In late 2022, ChatGPT became a major sensation for its innovative use of artificial intelligence (AI). Simply by entering a brief text prompt, you could request this AI chatbot to write just about anything, and it could do so within a matter of seconds.
The groundbreaking technology is so powerful that Microsoft (MSFT 2.26%) is now investing billions of dollars into it.
With many people trying to figure out how they can harness the power of ChatGPT, is it any surprise that innovators within the crypto industry are also experimenting with it? There could be many more examples in the coming months, but one that really stands out right now involves Polygon (MATIC +0.00%) and its experimentation with AI technology for the non-fungible token (NFT) market.
NFTs and the AI revolution
What Polygon has in mind is the launch of AI-powered avatars using a new technology called CharacterGPT. Once these avatars have been created, they can be transformed into NFTs that live on the Polygon blockchain.
That's a lot to unpack, but the essence can be boiled down to this: You type in a text prompt for what kind of avatar you want to interact with online, and the AI system powering CharacterGPT will create that avatar for you on the fly.
In a sample scenario from CharacterGPT that you can find on YouTube, you could type in "an old man as a grizzled prospector who wants to retire," and the AI immediately creates a digital representation of a man from the 1850s dressed in Western gear. This avatar would then be able to answer your questions from the perspective of a California prospector looking to retire.
Image source: Getty Images.
Where things get interesting is when you consider how this technology could completely reshape the NFT market. Ever since the launch of CryptoPunks in 2017, the NFT market has gone through two primary phases.
Phase 1 was NFT as digital art. You were basically buying a very expensive JPEG file. Phase 2 was the rise of the utility NFT, in which buyers received some added value from the NFT, such as entry to an online VIP club.
Phase 3 of the NFT market could be the introduction of the AI-powered avatar. The added value here would be the ability of this intelligent avatar to answer any question, from any source, from a particular perspective. Imagine a character from your favorite sci-fi film that you could customize according to your specifications, and interact with in the metaverse.
There are people far more creative than me, so this is probably just scratching the surface of what's possible. It could dramatically change the game here for NFTs and transform Polygon into the clear NFT market leader.
People often ask why they would want to buy an expensive digital image of a Bored Ape. They might be more interested in an intelligent NFT that could answer questions on a favorite subject.
What investors need to know
This project from Polygon is so interesting because this crypto has already partnered with a number of highly creative brands, including Starbucks (SBUX 1.43%) and Nike (NKE +2.09%), both of which can probably think of lots of interesting applications.
Another partner of Polygon is Walt Disney (DIS 1.14%). Imagine what Disney could do with this type of AI technology, the types of immersive experiences it could create for families, and the new digital experiences it could create for people around the world.
Moreover, the company behind CharacterGPT -- Alethea AI -- has the backing of billionaire investor Mark Cuban. In the past, Mark Cuban has invested in Polygon, and he is just the sort of person who could build popular support for AI-powered NFTs.
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Key Data Points
ChatGPT was just the beginning. Based on its initial acclaim and success, it's easy to see many more applications of AI technology. For Polygon, it's not so much a case of overtaking ChatGPT; it's about creating new uses for generative AI technology.
AI and crypto can make for a very powerful combination. I'm bullish on any crypto looking for ways to do this, and especially bullish on Polygon, which has the partnerships and technology to do this in a very big way.
