This chapter is from the book
This chapter is from the book
This chapter is from the book
AI in Blockchain Technologies
Blockchain is a decentralized, distributed ledger technology that enables secure and transparent transactions. It eliminates the need for intermediaries, making transactions faster and more cost-effective. Blockchain technologies can ensure the integrity and security of the data that AI algorithms use. This is particularly important in fields like healthcare and finance, where data integrity is crucial.
Automating the Execution of Smart Contracts with AI
Smart contracts have revolutionized the way we think about contractual agreements. These self-executing contracts, in which the terms are directly written into code, have emerged as a cornerstone of blockchain technology. The blockchain technology ensures that they are both immutable and transparent. However, the integration of AI into this domain can take smart contracts to the next level by automating their execution and making them more intelligent. This section explores how AI can automate the execution of smart contracts, as well as the benefits and challenges of this integration.
AI can play a significant role in automating the execution of smart contracts. By integrating ML algorithms and data analytics, AI models could make smart contracts more dynamic and more adaptable to real-world conditions. AI algorithms can make decisions based on predefined conditions, triggering the execution of certain clauses in the smart contract. AI models can also provide dynamic adaptation benefits. The AI technology can adapt the terms of the contract based on real-time data, such as market conditions, thereby automating complex decision-making processes. AI models could also be fine-tuned to automatically verify the conditions that trigger the execution of a smart contract, reducing the need for third-party verification.
Figure 7-2 illustrates how AI can process and analyze smart contract data much faster than humans ever could, making the execution of contracts more efficient.
)
Figure 7-2 AI Processing and Analyzing Smart Contracts
Automating the execution of smart contracts eliminates the need for intermediaries, which in turn reduces transaction costs. AI algorithms can detect fraudulent activities and anomalies, adding an extra layer of security to smart contracts.
However, there are a few challenges in this application area. The integration of AI into smart contracts can make them more complex and harder to understand. The AI models also require access to data, which could raise privacy concerns.
As an example, consider a use case in the real estate industry. Automated, AI-driven smart contracts can handle everything from property listings to the final sale, adapting to market conditions.
Another use case is in the supply chain. Smart contracts can automatically validate the receipt of delivered goods and trigger payments, with AI algorithms optimizing this process.
AI models could also assess claims data and automatically execute payouts when certain conditions are met. The integration of AI and smart contracts remains in its infancy at the moment, but it holds immense promise for making contracts smarter, more efficient, and more secure.
Could We Optimize Blockchain Mining Through AI Algorithms?
One of the most significant challenges that blockchain networks face is the resource-intensive nature of mining. The process of mining, which involves solving complex mathematical problems to validate transactions and add them to the blockchain, consumes vast amounts of computational power and energy.
The traditional proof-of-work (PoW) mining algorithms, such as those used in Bitcoin, require significant computational power. This has led to an enormous energy footprint, comparable to that of some small countries. The need for specialized hardware such as application-specific integrated circuits (ASICs) and graphics processing units (GPUs) has made mining inaccessible to average users. The time and resources required for mining limit the number of transactions that can be processed, affecting the scalability of the network.
AI algorithms could predict the most efficient way to allocate resources for mining, based on factors such as network traffic, transaction volume, and hardware capabilities. In consequence, mining power could be used where it’s most needed.
AI models could be used to dynamically adjust the difficulty level of mining problems, ensuring that the network remains secure without wasting computational resources. ML algorithms may be able to facilitate more efficient pooling strategies among miners, optimizing the use of computational power across the network. AI models could also manage the energy usage of mining farms, automatically switching off unnecessary systems and optimizing cooling solutions.
Many people are trying to use ML to optimize Bitcoin mining. These algorithms analyze vast datasets to predict the best times to mine, based on energy costs and network difficulty. Ethereum, for example, is exploring the integration of AI algorithms to make its transition to proof-of-stake (PoS) more efficient, further reducing the network’s energy consumption.
Additional Use Cases in Healthcare, Supply Chain Management, Financial Services, and Cybersecurity
The integration of AI models with medical records stored on a blockchain could revolutionize healthcare by providing more personalized, secure, and efficient treatment plans. With this approach, medical records would be stored on a blockchain, ensuring that they are immutable and tamper-proof. Blockchain’s decentralized nature could be leveraged to ensure that patients control who can access their medical records. Different healthcare providers could access the blockchain to update medical records, ensuring they and other providers have a comprehensive view of the patient’s history.
In such a system, AI algorithms could pull data from the blockchain after receiving permission from the patient or healthcare provider. The AI would clean and structure the data for analysis, by performing normalization, handling missing values, and accomplishing feature extraction. ML models could be applied to identify patterns and correlations in the medical data. For example, they might find that certain combinations of symptoms, medical history, and genetic factors are indicative of specific conditions. The AI system could then predict the likely progression of diseases or conditions based on current and historical data. Algorithms could suggest personalized treatment plans, including medication types, dosages, and lifestyle changes.
As the patient undergoes treatment, updates would be made to the blockchain. The AI model would continually learn from new data, refining its predictions and recommendations. The treatment plan can be dynamically adjusted based on real-time data and the AI’s evolving understanding of the patient’s condition. Figure 7-3 illustrates an example of this concept.
)
Figure 7-3 AI and Blockchain in Healthcare
Both the blockchain and AI algorithms must comply with data protection regulations like the Health Insurance Portability and Accountability Act (HIPAA) in the United States. Such algorithms could be used to automate permissions and ensure only authorized personnel can access specific data. Blockchain provides a transparent audit trail, which can be crucial for accountability and in case of any cybersecurity incidents. Care must be taken to ensure the AI algorithms do not inherit biases present in the training data. Patients should be fully informed about how their data will be used and analyzed.
What about in the supply chain? Blockchain and AI can be used for tracking the movement of goods. Blockchain provides a decentralized, immutable ledger that records every transaction or movement of goods. This ensures that all parties in the supply chain have access to the same information, enhancing transparency and traceability. Smart contracts (i.e., self-executing contracts with the terms directly written into code) can be used to automate various processes such as payments, receipts, and compliance checks, thereby reducing manual errors and inefficiencies. The blockchain can be updated in real time as goods move from one point to another. This enables quick identification and resolution of issues such as delays or lost shipments.
Blockchain can be used to verify the authenticity of products by providing a complete history of its journey from the manufacturer to the end user. The immutable nature of blockchain makes it nearly impossible to tamper with the data, reducing the chances of fraud and theft.
AI can be used in combination with blockchain technology to accelerate many tasks in the supply chain, as illustrated in Figure 7-4.
)
Figure 7-4 AI and Blockchain in the Supply Chain
AI models can analyze historical data to predict future demand, helping companies to better plan their inventory and shipping schedules. These models can analyze a variety of factors, such as traffic conditions, weather, and road closures, to determine the most efficient route for shipments, thereby saving time and fuel costs. AI can also help in determining the most cost-effective shipping methods and carriers based on real-time data, which can significantly reduce shipping costs. AI-powered robots and systems can manage inventory more efficiently, reducing the costs associated with warehousing.
AI algorithms can continuously monitor the condition of goods in transit, alerting the interested parties about problematic issues such as temperature fluctuations or potential damage, and allowing them to take proactive measures. Figure 7-5 explains which tasks might benefit from the combination of blockchain and AI.
)
Figure 7-5 Examples of AI and Blockchain Supply Chain Tasks
The intersection between AI and blockchain can also be a powerful force in enhancing security, especially in detecting fraudulent activities and monitoring for unusual activities in real time. AI algorithms can analyze transaction patterns over time to identify anomalies or irregularities that might indicate fraudulent activities. Unlike traditional methods that may involve periodic checks, AI can analyze transactions in real time, allowing for immediate detection and action. Advanced ML models can be trained to recognize the characteristics of fraudulent transactions, with the models becoming more accurate over time as they are exposed to more data.
Natural language processing (NLP) can also be performed to analyze textual data such as smart contract codes or transaction notes to identify suspicious language and hidden loopholes. The AI system could assign risk scores to transactions based on factors such as the transaction amount, the reputations of the parties involved, and the nature of the transaction, allowing for prioritized scrutiny.
AI technology can be applied to monitor the data packets being sent and received within the blockchain network to identify any unusual or unauthorized data transfers. By understanding the normal behaviors of users and nodes within the blockchain network, AI can quickly identify abnormal behaviors that deviate from the established patterns. Upon detecting unusual activities, the AI model can automatically send alerts to administrators or even take predefined actions such as temporarily blocking a user or transaction. AI can also be used to audit the smart contracts that automate transactions within the blockchain, a process that can help in identifying vulnerabilities or malicious code within the contracts.