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Numeraire crypto: is NMR a good investment? 

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If you’re fascinated by the activities of Wall Street or how hedge funds work, Richard Craib and his team of data scientists have developed a way for anonymous and mass participation. And you can contribute without risking too much money.

The thing about hedge funds is that they are fiercely competitive, even to their own detriment. The struggle to maintain a winning edge leads them to withhold information and resources.

In the 90s, you had to pay for each page of data or go to the brick-and-mortar courts to gather what you needed, which would be a lot. Guess this explains why they were not eager to share their data; until the Regulation Fair Disclosure evened the playing ground.

That marked the decline in the edge of the hedge fund industry, but Numerai is bringing it back.

So, what is Numeraire, and how is it related to Numerai?

What is Numerair?

One of the wealthiest men in the world quit his work for the National Security Agency (NSA) to start his hedge fund.

He had initially been using mathematics to decode information for the agency. And this experience honed his ability to recognize price moves through pattern recognition and anomalies in data.

Jim Simmons, the multi-billionaire owner of Renaissance Technologies, is a mathematician and investor worth more than 23 billion US dollars.

He devised a way to gather mass amounts of data, after which he hired a team of mathematicians and scientists who could also work large amounts of data. Together, they combed through terabytes of data daily, hunting for patterns or anything that could indicate an edge before competitors discovered it.

But the anomalies are not static; they need to be rediscovered. Jim Simmons ran the hedge fund industry until 2010, when he retired. Shortly afterward, the industry lost billions of dollars.

It is currently worth north of $100 billion, but it used to be much more.

Fast forward to now, and the Ethereum network hosts a digitalized hedge fund, or Numerai as we know it. It was modeled after Jim Simmons’ Renaissance Technologies technique of gathering mass amounts of data and pinpointing the anomalies and similarities in them.

Numerai is a virtual hedge fund that gathers and distributes data to data scientists interested in predicting patterns. These patterns, or the most accurate ones, are collected by an AI model and used to trade equities in the stock market.

The Numerai Classic Tournament is an event organized by the Numerai crowdsourcing hedge fund, and it invites data scientists to submit their predictions of the stock market.

But before you participate in the weekly tournament, you must stake some NMR tokens. If your predictions are correct, you will receive more NMR tokens; if not, your stake gets burned, or destroyed.

Numerai is an AI-enabled hedge fund established in 2015 to create a prediction ecosystem for users who lack the funding to participate in the stocks market but can detect anomalies in data patterns.

Gathering and combing through data was the major problem with the stock markets and hedge funds back in the day. Sharing it was a problem, but hoarding it was no better. And the Regulation Fair Disclosure only worsened matters, taking away the competitive edge that drove the industry.

But Numerai has found a way to use the RFD’s policy to its advantage.

Every week, the protocol releases a ton of data in CSV format that interested participants can download and work on. Weekly tournaments occupy participants for the entire month, after which winners are declared and remunerated.

The concept of the meta model, the ultimate AI for data analysis and prediction, exists so that the Numerai project will continually beat the market. Data patterns are subject to constant change, so it is presently impossible to develop software to this end. But do you know what is not impossible?

Mobilizing an unlimited group of data scientists to create models that detect disruptions and fluctuations in data. Every week, the Numerai project adds more than 1,200 models to its ultimate meta model.

The system is fair, and people who qualify get paid. Currently, more than 64 million dollars have been credited to successful participants of the tournaments.

But this is one hedge fund ecosystem where you must pay to participate and finance it with NMR tokens.

In this sense, the Numerai Classic Tournament is like mining cryptocurrencies, where miners are paid in crypto bits to solve critical mathematical problems. But in the case of Numerai, you must solve problems relating to data patterns in the stock market.

However, the process is not as energy-draining as mining Ether and bitcoin. Initially, Numerai paid participants in bitcoin, but before then, it used PayPal.

The system is designed so that participants do not know the problem their models are solving after receiving their reward, which is 25 percent of their staked amount. It may seem ridiculous to pay to compete in such a tournament, especially when there are chances of failure.

But it is this reason that dissuades non-serious competitors. If your prediction is less than accurate, you will lose 25 percent of your NMR-staked tokens. The upside, however, is that you have enough time and may even go through a training session before participating.

The virtual hedge fund is now worth $175 million, or $324 million, when fully diluted. Participants of the weekly competitions are not allowed to join in on the real stock markets and equities trade, but models with the correct predictions will be employed.

Numeraire crypto: benefits

Without Numeraire, you cannot participate in any of the Numeraire applications. Numeraire, or NMR, is the native token of the Numerai project.

It is the cryptocurrency with which you will buy your way into the weekly competition. You will also get rewarded in it.

Back when the first tournament was organized in December 2015, winners were paid with PayPal. Then, the system migrated to bitcoin and continued paying out with the cryptocurrency until it founded NMR in February 2017.

The token complies with ERC-20 standards, and the protocol has decided to mint a maximum of 21 million tokens. But as the real-life use cases expand, they have agreed to reduce the maximum amount minted to 1 million.

Users of the Ethereum network can convert their ERC-supported tokens to NMR to participate in the tournaments. But an expansion where the Numerai network won’t be the only place the data is being uploaded is being developed. 

Aside from using the Numeraire token to facilitate participation in competitions, non-data scientists may also invest in the token.

It is just like every other cryptocurrency sans stablecoins. As the demand for the tokens increases, the value also grows alongside. And Numerai promises to offer the world of data science a revolution like never before, so the demand for the tokens will also rise.

Therefore, you can still join the trend even if you are not participating in the weekly tournaments or know nothing about data science.

Alternatively, you can earn NMR tokens without staking or even buying NMR tokens. Here, you only need to solve problems for the protocol, such as developing applications or providing security by finding bugs.

Numerai Signals

Numerai signals are another aspect where data scientists can contribute to the world of accurate information and signals and will get rewarded accordingly.

The signals can be on anything that experiences uptrends and downtrends. Numerai signals are another avenue for data scientists to develop data models based on personal experience in any market. If it has a penchant for trends, which are not only in finance, it is acceptable and can earn you money on the network.

What is the Erasure Protocol?

The founders of Numeraire have pictured a world where accurate and reliable data can be sold. And it is not applicable only in the stock market but in every area where correct data patterns can be purchased by the big guns.

The Erasure Protocol is being developed for this reason, and it will continue to use data amassed from tournaments to guarantee accuracy. This decentralized application allows users of the Numeraire token to stake and publish any data on the Ethereum blockchain and earn a handsome commission based on the accuracy.

Numerai also plans to make the network all-inclusive, accommodating even non-NMR users. As long as you are staking with an Ethereum-supported token, you can upload accurate data.

Taking things further, a process called the griefing ratio has been introduced to connect buyers and sellers of data without needing a third party.

By creating a crypto wallet on an Ethereum-supported blockchain, if you don’t already have one, you can participate in Numeraire’s weekly data science tournaments. NMR tokens will be dispensed into your wallet if you win.

The Numerai protocol is based on the idea that you will only upload accurate information if something grave is at stake, such as your NMR tokens. This reduces the inaccurate data the meta model will have to sort through.

Additionally, Craib creates a space where two people, a buyer, and a seller of data, can come together to exchange resources on their terms. Again, the griefing ratio makes it even plausible to trust a stranger on the internet for high-stake information.

The foundation on which the Numerai project is built is fair. The system cannot alter the information submitted by participants, and it gives the assurance that they can stake their tokens and will get rewarded if their prediction model is accurate.

The Erasure Bay is an excellent example of the applications provided by the Numerai protocol. Here, any information can be exchanged, and it will be accurate.

Despite the detour from the usual Numerai Classic Tournament, the accuracy of information is still guaranteed. 

Furthermore, there is now a limited number of tokens to be minted. And the process of burning, reinforced through the griefing ratio, may also drive the value of NMR tokens.

So, even if you have no knowledge of depicting patterns in the data market, you can still make some cash. The network is expanding its objective of selling data and may become the future of the hedge fund market.

What are the odds that a peer-to-peer project will continue to grow, even when the big guns like Renaissance drop by massive points?

The trend may have begun – for instance, in just 2020 alone, during the pandemic, Numerai grew by a whopping 6 percent!

Richard Craib and his team may be up to something, and the next decade will unveil just what it is.

Like every other cryptocurrency, Numeraire can also be used to facilitate payments to anyone anywhere in the world. It can also serve as a store of value.

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