Is This New AI Chatbot for Crypto a Game Changer?

Ever since the launch of ChatGPT in November, the race has been on to find powerful new ways to integrate artificial intelligence (AI) with crypto trading and investing. That led to the appearance of the first crypto trading bots powered by ChatGPT at the end of last year.

These crypto bots used computer code generated by ChatGPT to execute very specific crypto trading strategies.

Now, just six months later, ChatGPT has just been taken to a whole new level within the crypto world. There is a new experimental ChatGPT-powered chatbot for Solana (SUN -1.64%) blockchain that specializes in decentralized finance (DeFi). This chatbot is more than happy to chat with you about DeFi, but its breakthrough value comes from its ability to transact within Solana’s blockchain ecosystem using simple text messages.

Crypto trading bots vs DeFi bots

There is an important distinction between crypto trading bots and DeFi bots. Crypto trading bots are designed for cryptocurrency exchanges, and are used to buy and sell cryptos according to specific trading rules.

With ChatGPT, for example, you can create one Bitcoin (BTC -0.31%) trading bot that specializes in long-term investing using a very simple text message like “Give me the computer code for a Bitcoin trading strategy using Dollar Cost Averaging (DCA).” Once you have the code, you can optimize it for several different variables, such as the frequency with which you plan to buy Bitcoin.

DeFi bots, on the other hand, do not buy and sell crypto on an exchange. Instead, they lock money into various DeFi protocols on a specific blockchain to earn financial rewards.

In very basic terms, a DeFi protocol is simply a self-executing computer program in the form of a smart contract for a particular blockchain ecosystem. So, for example, a crypto lending and borrowing protocol is a piece of computer code that describes the way borrowers and lenders interact on a blockchain, including what the financial rewards will be.

Image source: Getty Images.

Putting it all together, the new Solana chatbot (called Omni) can help you understand and then participate in various DeFi protocols to earn financial rewards. All you need to do is use a natural language text message, just like you would with ChatGPT, and then connect to your digital blockchain wallet.

Risk factors

There are several risk factors involved when using these DeFi robots. First, any time you connect your blockchain wallet to a cryptobot platform, there will obviously be an element of risk. You can go to bed thinking you just invested in a very profitable DeFi protocol and wake up the next morning to find your blockchain wallet wiped out.

Remember all the problems that the Celsius Network had during the 2022 crypto meltdown? Celsius was a crypto lender that did much the same as marginFi, the creator of the Solana chatbot, is doing now. It connected crypto borrowers with crypto borrowers, offering very high rewards for those willing to deposit their money. Celsius eventually filed for bankruptcy protection in July 2022.

So every time I hear about crypto loans and lending, I get a little nervous. This can be an attempt with a relatively high risk.

Also, as Omni makes very clear on its chatbot landing page, it’s “highly experimental software” capable of producing “inaccurate results.” When I played around with Omni, it also seemed much slower than ChatGPT, often taking an excruciating 10 seconds to think of a response. I’m used to ChatGPT spitting out responses immediately. This may be due to the technology stack that Omni uses — it uses two other different major language models in addition to ChatGPT.

The future of DeFi chatbots

The big picture is that the next generation of DeFi chatbots, if successful, could completely change the way we think about earning passive income in the crypto space.

The most popular form of passive income strategy right now is crypto betting, and it’s remarkably easy to do. On some cryptocurrency trading platforms, all it takes is a single click and you’re done. You don’t need an AI chatbot to do it for you.

But there are many other passive income strategies in the crypto space and some of them can be difficult to find, understand, evaluate or execute if you are an average investor. Examples of these strategies include yield farming, liquidity mining, and crypto lending.

These are all actions that an AI chatbot can be trained to understand and then perform more profitably than humans can. In your chatbot text message, you’ll simply include details such as the minimum and maximum returns you’re willing to consider, some hints about your risk-reward profile, and any preferences you may have when it comes to certain blockchains or protocols.

Again, there are many risks with AI-powered chatbots, but the potential opportunities here are certainly exciting. The “old” chatbots that just traded Bitcoin are now so 2022. The next generation of crypto chatbots will give you access to the entire world of DeFi with the help of just a simple text message.