled into the mainstream hype. Even my mom has now heard about it.
It is easy to mistakenly think that crypto is a quite recent trend, but the Bitcoin paper by Satoshi Nakamoto was actually first published in 2008. It took almost ten years for this trend to enter people’s daily lives and affect the common person. Over the last decade, so many risk-takers have put in enormous efforts to push this once naive technology to such a level, applicable to a wide range of things, from easy-to-use wallet systems to merchant spending infra. If you haven’t checked out the documentary video Banking on Bitcoin by Christopher Cannucciari, which offers a fantastic overview of the origins and path of Bitcoin, I strongly recommend watching it.
And Where Is Crypto Today?
If you are not too young, you might remember the prominent event in the bitcoin history about Mt. Gox case. It was 2011 when the firm suffered a security breach and lost almost all of their customer assets. By 2013, I was starting my own startup and had couple of friends in the bitcoin startup community, but I was completely out of the loop regarding the growing mainstream bitcoin hype. I never imagined bitcoin would be something my mom would talk about in 5 years. Note that this 2011–2013 time horizon was a full 5 years after the publishing of the Bitcoin paper, and even bitcoin connoisseurs like me never fathomed the recent crypto craze would occur.
With this being said, I still have no clue what the future that the crypto will be making in the next 10 years. Who could have imagined you would be able to connect with your high school friends through Facebook, and Amazon would start something called cloud business leveraging their online bookstore infrastructure, 20 years back? I’ll be humble and admit I probably don’t know how crypto technology will change the world exactly. People are excited about the opportunity behind this technology as well as how it can change the economy, and some anarchists go as far as to say that our entire sense of governments will be disrupted. The only thing I can say at this point is that this crypto trend just passed the peak of excitement, and will probably see a huge depression over the next few years, as the hype cycle predicts, but will see bigger impact over the next 10–20 years.
When Current AI Boom Started?
It is a very well known fact that the current AI trend is actually the third one in the AI history. The first one started right after the modern computer was born in 60’s-70’s, and the second one arose in the 90’s, when new theories arose. These two AI booms were significant but never reached full fruition, as the computing power was just not enough to accomplish what was aimed by them.
The third era emerged from the memorable 2012 ImageNet competition when the Deep Learning approach by the Toronto team outperformed any other previous techniques by far and approached the human recognition level. Some later research identified the use of GPU realized the theoretic idea with realistic cost. GPU, of course, is only one of many hardware approaches like FPGA, but it did prove that computation power had caught up to theory to some extent.
Since then, the chip maker nVIDIA has jumped into the space, turning itself from a game company to an AI business. Google established the Google Brain project, hiring many top-notch brains from academia, competing with companies like Baidu in self-driving car space, as well as beating human champion of Go by AlphaGo, backed by so many trials and errors with acq-hired startups. Around 2014–2015, we also saw the nativity of many Deep Learning startups that either don’t exist anymore or acquired by big players, around us Alpaca.
And Where Is AI Today?
It’s 2018 and it’s been only less than 6 years from the ImageNet shock. If you compare the bitcoin space, it is around the time Mt. Gox was in trouble and I had no clue what they were talking about. I can now see that AI may have some trouble soon; we are already starting to see technologies in this space fall short of what we expect, such as un performing chatbots self-driving cars, but we will just have to wait and see exactly how the AI trend as a whole plays out.
The best time to invest in AI is right now, based on the lessons learned from crypto. If you compare this trend with the internet boom, it’s either even before the bubble, or in another angle it is only around 2003–2004 where things like Google came out to the mainstream. I sometimes see that people think AI means Deep Learning, but that is not true; it is also not just playing Go or self driving cars. Artificial intelligence possesses a myriad of opportunities and applications, and has the potential to change every aspect of the human life, including finance; we have no idea the potential impact of this monumental technology. There are many leaders who offer specific insights and arguments regarding the future of AI technology, such as Elon Musk or Mark Zuckerberg. They predict it could kill people or there will be singularity. The only thing I can say for sure is that we are underestimating the impact of this trend, and we can only surely determine its effects 20 years from now. Today, however, Alpaca can take pride in the fact that we are the ones that are pushing the boundaries into this undefined space of innovation, paving the way for a new world full of possibility and innovation.
“There is only a “one in billions”chance that we’re not living in a computer simulation. Our lives are almost certainly being conducted within an artificial world powered by AI and highly-powered computers, like in The Matrix” — Elon Musk