Exclusive interview with Wang Chao, co-founder of DAO Investment: Investing in AI is more about opening up your mind, and encryption and AI will be d

When talking about DAO in the Chinese circle, Wang Chao is a name that cannot be avoided.

In 2020, after he stepped down as a partner of Bitpie Wallet, he focused his main energy on studying and researching the then emerging DAO. Since his daily work when making wallets was to communicate with a large number of teams, he also continued this style in studying and researching DAO. Over the years, he has talked to two or three hundred teams doing DAO. In this process, he wrote down what he saw and thought, and became a guide for many people to understand and participate in DAO.

But in addition to DAO, he has also made many investments. At the end of 2022, he participated in the establishment of a DAO dedicated to investing in AI-Metropolis DAO. Maybe you haven't heard of this name, but they have invested in some hot AI projects including Pika, Glif, and Altera. Recently, BlockBeats had a conversation with Wang Chao. As a participant, he introduced Metropolis DAO, AI investment, and his personal observations and thoughts on the current development of encrypted AI.

"ChatGPT made me believe in the potential of AI all of a sudden"

Does your previous industry experience have any impact on investing in AI now?

Wang Chao: My industry experience is basically divided into three parts: making traditional software, making wallets, and then making investments.

After graduating from college, I have been working in the software circle for more than ten years, first as a technician and then as a manager. I have worked in everything from emerging Internet projects to traditional service outsourcing and custom development. In this process, I came into contact with a lot of AI of that era. At that time, Microsoft promoted cognitive services, and we were one of the earliest suppliers in China to use it to provide solutions for enterprises. Therefore, I am definitely not unfamiliar with AI.

I started working in the crypto field in 2017 and joined Bitpie to work as a Bitcoin wallet for several years. But in fact, I have been involved in cryptocurrency speculation and industry investment on a personal level since 2013, and have been paying attention to industry trends. In 2015, the concept of blockchain became popular, and The Economist magazine published an article titled "Trust Machine: How the Technology Behind Bitcoin Changes the World", which made the concept of blockchain quickly popular. 2015 is therefore called the "first year of blockchain". In the 2B field, both software companies and financial institutions were making various attempts on alliance chains and private chains at the time.

Although we were still working in the traditional industry at the time, we had already invested some technical resources to explore this direction, including working with customers to conduct POC (proof of concept) experiments. At that time, I did not expect that AI would make such a breakthrough in just seven or eight years, let alone that AI could be combined with blockchain technology and play a role in many fields.

In the past few years since I left the wallet in 2020, I have actually spent more time on investment. Some friends are familiar with me because I personally have a special interest in the DAO field. I have explored many DAOs and also written some things. But in fact, the things that are truly productive in the past few years are still in the investment field, including investments in the encryption field and some investments in other industries.

When did you start wanting to make some AI investments?

Wang Chao: Because I have a technical background and have worked in the software industry for many years, I have always been sensitive to new technologies. When I was a child, I liked playing games and was eager to get in touch with new things. This interest has little to do with whether I am in the crypto industry, but new technologies will attract my attention when they appear. But I did not put all my energy on AI, and my investment in the crypto field has never stopped.

Speaking of AI specifically, I started to pay special attention to it around October 2022. There were two factors at the time: one was that generative AI such as Midjourney began to attract attention, and the other was that a friend shared with me the project he was going to do. Although it seemed very sci-fi at the time, it stimulated my interest and research in AI. About a month later, ChatGPT was released, and I suddenly believed in the potential of AI and realized that it was not far away.

Since I have been paying attention to the DAO field and have participated in other investment DAO projects, I discussed with some like-minded people whether it is possible to create a DAO dedicated to investing in AI. Everyone thought it was feasible, so they started to move forward. The release of ChatGPT attracted a lot of funds and attention, which greatly helped the smooth launch of this investment DAO. By February 2023, Metropolis DAO was officially launched. Through this platform, we have come into contact with more outstanding founders and new projects, and naturally put more energy into learning and investing in AI. But it should be emphasized that this investment DAO is participated in by everyone in their spare time, and it is not the main work of any member, including me.

When Metropolis DAO was launched, the AI craze had just begun. Would there be few AI projects to invest in at that time?

Wang Chao: There were actually quite a few AI projects that could be invested in at that time, and it is more difficult to invest now than then. Although we planned this very early, it was not until February 2023 that we really built all the compliance structures, had the funds in place, and began to formally look at projects.

By February 2023, AI was already quite popular, and many entrepreneurial projects came out, but there was not much attention and funding, so many early projects were willing to communicate with us, and the valuation was not expensive. Now a year and a half has passed, and the valuations of many projects have become expensive, and a lot of funds have poured in. As an investment institution, the competition has become greater. I think it is more difficult now than then. At that time, some projects were really cheap, and some projects we talked about but did not invest in, but later developed very well.

"Investment is highly related to connections and circles"

Are AI projects willing to accept a DAO-style investment? In my opinion, they still prefer to have the endorsement of traditional VCs.

Wang Chao: If it is a lead investment, our funds are not large enough to lead the investment. If it is a follow-up investment, it doesn’t matter. Lead investors generally hope to get money from top VCs such as Sequoia and Lightspeed, while follow-up investments are more about making friends. If the resources are helpful, they will give some shares, and it doesn’t matter if they are not enough. The key is whether you know about the project financing and whether you are in the circle. Often when you know about a new project, they have already announced the end of financing. At this time, it is too late, unless you are particularly optimistic about it and quickly contact them to say that you want to invest in the next round. This situation also happens.

Investment is highly related to connections and circles. Most of our DAO members are in New York and Silicon Valley, about half of them are from the crypto industry, and the other half are from other industries. Some of these members are very active and meet new founders through connections and various activities. Of course, we can’t get in touch with all the projects on the market. After all, we are not Sequoia, and everyone will come to you. But our funds are there, and it is enough to accept a part of it.

Some projects do express doubts about the DAO format. The doubts come from two aspects: First, the founders may not understand encryption, have a natural aversion to encryption, or think that DAO's KYC is difficult to do. In fact, we can do KYC because our off-chain structure is compliant and all physical institutional accounts are available. It's just that he doesn't understand and needs to spend time explaining. The second is that he is worried that your DAO has 30 people, whether it will cause additional communication costs. Some founders are very open and willing to establish connections with everyone to seek potential synergies. But some founders will worry that after you invest, a lot of people will come to him. In fact, no, we have a fixed contact person for each project.

In general, there are not many communication barriers. More often, it is a very good project and no one knows the founder, and we can't contact him, or the quota is too tight and can't be divided, then we give up the follow-up investment.

How many projects has Metropolis DAO invested in so far?

Wang Chao: We have invested in nearly 20 projects. Some of these projects have publicly disclosed their financing information, and I will talk about them on Jike. There are also some projects that do not strictly require confidentiality, but because their round of financing has not yet been disclosed, it is not convenient to publicly say that we have invested in these projects. In most cases, if the project party does not disclose financing information, we will remain silent.

What tracks can the invested projects be divided into?

Wang Chao: The projects we invested in are actually very diverse. First of all, anything I say today does not represent the official position of Metropolis DAO, but is just a personal experience sharing of participating in an investment DAO. I have personally invested in about ten AI projects. Overall, non-crypto AI projects account for more than two-thirds. Crypto AI has also invested in some, but the proportion is small.

In the track, we did not systematically sort out each direction like Sequoia, because we do not have such resources and status. More often, we look at whatever we encounter. We have some preferences of our own, and we may give up on projects that are not within our preferences after just one look. Therefore, our investment is relatively random, and it is difficult to systematically divide it by track.

At present, our investment is concentrated in several fields. Generative AI is one of the main directions, especially multimedia-related creation projects, such as Glif, Scenario, etc., which account for 5-6 and are the first category. The second is projects related to Agents. Whether it is a combination of AI Agent and encryption, or pure AI Agent, we have bet on some of them. There are about 5-6 such projects.

We also have a category of investment direction called "brain-opening projects". This type of project can think of things that others cannot or dare not think of, and has its own set of methodologies to achieve them. This type of project generally does not have a clear application scenario, and the risk is high, but we think it is worth betting on. Because innovation is always born on the fringes. It doesn’t matter if you can’t see the path to monetization for the time being. Answering how a new scenario driven by artificial intelligence and unlimited creativity will be monetized is like going back 30 years to answer how the Internet will be monetized. It will be monetized in every possible way, but we couldn’t imagine it at that time. Even if such projects are not successful in the end, if they may bring some technological breakthroughs or give birth to unexpected new things in the process, we think it is also valuable in the long run and will benefit us in the future.

Can brain-opening projects be understood as looking more at people?

Wang Chao: On the one hand, it depends on the person, and on the other hand, it depends on the creativity of the project. For example, there is a project called Altera that has disclosed financing in the first half of the year. This project was founded by a Chinese professor at MIT. His major is computational neuroscience. In the past, he has been studying how to rebuild the human brain in computers. Now he hopes to build "digital humans".

The "digital humans" here are not just simple virtual people, but beings with sufficient action capabilities and able to interact with humans in some scenarios. For example, he now has an Agent based on "Minecraft". This AI can play the role of an AI teammate and play games with you. It is not a simple NPC, but a real AI teammate.

His long-term goal is to create digital humans who can truly integrate into human society and have their own emotions. In simple terms, it is to realize a scenario similar to "Westworld". Many people can think of this idea, but we will also select projects. We hope that the founder has accumulated experience in this field and can form his own methodology to achieve this goal. Regardless of the success or failure of the experiment, we believe that it is worth supporting.

What investment preferences have been formed since the investment?

Wang Chao: Over the past year or so, the entire AI field has changed dramatically. This is an extremely active field, with outstanding talents and global funds pouring in, and new things appearing every day. But this field is still very new and the paradigm has not yet stabilized. For example, everyone thought that Runway's videos were very well made before, but as soon as Sora was released, Runway was no longer good. As a result, Sora itself was not released, but Kuaishou's Keling came out and became the first real Sora-level product. Including yesterday's Llama 3.1, everyone thought that Llama 3.1 would kill ChatGPT. This is an industry where the paradigm is not stable and the pattern is changing dramatically every day.

Investing in this field, especially traditional investment, is extremely risky. Because after you invest in a project, it is very likely to fail six months later. In this case, in addition to being particularly optimistic about a certain track, we are more concerned about people. This includes their background, ability to organize resources, and the iteration speed of the team. Because the changes are so fast, you may need to adjust the direction within three months. If you don't adjust in time, the project will fail soon. If the team can obtain sufficient funds, even if the initial direction is falsified, as long as they quickly find a new direction, they may still be successful.

We had a company that we didn't invest in last year. At that time, we thought it was not as strong as another company in the selected direction, so we invested in another company that performed better in the game field. As a result, the company that we didn't invest in quickly gave up this field and turned to a broader creation-related direction, and it was very successful. Every time I see this company at the top of the AI traffic list, my heart bleeds, because the valuation of this company was particularly cheap at the time. Therefore, I think people's execution and iteration speed are particularly important.

In addition, we particularly prefer brain-opening projects, because human thinking has limitations, and it is difficult for us to predict the future at present. Some people can come up with things that others have not thought of, which may coincide with future developments. We will bet on some of these projects.

"You can't use traditional investment standards to look at crypto AI"

Is it because crypto AI projects are less invested because they are more difficult to invest?

Wang Chao: I don't think so. First of all, the methodology for investing in these two types of projects is definitely different.

Before, we tended to look at crypto AI projects in the same way as traditional AI, so many things were simply unreadable because the evaluation criteria were different. In this case, some projects were rejected. Later, we gradually realized that these two projects should not be evaluated by the same standards, and the focus was different. So we began to adjust and invested in some crypto AI projects.

There is a bad habit in the crypto circle: once a certain concept becomes popular, a large number of similar projects will suddenly appear, and the market becomes very crowded. The background of each team looks good, but nothing truly unique can be seen. In this case, we will be relatively cautious. I think this is the result of the market situation and our past preferences.

For us, crypto projects are not extra difficult to invest in. Because nearly half of our members come from different crypto funds, and seven or eight of them are partners or founders, our resources in the field of crypto AI are far greater than in the field of traditional AI. However, everyone is already looking at such projects every day in their own funds, and there is no particular need to invest through DAO, which is also one of the reasons for the relatively small investment.

What are the better paradigms for combining crypto and AI now?

Wang Chao: In fact, there are many, and there are dozens of good paradigms that can be cited. I generally look at it in three major directions: First, encryption technology is used in AI to solve problems that AI itself cannot solve well, but it is still AI, just using encryption technology. Second, AI technology is used for encryption, such as smart contract auditing, can AI be used to audit smart contracts?

What is more attractive is decentralized AI. This direction can be divided into many aspects, such as using a decentralized approach to data collection. Data is extremely scarce now, and almost all the available data has been used up. The remaining data is either too costly or lacks the coordination ability to mobilize large-scale data collection. After data collection, the management of data ownership is also a major challenge, which is obviously a problem that can be solved by combining encryption and AI.

In addition, there is the decentralization of models and computing power. Although many people think that the decentralization of computing power may not be included in AI, I think computing power is definitely the most important component of AI. There are too many directions to list them one by one.

I am particularly optimistic about the data direction. In the field of traditional AI, everyone's desire for data has reached an extremely serious level. Whoever can bring data, whether it is compliant or gray, will be welcomed. For example, when Sam Altman released Sora, he was asked if he used YouTube data. He avoided the question because it was obviously used and it was unauthorized. There are too many things that can be done around data, and encryption technology has great opportunities here. For example, can we use the form of "collect to earn" to encourage everyone to contribute a certain form of data.

Most of the past "XX to earn" models fell into Ponzi schemes because they did not create real economic value. But data collection will definitely create economic value. Whether it is purchased by companies as individual data or contributed to AI training as a whole data set, there is huge potential. At the same time, the digitization of these data will help human civilization move towards the next era.

By designing reasonable token economics, finding areas with product market fit (PMF) or data market fit (Data Market Fit), making these data truly used, having customers willing to buy, and being more widely used for AI training are all directions worth exploring. Of course, there are already many projects in this track, facing different data fields. Some projects are very promising, while others may just be hot.

Computing power is a commonplace topic. All people around the world who are concerned about AI and Crypto are paying attention to this field, and many projects have emerged. I think computing power is the foundation of the entire AI operation, and it is not an exaggeration to emphasize its importance. Decentralized computing power will definitely usher in huge development in the future.

But all platforms are not good enough at present, including some very popular platforms. First, the technical facilities are not good enough. Is it truly decentralized now? No, many of them are just computing power matching platforms, and the structural system is still centralized. They just use encryption technology for settlement or incentives, which is still a long way from the completely decentralized computing network we want.

Another thing is that it is not mature enough in terms of distributed training. Because real AI training requires huge data transmission needs, distributed architecture is difficult to meet. There are indeed many startups working on distributed training architecture, whether it is Web3 or Web2, but no mature solutions have been seen so far. This leads to the immature architecture used for training, which can only be used for reasoning, but there are many solutions that can meet the reasoning needs, but training faces a shortage of computing power. If you choose a decentralized platform for privacy needs, but find that the privacy protection is not good enough, this is also not mature enough.

In addition, I think the entire Agent economy has not yet developed, but I am personally very optimistic about the future development of Autonomous Agent. If the intelligence of Agent is greatly improved in the future, will it choose to rent computing power on AWS, or choose a decentralized network that no one can shut down to rent computing power, to ensure the continuation of work in the next 5, 10 or even longer years? I think the answer is undoubtedly.

Although Agent has not reached that level yet, I believe that in the future there will be a decentralized computing power and cloud network that will occupy a very important position in the market.

Many people say that the prosperity of AI Agent will become a key to the mass adoption of encryption. When do you think this key point will come?

Wang Chao: It is difficult for me to judge this now. I have indeed seen many projects that provide infrastructure for AI Agent, including some projects that try to put AI Agent on the chain. But at present, both the maturity of the infrastructure and the application scenarios of on-chain are still in the early stages.

I think the first large-scale scenario of combining Agents with encryption may not be on-chain, but Agents using encryption technology in settlement. Using encryption technology is much more convenient than opening an account at Citibank. If encryption technology itself, such as USDC, can be further compliant and accepted by more people, then the scenario of using encryption as a means of payment may mature first. Of course, the premise is that the network and capabilities of the Agent must also be mature. Because the Agent is not mature enough at present, it cannot be safely allowed to handle the flow of funds. Optimistically, very powerful AI Agents may appear in three to five years. At that time, these AIs may widely use encryption technology in their own business scenarios instead of placing themselves on the encryption network.

Let's not talk about Agent on-chain first, let's talk about Agent use first. If the future is a society composed of billions or even tens of billions of Agents, these Agents and humans, and Agents will form very complex economic relationships. Such a huge economic network, even if only part of it is supported by the encryption network, will increase the volume of encryption transactions by hundreds or thousands of times. This in itself is a huge breakthrough.

In the future, Agents may truly use the chain as their own habitat. Agents will grow out of the encrypted network, live in the encrypted network, obtain a near-permanent state through the encrypted network, and continue to work according to their free will. This may be a little further away, but I think this is the future.

There are already DAOs like Metropolis DAO that invest in AI. Will there be DAOs that develop AI in the future?

Wang Chao: I think there will be. First of all, if we expect an organization like OpenAI to operate completely in a DAO way, such as BanklessDAO, putting all work and resources within the DAO framework, this goal is still far away. Because of these complex tasks, it is very difficult for DAOs to handle them quickly. It is not impossible, but it will take a long time.

It took 400 years for companies to develop into a highly developed form in the 20th century. DAOs still have a long way to go to reach this level. But if it is a similar decentralized organizational model, handing over governance to DAO, I think it is possible in the short and medium term. Although OpenAI did not do this completely, its structure has already embodied the idea of decentralization, allowing the whole society to participate (but the actual effect is not achieved at all). Anthropic's community approach goes one step further than OpenAI.

Another example is Stability. Emad (founder and former CEO of Stability AI) originally wanted to make Stability a DAO, but later found that this was not feasible given the current state of DAO development, so he finally chose a centralized approach. If you look at the first round of investors in Stability, they were Seed Club Ventures and other crypto funds, and the second round came in at the speed of light. I believe he must have thought so at first, but he compromised in the end.

In addition, if we do not pursue collaboration in a complete DAO manner, we can hand over some modules, such as data collection, to data collection DAO, which is also an important form of AI development. Or in the training and fine-tuning of models in specific fields, whether we can use a DAO in an industry field to gather talents and jointly contribute to a certain segmented vertical model, these are all possible directions. I am still optimistic about these directions.

"Raise enough money to survive the cycle"

The current market value of crypto AI is 30 billion, while the market value of DeFi is 88 billion, the market value of Ethereum is 400 billion, the market value of Bitcoin is 1 trillion, and the market value of Nvidia is 3 trillion. If crypto AI develops well in the future, what market value will it eventually reach?

Wang Chao: I am not good at predicting the secondary market, and I definitely don't have a clear answer to this question. First of all, I am really not good at it. Secondly, I think it will not be easy to distinguish between AI and crypto in the future.

I think that in the future, crypto and AI will definitely be deeply integrated, which will bring about a phenomenon. For example, a project we recently invested in is to provide crypto payments for AI Agents to hire human markets. It is not a crypto project, but an AI project that uses crypto technology, and it will not issue coins. But if this project is successful, it may form a huge market, with a large amount of economic activities flowing on it every year, and the valuation may increase by hundreds of times, reaching tens of billions or even hundreds of billions.

Whose market value do you think this belongs to? Is it crypto or not? If it becomes a huge market and brings in a huge amount of capital flow, it may increase Ethereum by 50% and Polkadot by 30%. Then whose part do you think this increase belongs to? Is it crypto AI or traditional AI? I think it is hard to tell. In the future, if crypto and AI are deeply integrated and widely used, it will become more difficult to calculate the market value alone.

If we use data to analyze it, we can see it this way. Everyone expects that in the next ten or fifteen years, AI technology will greatly increase global GDP. The current global GDP is about $100 trillion per year. If AI technology can create another $100 trillion in GDP in ten to fifteen years, then I think it is reasonable for AI technology to take a 20% share of it as the underlying support, which is $20 trillion.

Of the $20 trillion, electricity and computing power as the underlying support may take $10 trillion; the model layer, such as OpenAI, may take $5 trillion; the application layer takes $4 trillion; and the remaining service layer takes $1 trillion. Many products that create the $20 trillion will use encryption technology, even if the combination of encryption and AI only penetrates 1% of the overall AI market, which means that Crypto AI may get $200 billion from it.

Currently, the value capture ability of the blockchain network is very weak, and the price support comes more from narrative drive and meme drive. I guess the real value capture from network use may only be $2 billion a year. If encryption and AI are deeply combined and begin to be applied on a large scale, this may transform the encryption market from a market that relies on narratives and emotions to a market that is truly supported by value capture capabilities. But this will take time, perhaps ten or fifteen years. Don't expect to see such changes in one or two cycles. The current cycle may end in one or two years, and there may not be particularly strong projects in the next cycle in three or four years. But as long as the team that works hard on this track survives the industry cycle, it may be the industry leader in eight years. Even if it doesn't survive, but there are innovations and verifications in technology, it is also a huge contribution to the development of the entire industry.

Some time ago, Polygon co-founded a new project Sentient, which raised 85 million in one round, close to the financing scale of traditional AI. But it caused constant controversy, and many people thought it was just a PPT project. What do you think of this kind of encrypted AI project with a strong lineup of investors and a celebrity founder?

Wang Chao: From an investment perspective, I have a neutral to positive attitude towards this kind of project. Why neutral to positive? Because I have also seen many projects without celebrity investors, which have done very well in the end and have their own innovations. I don’t think you must have celebrity investors or a glorious background in the past to succeed. But there is no doubt that a good investment background can help the project expand consensus. A team can only be called a celebrity entrepreneurial team if it has done outstanding things in the past, which is definitely a verification of its ability.

Secondly, my expectation for all encrypted AI projects now is that it is impossible to make something really useful within this cycle. All of them may be proof of concept, or get a little PMF, but their market value and narrative are mainly supported by future expectations. If a small team only raises 3 million US dollars, it may not last until that day; but if a large team is not here to raise money, but is serious about doing things, it will raise 85 million US dollars in the first round, and may raise another round of financing to reach 300 million US dollars in one or two years, so that they can survive the capital winter. If it keeps up with each iteration in technology, it may succeed in a few years or more.

Look at the early days of the Internet, many companies successfully survived the winter and finally became successful. For example, Amazon was founded in 1995. When the Internet bubble burst in 2000, many companies went bankrupt, but Amazon survived and is now a giant in the industry.

Therefore, I think if such a project is doing things seriously, I will give it a positive evaluation. Whether to invest is another matter. It may not be invested because the valuation is too high, but it will not be considered a project because it has taken a lot of money. On the contrary, if you really want to do something, this is definitely a good thing.

Including investing in DAOs and personal investments, which AI investment are you most satisfied with?

Wang Chao: In terms of AI, it is difficult to describe it as "most satisfied", "excited" is more appropriate. At present, the AI project that excites me the most is Altera. The background and goals of the team are particularly attractive to me, including its strong financing. It has raised two rounds in less than 100 days since its establishment. The first round was invested by a16z SPEEDRUN, and the second round was invested by First Spark Ventures, the deep technology fund of former Google CEO Eric Schmidt. The Altera project itself involves simulating the human brain on a computer, which may be a good fit with such a deep technology fund.

I am full of expectations for it, and I think many of its experiments will definitely help humans enter the next generation. If successful, this investment may bring hundreds or even thousands of times the return. Even if it fails, I will not feel regretful, and I will be happy to have supported such innovation.

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