Real AI use cases in crypto, No. 3: Smart contract audits & cybersecurity
Every day this week we’re highlighting one genuine, no bullsh*t, hype free use case for AI in crypto. Today it’s the potential for using AI for smart contract auditing and cybersecurity, we’re so near and yet so far.
One of the big use cases for AI and crypto in the future is in auditing smart contracts and identifying cybersecurity holes. There’s only one problem — at the moment, GPT-4 sucks at it.
Coinbase tried out ChatGPT’s capabilities for automated token security reviews earlier this year, and in 25% of cases, it wrongly classified high-risk tokens as low-risk.
James Edwards, the lead maintainer for cybersecurity investigator Librehash, believes OpenAI isn’t keen on having the bot used for tasks like this.
“I strongly believe that OpenAI has quietly nerfed some of the bot’s capabilities when it comes to smart contracts for the sake of not having folks rely on their bot explicitly to draw up a deployable smart contract,” he says, explaining that OpenAI likely doesn’t want to be held responsible for any vulnerabilities or exploits.
This isn’t to say AI has zero capabilities when it comes to smart contracts. AI Eye spoke with Melbourne digital artist Rhett Mankind back in May. He knew nothing at all about creating smart contracts, but through trial and error and numerous rewrites, was able to get ChatGPT to create a memecoin called Turbo that went on to hit a $100 million market cap.
But as CertiK Chief Security Officer Kang Li points out, while you might get something working with ChatGPT’s help, it’s likely to be full of logical code bugs and potential exploits:
“You write something and ChatGPT helps you build it but because of all these design flaws it may fail miserably when attackers start coming.”
So it’s definitely not good enough for solo smart contract auditing, in which a tiny mistake can see a project drained of tens of millions — though Li says it can be “a helpful tool for people doing code analysis.”
Richard Ma from blockchain security firm Quantstamp explains that a major issue at present with its ability to audit smart contracts is that GPT -4’s training data is far too general.
Also read: Real AI use cases in crypto, No. 1 — The best money for AI is crypto
“Because ChatGPT is trained on a lot of servers and there’s very little data about smart contracts, it’s better at hacking servers than smart contracts,” he explains.
So the race is on to train up models with years of data of smart contract exploits and hacks so it can learn to spot them.
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“There are newer models where you can put in your own data, and that’s partly what we’ve been doing,” he says.
“We have a really big internal database of all the different types of exploits. I started a company more than six years ago, and we’ve been tracking all the different types of hacks. And so this data is a valuable thing to be able to train AI.”
Race is on to create AI smart contract auditor
Edwards is working on a similar project and has almost finished building an open-source WizardCoder AI model that incorporates the Mando Project repository of smart contract vulnerabilities. It also uses Microsoft’s CodeBert pretrained programming languages model to help spot problems.
According to Edwards, in testing so far, the AI has been able to “audit contracts with an unprecedented amount of accuracy that far surpasses what one could expect and would receive from GPT-4.”
The bulk of the work has been in creating a custom data set of smart contract exploits that identify the vulnerability down to the lines of code responsible. The next big trick is training the model to spot patterns and similarities.
“Ideally you want the model to be able to piece together connections between functions, variables, context etc, that maybe a human being might not draw when looking across the same data.”
While he concedes it’s not as good as a human auditor just yet, it can already do a strong first pass to speed up the auditor’s work and make it more comprehensive.
“Sort of help in the way LexisNexis helps a lawyer. Except even more effective,” he says.
Don’t believe the hype
Near co-founder Illia Polushkin explains that smart contract exploits are often bizarrely niche edge cases, that one in a billion chance that results in a smart contract behaving in unexpected ways.
But LLMs, which are based on predicting the next word, approach the problem from the opposite direction, Polushkin says.
“The current models are trying to find the most statistically possible outcome, right? And when you think of smart contracts or like protocol engineering, you need to think about all the edge cases,” he explains.
Polushkin says that his competitive programming background means that when Near was focused on AI, the team developed procedures to try to identify these rare occurrences.
“It was more formal search procedures around the output of the code. So I don’t think it’s completely impossible, and there are startups now that are really investing in working with code and the correctness of that,” he says.
But Polushkin doesn’t think AI will be as good as humans at auditing for “the next couple of years. It’s gonna take a little bit longer.”
Also read: Real AI use cases in crypto, No. 2 — AIs can run DAOs
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Solana decentralized finance (DeFi) protocol Loopscale has temporarily halted its lending markets after suffering an approximately $5.8 million exploit.
On April 26, a hacker siphoned approximately 5.7 million USDC (USDC) and 1200 Solana (SOL) from the lending protocol after taking out a “series of undercollateralized loans”, Loopscale co-founder Mary Gooneratne said in an X post.
The exploit only impacted Loopscale’s USDC and SOL vaults and the losses represent around 12% of Loopscale’s total value locked (TVL), Gooneratne added.
Loopscale is “working to resume repayment functionality as soon as possible to mitigate unforeseen liquidations,” its said in an X post.
“Our team is fully mobilized to investigate, recover funds, and ensure users are protected,” Gooneratne said.
In the first quarter of 2025, hackers stole more than $1.6 billion worth of crypto from exchanges and on-chain smart contracts, blockchain security firm PeckShield said in an April report.
More than 90% of those losses are attributable to a $1.5 billion attack on ByBit, a centralized cryptocurrency exchange, by North Korean hacking outfit Lazarus Group.
Related: Crypto hacks top $1.6B in Q1 2025 — PeckShield
Unique DeFi lending model
Launched on April 10 after a six-month closed beta, Loopscale is a DeFi lending protocol designed to enhance capital efficiency by directly matching lenders and borrowers.
It also supports specialized lending markets, such as “structured credit, receivables financing, and undercollateralized lending,” Loopscale said in an April announcement shared with Cointelegraph.
Loopscale’s order book model distinguishes it from DeFi lending peers such as Aave that aggregate cryptocurrency deposits into liquidity pools.
Loopscale’s main USDC and SOL vaults yield APRs exceeding 5% and 10%, respectively. It also supports lending markets for tokens such as JitoSOL and BONK (BONK) and looping strategies for upwards of 40 different token pairs.
The DeFi protocol has approximately $40 million in TVL and has attracted upwards of 7,000 lenders, according to researcher OurNetwork.
Magazine: Ripple says SEC lawsuit ‘over,’ Trump at DAS, and more: Hodler’s Digest, March 16 – 22
United States Senator Jon Ossoff expressed support for impeaching President Donald Trump during an April 25 town hall, citing the President’s plan to host a private dinner for top Official Trump memecoin holders.
“I mean, I saw just 48 hours ago, he is granting audiences to people who buy his meme coin,” said Ossoff, a Democrat, according to a report by NBC News.
“When the sitting president of the United States is selling access for what are effectively payments directly to him. There is no question that that rises to the level of an impeachable offense.”
Senator Ossoff said he “strongly” supports impeachment proceedings during a town hall in the state of Georgia, where he is running for reelection to the Senate.
The Senator added that an impeachment is unlikely unless the Democratic Party gains control of Congress during the US midterm elections in 2026. Trump’s own Republican Party currently has a majority in both the House of Representatives and the Senate.
Related: US lawmaker says TRUMP coin could risk national security
Conflicts of interest
On April 23, the Official Trump (TRUMP) memecoin’s website announced plans for Trump to host an exclusive dinner at his Washington, DC golf club with the top 220 TRUMP holders.
The website subsequently posted a leaderboard tracking top TRUMP wallets and a link to register for the event. The TRUMP token’s price has gained more than 50% since the announcement, according to data from CoinMarketCap.
The specific guest list is unclear, but the memecoin’s website states that applicants must pass a background check, “can not be from a [Know Your Customer] watchlist country,” and cannot bring any additional guests.
On April 25, the team behind TRUMP denied social media rumors that TRUMP holders need at least $300,000 to participate in an upcoming dinner with the president.
“People have been incorrectly quoting #220 on the block explorer as the cutoff. That’s wrong because it includes things like locked tokens, exchanges, market makers, and those who are not participating. Instead, you should only be going off the leaderboard,” they wrote.
Legal experts told Cointelegraph that Trump’s cryptocurrency ventures, including the TRUMP memecoin and Trump-affiliated decentralized finance (DeFi) protocol World Liberty Financial, raise significant concerns about potential conflicts of interest.
“Within just a couple of days of him taking office, he’s signed a number of executive orders that are significantly going to affect the way that our crypto and digital assets industry works,” Charlyn Ho of law firm Rikka told Cointelegraph in February.
“So if he has a personal pecuniary benefit arising from his own policies, that’s a conflict of interest.”
Magazine: Trump’s crypto ventures raise conflict of interest, insider trading questions
Crypto investor sentiment has seen a significant recovery from global tariff concerns, but analysts warn that the market’s structural weaknesses may still result in downside momentum during periods of weekend illiquidity.
Risk appetite appeared to return among crypto investors this week after US President Donald Trump adopted a softer tone, saying that import tariffs on Chinese goods may “come down substantially.”
However, the improved investor sentiment “does not guarantee that Bitcoin will avoid volatility over the weekend,” analysts from Bitfinex exchange told Cointelegraph:
“Sentiment improvements reduce fragility, but they do not eliminate structural risks like thin weekend liquidity.”
“Historically, weekends remain vulnerable to sharp moves — especially when open interest is high and market depth is low,” the analysts said, adding that unexpected macroeconomic news can still increase volatility during low liquidity periods.
Related: Trump fought the bond market, the bond market won: Saifedean Ammous
Bitcoin (BTC) staged a near 11% recovery during the past week, but its rally has previously been limited by Sunday liquidity dynamics.
Bitcoin fell below $75,000 on Sunday, April 6, despite initially decoupling from the US stock market’s $3.5 trillion drop on April 4 after US Federal Reserve Chair Jerome Powell warned that Trump’s tariffs may affect the economy and raise inflation.
The correction was exacerbated by the lack of weekend liquidity and the fact that Bitcoin was the only large liquid asset available for de-risking, industry watchers told Cointelegraph.
Related: US banks are ‘free to begin supporting Bitcoin’ — Michael Saylor
“While improved sentiment creates a more stable foundation, cryptocurrency markets are still susceptible to rapid movements during periods of reduced trading volume,” according to Marcin Kazmierczak, co-founder and chief operating officer of RedStone blockchain oracle firm.
“The sentiment recovery provides some cushioning, but traders should remain cautious as weekend liquidity constraints can still amplify price movements regardless of the current market mood,” he told Cointelegraph.
Crypto investors may have “maxed out on tariff-related fears”
Cryptocurrency markets may have priced in the full extent of tariff-related concerns, according to Aurelie Barthere, principal research analyst at crypto intelligence platform Nansen.
“It feels like we’ve maxed out on tariff-related fear,” she told Cointelegraph, adding:
“While many remain uncertain about where things are headed over the next month or so, it also seems like markets were just waiting for the slightest signal that we’re back in the game.”
“Whether the rally is sustainable depends on whether we can break through previous resistance levels, at least in isolation. It could have legs, as markets now seem to believe there’s a ‘Trump put’ under equities, the US dollar and US Treasurys,” Barthere added, warning of more potential volatility amid the upcoming negotiations.
Nansen previously predicted a 70% chance that crypto markets will bottom and start a recovery by June, but highlighted that the timing will depend on the outcome of tariff negotiations.
The tariff negotiations may only be “posturing” for the US to reach a trade agreement with China, which may be the “big prize” for Trump’s administration, according to Raoul Pal, founder and CEO of Global Macro Investor.
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