Following on from ChatGPT’s meteoric rise to over 1 million users in only 5 days, many people who would have previously not even known where to begin have become exposed to the potential of AI. Despite this, blockchain users have been utilising the power of AI for over a decade in order to make tasks easier, allowing large amounts of data to be interpreted, correlated and processed for us to understand in a fraction of the time that a person could do it.
There are many ways that artificial intelligence (AI) can be used in conjunction with blockchain technology, however, here are just a few of the ways that it can help:
- Predictive analytics
- Smart contracts
- Identity verification
- Supply chain management
- Trading
Predictive Analytics
Predictive analytics involves using machine learning algorithms to analyse data and make predictions about future events. When combined with blockchain technology, AI can be used to analyse data stored on the blockchain and make predictions about a wide range of future outcomes. For example, AI could be used to predict the price of a cryptocurrency, the likelihood of a particular contract being fulfilled, or the likelihood of a fraudulent transaction taking place.
To use predictive analytics with blockchain technology, AI algorithms would need access to data stored on the blockchain. This could include transaction data, contract terms, and other relevant information.
This can be utilised by the general public for a wide variety of purposes, not just stocks/crypto etc, but also for forecasting prices of properties, when the best purchase or trade-in time for cars, even going as far as specific brands/style. It also has uses in agriculture, allowing farmers to predict the best times to plant and harvest their crops, leading to increased efficiency, and provides traceability of information in the supply chain, allowing for increased food safety and sustainability, for example, Ripe.
Smart Contracts
Smart contracts are self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code. The code and the agreements contained therein are stored and recreated on a blockchain network. Blockchain security along with the vast data processing capabilities of AI has the ability to increase the efficiency and possibilities of smart contracts.
AI can be used in conjunction with smart contracts in several ways:
- Creation: Analysing legal documents and extracting relevant terms and conditions can help to streamline the contract creation process and reduce the risk of errors, including the chances of contract avoidance due to loopholes and technicalities.
- Execution: AI can be used to monitor the performance of a smart contract and automatically execute the terms of the agreement when certain conditions are met. For example, an AI system could automatically release funds from an escrow account when a product is delivered or a service is completed, which could also be incredible for the freelancing industry.
- Analysis: AI can identify potential issues or ambiguities in contracts, which can help to ensure that contracts are clear and enforceable, mitigating the need for litigation in many cases, which in turn frees up the time and resources for both individuals and companies.
Identity Verification
AI can be used to improve identity verification in blockchain-based systems in several ways:
- Biometric Authentication: AI can be used to analyse biometric data, such as fingerprints or facial scans, to verify the identity of a user. This can help to improve the security of a blockchain-based system, as biometric data is difficult to forge. These systems can be used to create a digital identity, however, this is obviously highly controversial due to the nature of the information that is being stored. Despite this, benefits include adding security to hardware wallets such as dcent, and other digital identity verification FinTechs.
- Fraud Detection: AI can analyse user behaviour and identify patterns that may indicate fraudulent activity. For example, an AI system could analyse the IP addresses associated with a user’s accounts and flag any that appear to be coming from different locations. These are common issues in mobile banking and online transactions, so AI can provide a more secure method of fraud detection and trigger other verification methods. This would be especially relevant in a time of such a high prevalence of hacks on both a large and small scale.
- Risk Assessment: AI can be used to assess the risk of a particular user or transaction, based on various factors such as the user’s past behaviour or the likelihood of fraud. The spending habits and transactional history of users can be analysed in order to determine the spending personality of someone in the process of applying for loans, mortgages, or credit.
Overall, the use of AI in identity verification can help to improve the security and reliability of a blockchain-based system, as it allows for more accurate and efficient identity verification processes.
Supply Chain Management
AI can be used to improve supply chain management in a number of ways when combined with blockchain technology:
- Tracking & Tracing: AI can track goods as they move through the supply chain, using sensors and other IoT devices that are connected to a blockchain. This can help to improve transparency and traceability, as all relevant data is stored on the blockchain and can be accessed by authorised parties. This can be particularly useful in the transportation of valuable goods such as artwork, vehicles, technology, and even from something as humble as food, as mentioned above.
- Data Storage: Blockchain technology can store data that is used by AI algorithms to make demand forecasts. This data could include data from sales, weather, and other relevant information. Because the data is stored on a decentralised network, it is secure and cannot be tampered with, and forgery isn’t possible due to the network architecture.
- Data Accessibility: Blockchain technology can make data accessible to authorised parties in real-time. This can help to ensure that AI algorithms have access to the most up-to-date information, which can improve the accuracy of demand forecasts. Along with this, the processing speed of AI vs a human is immeasurable, making data in large sets to be far more accessible to those who don’t have the time.
- Data Integrity: Blockchain technology can ensure the integrity of the data used by AI algorithms. Because each piece of data is cryptographically signed and stored on multiple servers, it is difficult for data to be altered or corrupted, meaning that important documents used across multiple industries can be verified as originals, meaning that the authenticity of these files can be certain, providing stability in legal matters, and financial disputes.
- Data Security: Blockchain technology can secure the data used by AI algorithms from unauthorised access, in turn protecting sensitive data and ensuring that demand forecasts are not compromised, as this could potentially put an entire company’s business at risk, protect a person’s medical history, trace the original copy of disputed files, and the authenticity of work.
Trading
AI can be used in conjunction with blockchain technology to maximise profits in trading in several ways:
- Market Analysis: AI can analyse market data stored on-chain and identify trends and patterns that may indicate profitable trades, helping traders to make more informed decisions about when to buy and sell assets, and taking vast amounts of data into account in order to provide information for portfolio optimisation.
- Trade Execution: AI can execute trades on behalf of a trader, using algorithms that are designed to maximise profits. Using smart contracts and other blockchain-based tools, AI will put in automatic buy and sell orders in order to maximise opportunities and minimise losses.
- Risk Management: AI can analyse market data and identify risks that may impact the profitability of a trade. Traders would be able to make more informed decisions about the level of risk they are willing to take on.
- Predictive Analytics: As mentioned previously, AI can be used to analyse data and make predictions about future events. This can be used to inform trade decisions and help traders to maximise profits.
All in all, the use of AI and blockchain technologies has the potential to revolutionise the lives of people, both with and without technical know-how, allowing automation of tasks and contracts, financial advice, security, data processing, increasing visibility, and much more.
Not to mention the entertainment factor that Chat GPT has provided people so far, as they test the limitations of this new technology.
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