Throughout 2021, a new technology, commonly referred to by an abbreviation, swept financial markets. Non-fungible tokens (NFTs) were new and exciting, baffling many but helping turn profits for those who understood them. Just as the rise of artificial intelligence (AI) tools such as OpenAI’s ChatGPT have become a defining market trend of 2023, NFTs became synonymous with investing throughout 2021 and part of 2022.
Notorious for images of cartoon monkeys, known as Bored Apes, NFTs seemed niche at first. But as the market expanded, people throughout many industries found ways to cash in on the new boom. Musicians found ways to extend new offerings to fans through NFTs while politicians have used them as campaign fundraising tools.
As a writer covering financial markets at the time, I found myself constantly tasked with a unique challenge: explaining NFTs to just about everyone outside the digital investing community. The search engine definition of an NFT as “a unique digital identifier that cannot be copied” didn’t provide much clarity for people who weren’t well-versed in digital asset jargon.
In an effort to provide an explanation that made sense to everyone, I spoke to several experts whose backgrounds spanned the legal and technical fields. They made interesting analogies, drawing comparisons between real world collectibles and NFTs. But more than a year later, data indicates NFTs remain a mystery to many, even after Donald Trump launched his own set of digital trading cards.
NFTs in the Age of ChatGPT
In November 2022, the digital world gained a powerful new tool for information sharing. ChatGPT has taken the world by storm. As a tool for providing information, it has demonstrated impressive prowess in many areas.
While the information it provides isn’t always 100% factual, some experts have speculated many people aren’t using it as the chatbot’s makers intended. However, its power as an organizational and research tool is clear. With that in mind, I decided to test the following question: can ChatGPT explain NFTs?
I began by asking the chatbot to provide a definition of an NFT. It provided a highly technical response, exactly as should be expected from a AI product:
ChatGPT’s definition of an NFT is technically correct. It does a good job distinguishing between NFTs and other digital assets, specifically cryptos, citing Bitcoin (BTC-USD) and Ethereum (ETH-USD).
While the analogy works for this instance, the chatbot might have been better served to follow the methodology of CMORQ CEO and founder Hossein Azari, who compared NFTs to baseball cards, as both center around images of something distinctive. However, the bot does name art, music, videos and social media posts as things that can be represented through NFTs, while highlighting the distinctive nature of each one as well as their blockchain presence.
An NFT Market Rebound?
Knowing ChatGPT can explain NFTs well, I wanted to see how it would assess their market. The momentum that carried NFTs to Wall Street’s radar in 2021 has significantly subsided, but it may be making a comeback. TechCrunch reports the Ethereum NFT marketplace recently passed $1 billion in value for the first time since May 2022. Does this mean NFTs are a good investment? Here’s what ChatGPT had to say:
“It is important to note the market for NFTs is still relatively new and speculative, so it can be difficult to predict the long-term value of any particular NFT. While some NFTs have sold for significant amounts of money, others may not hold their value over time.
Additionally, the market for NFTs can be volatile and subject to rapid changes in demand and pricing. This can make investing in NFTs a high-risk, high-reward proposition, and it is important to carefully consider your investment goals and risk tolerance before investing in NFTs.
Again, nothing ChatGPT has to say on the NFT market is incorrect. However, it doesn’t offer any groundbreaking insights. The bot concludes this answer by stating investors should approach NFTs with “caution and careful consideration of the risks and potential rewards involved.”
Wanting to further assess the chatbot’s value assessment criteria for NFTs, I decided to try the “Everyman DAN” approach. Successfully employed by InvestorPlace markets analyst Thomas Yeung, this approach provided me with a list of electric vehicle (EV) stocks to buy. I asked ChatGPT to write me a story about an NFT investor and explain the methodology behind his decisions. Here is a sample of the story:
What This Means
ChatGPT has proven it can explain NFTs and provide some basic insights into what drives their value. It can be a useful tool for investors looking to explore the asset class who may not understand them fully. However, the platform proved repeatedly, first by responding to my prompt regarding the NFT market and later to my Everyman DAN request, it still cannot provide anything too in-depth.
It is also important to note the chatbot’s data is limited and often not up to date past 2021. InvestorPlace financial news writer Brenden Rearick recently asked ChatGPT for a list of ten cryptos to sell and found some of its information out of date, as it referenced long-dead projects. This may be a symptom of the chatbot’s lack of current information, thereby rendering its responses to be questionable. ChatGPT can provide reliable technical definitions, but investors should be careful trusting it with anything further.
On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
