AI in 2023: The Application Layer Has Arrived - Bitcoin Killed The King & Now Network Effects Will Determine Its Future

AI in 2023: The Application Layer Has Arrived - Bitcoin Killed The King & Now Network Effects Will Determine Its Future

In 2023, the application layer of AI is finally emerging. The platform layer has solidified, paving the way for exciting advancements in AI technology. Our world has changed dramatically in the past century, yet our brains remain the same. The evolution of technology has been powered by mobile and cloud advancements in the past decade. Mobile facilitated the rise of large consumer internet companies, while cloud enabled software-as-a-service and the importance of data. However, the most compelling force for tech in the 2020s is artificial intelligence.

AI has the potential to revolutionize various industries and consumer experiences. For example, SHEIN, a popular shopping app, uses AI to quickly create designs, forecast demand, and adjust inventory in real-time. AI applications are still rudimentary compared to what we will see in the coming years. Preferences for richer media formats are evident, with platforms like Instagram and TikTok gaining popularity. Generative AI will likely follow this trend, with images, videos, and eventually immersive 3D experiences becoming more prevalent.

Technical advancements, such as Stable Diffusion, have significantly improved the quality of image models. However, training larger models with hundreds of billions of parameters can cost millions of dollars. Despite this, the progress in image and language models, along with the infrastructure provided by companies like OpenAI and Hugging Face, have driven improvements in generative AI.

The cost of producing culture has dropped drastically with the rise of platforms like YouTube and TikTok. TikTok, in particular, has removed barriers to content creation, resulting in a higher percentage of users who create content compared to YouTube. AI amplifies both creativity and productivity, impacting various industries. The challenge for companies is to build competitive moats and find ways to stay ahead of the competition.

Software-as-a-Service (SaaS) companies are expected to be at the forefront of AI startups. The predictable, recurring revenue and high gross margins make SaaS an attractive business model. However, defensibility is a concern, as seen with Lensa, which relies on platforms like Instagram, Twitter, and TikTok. One innovative company, PromptBase, has built a marketplace for text-to-image prompts, leveraging the power of generative AI.

Bitcoin has disrupted the traditional concept of currency and is replacing it with a network. Decentralized cryptocurrencies like Bitcoin offer benefits such as decentralization, software-encoded rules, ubiquity, and resiliency. Belief in Bitcoin is driven by network effects, which are the greatest defensibility native to the digital age.

Network effects, brand, scale, and embedding are the key factors that will determine the future of Bitcoin. It is too late for governments to stop Bitcoin, as the network math protects it. The network gravity of Bitcoin will prevail, as beliefs become more valuable the more people believe. Bitcoin's future will be based on its network effects and its ability to create value for users.

Bitcoin's network effects create two forms of marketplace: a store of value and a payments marketplace. The more buyers and sellers in the store of value marketplace, the higher the liquidity of Bitcoin. Developers also play a crucial role in strengthening network effects, as seen with the number of active developers on Bitcoin and Ethereum.

The brand of Bitcoin is a significant advantage, as it is the most well-known and has the largest market cap in the crypto world. The bandwagon effect and psychological switching costs make it difficult for people to switch to lesser-known crypto brands. As the network grows, scalability becomes a concern, and changes may be needed to alleviate the strain on miners.

Belief was the original force in the Bitcoin network, and it has become embedded in the crypto ecosystem and the world's consciousness. Embedding Bitcoin directly into customer operations and the broader ecosystem increases switching costs and solidifies its position.

In conclusion, AI is entering the application layer in 2023, bringing exciting advancements and opportunities. Bitcoin has disrupted the traditional concept of currency and relies on network effects for its success. Network effects, brand, scale, and embedding will determine the future of Bitcoin. To stay ahead, companies must build competitive moats and leverage the power of AI. Three actionable advice to take from this article are:

1. Embrace the application layer of AI and explore its potential to revolutionize your industry or consumer experiences.
2. Consider the benefits of decentralized cryptocurrencies like Bitcoin and the network effects they offer.
3. Focus on building strong network effects, brand recognition, scalability, and embedding to drive the success of your business in the digital age.