Effect AI: Searching for the Right Home (Part 1)
This article is part 1 of a two-part series exploring Effect AI’s history and its search for the right blockchain ecosystem.
The Vision and Early Days
Founded in Amsterdam in 2017, Effect AI emerged with a revolutionary vision: to decentralize artificial intelligence development and challenge the tech monopoly on AI. The project aimed to democratize AI services while empowering a global workforce. Effect AI represents the overall project, while Effect Network denotes the functional blockchain infrastructure it operates on.
The project launched with an Initial Coin Offering (ICO) on the NEO blockchain in March 2018, introducing the EFX token. The ICO proved successful, raising approximately 11 million Euros and demonstrating strong market confidence in blockchain-powered AI solutions. The project’s original whitepaper outlined three ambitious phases:
1. Effect Force: A decentralized marketplace for human intelligence tasks
2. Effect Smart Market: A decentralized exchange for AI services
3. Effect Power: A global computational network supporting deep learning models
While all three phases were conceptualized, the whitepaper primarily focused on Effect Force and its governance system, Effect DAO.
Early Success and Corporate Growth
Following its ICO, Effect AI quickly established itself in the enterprise space through strategic partnerships with major clients. The flagship collaboration came through Kraft Heinz, which became one of the platform’s largest enterprise clients. Kraft Heinz utilized Effect Force’s capabilities for multilingual data annotation across their diverse global product lines, demonstrating the platform’s ability to handle complex, language-dependent tasks at scale.
The platform’s versatility was further showcased through a key partnership with Quadrant Protocol, which led to a significant government contract. Working with the Singaporean Government, Effect Force workers undertook the specialized task of analyzing aerial imagery, specifically identifying residential rooftops from aerial photographs. This project highlighted the platform’s capacity to handle highly specialized tasks requiring human insight and judgment.
Scaling Challenges and Technical Evolution
The success of these partnerships drove rapid growth, with millions of tasks being completed on the platform. However, this scale of operations exposed the limitations of the NEO blockchain’s throughput capabilities. Facing these technical constraints, the team made the strategic decision to migrate to the EOS blockchain. EOS offered two critical advantages: faster transaction speeds and lower operational costs, enabling the platform to maintain high task volumes while keeping operations economically viable.
Operational Realities and Hybrid Solutions
Despite the technical improvements, the practical implementation of these enterprise partnerships revealed a gap between vision and reality. Effect B.V., the project’s corporate entity, operated primarily as a traditional contractor, receiving fiat payments from enterprise clients. To maintain operational efficiency, the team implemented a hybrid payment system:
- Direct payments to workers via PayPal
- Conversion of fiat to EFX tokens for worker compensation
While this hybrid approach ensured smooth task fulfillment and client satisfaction, it represented a departure from the original vision of fully decentralized artificial intelligence.
Expansion into Specialized Services
During this period, Effect AI also expanded its service offerings through Rosette.AI, a specialized multilingual translation service. This platform leveraged human workers to provide accurate translations at scale, focusing on:
- YouTube content localization
- Website translation
- Other digital content adaptation
Rosette.AI maintained the project’s flexible approach to payments, accepting both fiat currency and EFX tokens, thereby bridging traditional business needs with blockchain capabilities.
Strategic Migration to EOS
The transition to EOS marked a pivotal moment in Effect AI’s evolution, beginning on April 30, 2019. This migration addressed two critical objectives:
- Resolving NEO’s performance limitations
- Creating infrastructure for decentralized governance
As part of the migration, EFX holders gained the ability to stake their tokens and earn NFX, laying the groundwork for the upcoming Effect DAO. The DAO was designed as a transparent management system that would oversee treasury funds and process community proposals. During this transition period, the project temporarily rebranded to “Effect Network,” though a later DAO proposal would eventually return it to its original name, Effect AI.
Expanding to BSC
By June 1st, 2021, Effect AI expanded its blockchain presence by launching a bridge to Binance Smart Chain (BSC). This expansion brought several key developments:
- Multi-chain EFX token existence across EOS and BSC
- Integration with Metamask wallets for task completion and requests
- Access to PancakeSwap’s liquidity pool
However, the bridge implementation faced technical challenges. Since the core smart contracts remained on EOS, the system required complex cross-chain routing mechanisms. This architecture proved problematic, unable to deliver the necessary throughput and cost-effectiveness for optimal operation. Despite these limitations, the PancakeSwap liquidity pool proved vital, providing essential financial stability while the EOS DeFi ecosystem struggled.
Launch and Operational Structure
The Effect DAO officially launched on January 1st, 2021, introducing a systematic governance approach through two-week cycles. During these cycles, DAO members could:
- Submit proposals for the upcoming cycle
- Vote on current cycle proposals
- Stake both EFX and NFX tokens for voting power
With the DAO’s launch, NFX generation ceased, transforming the token’s utility to focus on governance through staking.
Early Governance Debates
The DAO’s early days were marked by vibrant discussions and debates over critical issues:
- Suggestions for implementing more flexible vote weight systems
- Concerns regarding the implementation of Network Fees
The Network Fees debate proved particularly significant. While the EFX tokenomics required task requestors to pay these fees, the existing partnership structure made implementation challenging. Despite DAO members receiving network fee airdrops, this conflict highlighted the need for a more thoroughly decentralized operational structure.
Evolution Toward Greater Decentralization
A turning point came through the advocacy of DAO member DJSTRIKANOVA, who proposed two key initiatives:
1. A fully decentralized microtasking system utilizing APIs, with all operations settled directly on the blockchain
2. The organization of hackathons to encourage developers to build decentralized applications using the API
As corporate client contracts reached completion, the team embraced this vision of greater decentralization for the Effect Force system.
The Inaugural Hackathon
The vision materialized into a major hackathon later in 2021, featuring:
- $55,000 in prize money
- 183 registered participants
- Award ceremony on January 20, 2022
The event produced several notable applications:
- Delos: An image labeling platform
- Catalogue (QuickCat): A Shopify inventory management solution
- Effect Notebooks: A data cleaning application
While these applications didn’t achieve significant market penetration, they successfully demonstrated the versatility and potential of Effect AI’s SDK, validating the project’s move toward greater decentralization.
EOS Ecosystem Challenges
Despite EOS’s initial promise as Ethereum’s primary challenger in 2019, several factors hindered its ecosystem development:
- Block.one controversies, particularly their failure to fully invest ICO proceeds into platform development
- High technical barriers to entry, especially in wallet creation
- Limited ecosystem growth and adoption
These fundamental issues prevented EOS from achieving the widespread popularity necessary for a thriving decentralized ecosystem.
Impact on Effect AI’s Operations
The ecosystem limitations directly affected Effect AI’s operations in several ways:
- Corporate clients showed reluctance to engage with cryptocurrency-based systems
- Platform activity decreased as task completion volumes declined
- Legacy tools like Rosette (Effect Captions), the YouTube video transcribing service, proved incompatible with the new decentralized microtasking architecture
Adaptation and New Initiatives
Despite these challenges, the team continued innovating with new projects:
Effect Socials
The team launched Effect Socials, a fully EFX-based platform that enabled brands to compensate workers for social media engagement, particularly on Twitter. This project successfully implemented the new decentralized system.
Neural Pepe Collaboration
In February 2022, Effect AI partnered with Neural Pepe, an NFT project on BSC featuring AI-generated meme frog artwork. Effect Force workers contributed by analyzing trait recognition for rarity determination. However, broader adoption remained limited due to two key constraints:
- Mandatory EFX requirement for network fees
- EOS’s position as Effect AI’s native chain
These technical and economic constraints ultimately highlighted the challenges of implementing a truly decentralized microtasking platform within the EOS ecosystem.
Leadership Transition and Technical Progress
2022 proved to be a turbulent year for Effect AI, marked by significant leadership changes. Chris Dawe stepped down from his position as CEO and left the project, with Jesse Eisses taking the helm. During this period of transition, Jesse and several other team members also joined the founding team of Nosana. Despite this additional commitment, they maintained their dedication to Effect AI’s development, launching the Effect SDK mainnet on July 21, 2022.
Technical Evolution and Market Challenges
Throughout 2022 and 2023, the team focused on refining and improving the Effect SDK. Effect DAO also saw substantial governance enhancements through the implementation of Arbitrary Transaction Proposals (ATPs), which gave DAO members greater control over smart contract proposals. The broader AI landscape was also evolving, with the release of Stable Diffusion and ChatGPT rekindling interest in artificial intelligence.
As development continued, it became clear that the SDK required significant upgrades. After a year of mainnet operation, throughput limitations necessitated the development of a better version, dubbed “V2”. Recognizing Python’s prominence in AI programming, Jesse undertook the development of a Python version of the SDK, originally written in TypeScript. However, EOS’s declining prominence in the cryptocurrency landscape took its toll. Kucoin delisted EFX in July 2023, with all withdrawals disabled in January 2024. In March 2024, the project returned to its original name, Effect AI, reflecting the DAO’s view that this better represented their core mission of creating AI.
The Solana Transition
As the team worked on refining Effect Force, the EOS ecosystem underwent significant changes. Late 2023 saw the introduction of new tokenomics that increased the costs of RAM, a crucial resource for Effect Force operations on EOS. Meanwhile, Nosana’s success on Solana captured attention, with its performance highlighting Solana’s advantages as a blockchain ecosystem for growth. This sparked discussions about Effect AI’s future blockchain home.
The Effect DAO initially supported a bridge to Solana following V2’s completion, hoping to demonstrate the potential of decentralized microtasking. However, when V2 launched in May 2024, EOS’s new tokenomics rendered the implementation prohibitively expensive for workers. The situation worsened when USDT announced its withdrawal of EOS support, giving token holders a one-year redemption window.
The Final Decision
By September 2024, after these successive setbacks, both the team and Effect DAO reached a unanimous decision: continuing to refactor Effect Force on EOS was futile. The future clearly lay with Solana. In its final cycles, the Effect DAO focused on preparing for this transition, establishing the framework for unifying EFX and NFX into the new Solana token “EFFECT.” These final meetings centered on ratifying migration deadlines and terms, setting the stage for Effect AI’s next chapter on a more promising blockchain platform.
Solana: The Promised Land
Effect AI’s journey began with an ambitious vision laid out in its whitepaper: to establish a decentralized network for artificial intelligence. While this initial scope proved too broad, the project found its focus in Effect Force, creating a decentralized microtasking platform. Now, as Effect AI looks toward Solana, that original vision seems more achievable than ever.
Solana’s ecosystem presents an ideal environment for decentralized artificial intelligence projects. Its vibrant DeFi landscape continuously spawns new tokens and trading opportunities, creating a dynamic foundation for AI integration. The emergence of DePIN (Decentralized Physical Infrastructure) demonstrates Solana’s capability to bridge digital systems with real-world information flows. Nosana’s success as a decentralized compute platform further validates Solana’s potential in this space.
Perhaps most intriguingly, Solana has become home to autonomous AI agents — sophisticated programs capable of independent decision-making when interacting with smart contracts. This development particularly aligns with Effect AI’s original vision of decentralized artificial intelligence, suggesting that the platform’s initial ambitions may have simply been ahead of their time rather than too ambitious.
As more AI projects make Solana their home, the blockchain is rapidly emerging as a promised land for decentralized artificial intelligence. This concludes Part 1, which has chronicled Effect AI’s journey and its search for the right blockchain home. Part 2 will delve deeper into Solana’s unique advantages and explore how Effect AI, alongside other projects, is positioned to fulfill the promise of truly decentralized artificial intelligence.
Website: https://effect.ai/
Telegram: https://t.me/effectai
Discord: https://discord.gg/effectnetwork
Author: https://x.com/djstrikanova
