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 the Solana (SOL -2.25%) blockchain that specializes in decentralized finance (DeFi). This chatbot is more than happy to chat with you about DeFi, but its groundbreaking value comes from its ability to take action within the Solana blockchain ecosystem using simple text prompts.
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 a Bitcoin (BTC -0.67%) trading bot that specializes in long-term investing using a very simple text prompt such as, "Give me the computer code for a Bitcoin trading strategy that uses 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, are not buying and selling cryptos on an exchange. Instead, they are locking money into different DeFi protocols on a specific blockchain in order to earn financial rewards.
In very basic terms, a DeFi protocol is simply a self-executable 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.
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Putting it all together, the new Solana chatbot (called Omni) can help you understand and then participate in different DeFi protocols in order to earn financial rewards. All you have to do is use a natural-language text prompt, just as you would with ChatGPT, and then connect your digital blockchain wallet.
Risk factors
There are several risk factors involved with using these DeFi bots. For one, any time you are connecting your blockchain wallet to a crypto bot platform, there is obviously going to be an element of risk. You might go to bed thinking that you just invested in a very profitable DeFi protocol, and wake up the next morning finding that your blockchain wallet has been wiped out.
Remember all the problems that the Celsius Network had during the crypto meltdown of 2022? Celsius was a crypto lender that was doing much the same thing as marginFi, the creator of the Solana chatbot, is doing now. It connected lenders of crypto with borrowers of crypto, offering very high rewards for those willing to deposit their funds. Celsius eventually filed for bankruptcy protection in July 2022.
So whenever I hear about crypto borrowing and lending, I get a little bit nervous. This can be a relatively high-risk endeavor.
Moreover, as Omni makes very clear on its chatbot landing page, it is "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 spewing out responses instantaneously. This could be due to the technology stack that Omni uses -- it uses two other different large-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 staking, and it's remarkably easy to do. On some cryptocurrency trading platforms, all it takes is a simple click, and you're done. You don't need an AI chatbot to do that for you.
But there are plenty of other passive-income strategies in the crypto space, and some of them can be hard 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 execute more profitably than humans can. In your chatbot text prompt, you would simply include details such as the minimum and maximum yields you are willing to consider, some hints about your risk-reward profile, and any preferences you might have when it comes to certain blockchains or protocols.
Again, there are a lot of risks with AI-powered chatbots, but the potential opportunities here are certainly intriguing. 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 using just a simple text prompt.
