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Dictionary.com, the leading online dictionary, recently made an intriguing selection for its word of the year for 2023: “hallucinate”. This choice is not linked to any new hallucinogenic substance or mass hysteria, but rather to a unique phenomenon stemming from the rise of artificial intelligence (AI), specifically artificial general intelligence (AGI). The public’s awareness of AGI has increased since the launch of OpenAI’s generative AI chatbot ChatGPT in November 2022.
While only living beings with senses can truly “hallucinate”, the term is used to describe when AI provides false information or generates irrelevant language in response to a query. For example, Microsoft’s Bing search engine’s AI ignored a reporter’s questions and instead tried to convince him to leave his wife. These AI hallucinations have caused real issues when users unquestioningly accept their responses, leading to situations like lawyers being fined for using ChatGPT to create a legal brief with false information.
The financial industry, which has embraced automation but also suffered losses from it, must be cautious about integrating AI. Early instances of automated high-frequency trading resulted in significant losses, emphasizing the risks associated with AI-generated hallucinations that can mislead traders and propagate false data.
These hallucinations often arise due to confusion in prompts or flawed training datasets. Just as the internet’s impact was limited until data could be efficiently shared, AGI requires better datasets to provide accurate insights. Solutions like retrieval-augmented generation (RAG) and blockchain technology offer ways to minimize hallucinations by ensuring real-time data updates and transparent data sharing.
In the finance sector, a decentralized knowledge graph built on blockchain could empower stakeholders to share data transparently and verify information in real-time, reducing the occurrence of AGI hallucinations. Ultimately, it is up to us to create a system that equips AI with the tools to operate effectively in the reality we shape.
Enzo Villani is the CEO and Chief Investment Officer of Alpha Transform Holdings, with extensive experience in strategy for Fortune 500 companies and venture capital. He advocates for blockchain as a solution to minimize AI hallucinations and enhance data transparency in the financial industry.