EUBOF Provides Recommendations to EU for Blockchain and AI Integration
The European Blockchain Observatory and Forum (EUBOF), an initiative by the European Commission, has recently published a report urging the European Union (EU) to prepare for the integration of blockchain technology and artificial intelligence (AI). This move by the EU blockchain is seen as a proactive measure to safeguard user data.
The report, prepared by the Directorate-General for Communications Networks, Content, and Technology, explores the potential integration of blockchain technology with AI. It highlights the secure data storage and management capabilities of blockchain, particularly in sensitive sectors like healthcare and finance.
One of the key focuses of the EU blockchain report is the concept of decentralized AI networks, which could disrupt the current centralized model dominated by large corporations and governments. By leveraging the distributed nature of blockchain, these networks could foster collaboration and innovation among a wider range of participants.
Additionally, the report delves into emerging trends in web3, including decentralized finance (DeFi) and advancements in smart contracts. DeFi, which offers financial services without traditional intermediaries like banks, requires the establishment of regulatory frameworks to ensure consumer protection and financial stability.
Smart contracts, which are self-executing agreements stored on a blockchain, are also discussed in the report. It emphasizes the need for further developments in smart contract functionalities to fully harness their potential in various applications.
The proactive approach of the European Commission towards the integration of blockchain and AI is considered strategic, especially in light of recent security incidents in the cryptocurrency space. Notably, Sonne Finance, a DeFi lending platform, experienced a significant security breach resulting in a loss of approximately $20 million.
Similarly, Hundred Finance faced a similar issue in 2023, where a hacker exploited a vulnerability by manipulating the exchange rate and draining lending pools with minimal tokens.
Prominent philosopher Yuval Noah Harari has cautioned against the uncontrolled integration of AI in the financial sector. Speaking at the Bank for International Settlements (BIS) Innovation Summit, Harari highlighted the potential risks and advocated for effective regulation to mitigate misuse and adverse events.
Regulatory bodies, such as the US Securities and Exchange Commission (SEC), have also issued alerts warning investors about the rise of investment fraud involving AI and other emerging technologies. SEC Chair Gary Gensler has expressed concerns about the impact of AI on financial systems and emphasized the need to address algorithm bias and other related issues.
Experts predict that global authorities will continue their efforts to mitigate AI risks by ensuring transparency in AI capabilities and the role of AI in businesses.
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