Synergies Between Blockchain Technology and AI
Performance Highlights
As of September 30, BLOK has appreciated 55.50% year-to-date (NAV). While July and August reflected a period of consolidation following earlier gains, September marked a notable acceleration, with the portfolio advancing 12.67%. For the third quarter overall, BLOK delivered a 17.71% return. View standardized performance.
These results were supported by continued capital inflows into the blockchain and digital asset ecosystem. Yet beyond short-term momentum, our focus remains on the broader trajectory of technological adoption. While price action provides useful signals, we believe the long-term value proposition of blockchain technology is still in its early stages.
The performance data quoted represents past performance and does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. For most recent month-end performance, visit BLOKETF.com.
The Broader Technological Context
We see significant potential in the convergence of artificial intelligence (AI) and blockchain, particularly through the application of smart contracts. Together, these technologies are poised to generate efficiencies and disruptive benefits across multiple industries. Sectors such as financial services and real estate are likely to be meaningfully reshaped by the enhanced capital access and operational innovation that blockchain enables. Companies embracing these advancements are positioned to lead, while those that fail to adapt face the risk of disintermediation.
We continue to caution against viewing blockchain investment solely through the lens of speculative cycles or just as Bitcoin. Investors, financial advisors, and corporate leaders who remain hesitant due to fears of “bubbles” may, in fact, be assuming greater risk—the risk of underperformance or obsolescence. The history of the company Blockbuster serves as a powerful reminder: once dominant, it failed to adapt to technological change and was ultimately displaced.
Since 2018, our guidance has been consistent: do not focus exclusively on short-term price movements or headlines surrounding Bitcoin and blockchain. Neither extreme—expecting collapse to zero nor predicting an unchecked surge “to the moon”—captures reality. A more prudent approach is to evaluate how these technologies are transforming industries, improving customer outcomes, and scaling over time.
Held in the Portfolio
We believe the rise of global platform companies built on blockchain infrastructure—in trading, commerce, or global payments—will evolve in parallel with the race to build AI data centers. However, blockchain’s infrastructure advantage lies in its ability to leverage existing data centers rather than just requiring new capital-intensive buildouts.
Blockchain and AI are highly complementary technologies. While AI provides advanced analytics and automation, blockchain offers a decentralized, tamper-proof framework that ensures data integrity and transparency. Together, they address many of each other’s weaknesses and unlock new opportunities across industries. To be clear, our timing about emphasizing the synergies between AI and Blockchain should not be considered a new part of our strategic narrative or an expansion of our investment process. Companies like Oracle and Walmart have been held in the portfolio in the past. In many ways, the adoption by companies like these is critical to our vision for the successful ubiquity of the integration of technologies into people’s daily lives. It was therefore very logical to us when Walmart, which has been behind the scenes using Blockchain for traceability with its Supply Chain for years announced a partnership with OpenAI.1
How Blockchain Benefits AI
Blockchain addresses several of AI’s biggest challenges around trust, data, and accountability:
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Improves explainability and auditability: Recording AI decisions and data sources on-chain creates a transparent, auditable trail that can be examined for accuracy, bias, and compliance. |
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Enables decentralized AI: Blockchain facilitates open, transparent AI platforms, reducing concentration among a few large tech companies and allowing fairer monetization and broader participation. |
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Enhances privacy and security: Decentralized storage minimizes data breach risks, while secure multi-party computation enables AI training on private data without exposure. |
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Protects intellectual property: Tokenizing IP through NFTs (non-fungible tokens) and smart contracts ensures creators receive attribution and compensation when their data or content is used to train AI. |
How AI Benefits Blockchain
AI, in turn, helps overcome blockchain’s traditional limitations: scalability, speed, and energy consumption:
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Optimizes energy consumption: For energy-intensive networks, AI can streamline mining and predict load requirements, improving energy efficiency. |
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Enhances security: AI-driven anomaly detection bolsters blockchain’s defenses against fraud and cyber threats. |
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Improves smart contracts: AI enables adaptive, intelligent smart contracts that can make real-time decisions based on live data. |
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Enables data management: AI refines blockchain data handling through compression and indexing, reducing storage needs and enhancing retrieval speed. |
Real-World Applications
The synergy between blockchain and AI is already reshaping industries:
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Healthcare: Blockchain securely stores patient data; AI analyzes it for diagnosis, treatment, and drug discovery. |
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Financial Services: AI enhances fraud detection and risk management, while blockchain automates settlements and ensures data integrity. |
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Decentralized Autonomous Organizations (DAOs): AI can analyze proposals and predict outcomes, while blockchain ensures transparent governance. |
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AI Marketplaces: Blockchain enables decentralized platforms for trading AI models and data, ensuring fair compensation and privacy. |
Industry Developments Driving Adoption
The competitive race to modernize digital infrastructure accelerated in September, driven by key developments:
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Stablecoins: Regulatory clarity continues to improve. The GENIUS Act paved the way for constructive frameworks like the CLARITY Act and the Responsible Financial Innovation Act (RFIA). Traditional institutions are preparing aggressively: SWIFT advanced its blockchain-based tokenized payment network6; Tether introduced USAT, a U.S.-regulated stablecoin backed by Anchorage Digital and Cantor Fitzgerald7; and Fnality, supported by global banks including Bank of America and Citi, raised $136 million to expand on-chain settlement.8 As with AI data centers, financial firms now face strategic pressure to plan for multiple regulatory outcomes. |
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Blockchain Beyond Finance: Adoption is expanding into luxury goods and supply chains. The Aura Blockchain Consortium, founded by LVMH, Prada, and Richemont, continues to scale its product authentication. This trend underscores a shift toward enterprise-grade blockchain use cases, where value is driven by transparency and traceability rather than speculation. BLOK remains positioned in technology leaders such as IBM, which provides blockchain-as-a-service solutions and supply-chain integrations for global brands. |
Transactions and Repositioning
The portfolio made some subtle, but significant changes in September that reinforce our discipline around managing risk through diversification. Steadily we trimmed Cipher (CIFR) in increments of 0.50% - 0.75% and took profits into strength. Core Scientific (CORZ) on the other hand was sold completely. We would note that we are challenged to understand how the deal with Coreweave (CRWV) was negotiated and constructed without floors on the CRWV stock price and with the stock trading at a premium to the ratio that would be received we decided not to fight the disappointing deal structure. Afterall, our mandate is not to be an activist investor or a merger-arb fund. This also made particular sense given other opportunities in the space that had greater defined upside. The cash that we raised was later re-deployed in SharpLink (SBET) and Bed Bath & Beyond (BBBY), formerly Beyond.
Our portfolio performance success over the years has at many times come from individual stocks which at a 2-3% weighting have moved parabolically. Frequently, this is a function of changes in sentiment around a theme or trend that we have identified early that later are recognized. Examples of this include:
To be clear we don’t claim to have invented these trends or themes but rather identify companies that would benefit by the adoption. In certain ways, this is an example of how the Blockchain investment opportunity is constantly evolving and why we believe we are still very early. Bitcoin is the largest Blockchain, but its current value proposition is mostly focused on serving as a “store of value”, aka as “digital gold”. Simply put, due to its limited supply and network effects it serves as a hedge against the debasement of currencies. To this point, while we are excited about Bitcoin and expect to capture the innovation from this opportunity, we think that the Real World Asset (RWA) theme and trend could be an even more important. Regardless our goal in BLOK is to capitalize on the infrastructure buildout of the evolution and we are thrilled that this has led us to participate in the AI data-center buildout.
1corporate.walmart.com/news/2025/10/14/walmart-partners-with-openai-to-create-ai-first-shopping-experiences
2markets.ft.com/data/announce/detail?dockey=600-202509150325BIZWIRE_USPRX____20250915_BW788477-1
3theblock.co/post/373240/cme-make-crypto-futures-always-on-24-7-trading-2026
4reuters.com/business/finance/nasdaq-makes-push-launch-trading-tokenized-securities-2025-09-08/
5ir.theice.com/press/news-details/2025/ICE-Announces-Strategic-Investment-in-Polymarket/default.aspx
6finance.yahoo.com/news/swift-big-banks-building-blockchain-163108526.html
7cryptonomist.ch/2025/09/16/usat-the-banking-stablecoin-by-tether-federal-issuance-with-anchorage-and-verified-reserves/
8fnality.com/news/fnality-raises-136-million-in-series-c-funding