What is Numeraire?
Numeraire is a protocol that synthesizes machine learning intelligence to control and effectively manage capital for a hedge fund. Numeraire brings together machine intelligence skills from more than 30,000 data scientists all over the world to push for breakthroughs in the level of prediction accuracy in stock markets.
What is the problem that Numeraire Solves?
Machine learning has always brought along algorithms that solve some of the biggest problems we have had with computers, especially computer vision. Since 1998, scientists have attempted to use and improve the concept of machine learning to yield accurate results. Another challenge that has hindered this progress is the hardware that is available to scientists.
However, there have been attempts over the years, at improving the efficiency of machine learning to the point where near-human performance can be achieved, alongside recognition of handwritten digits.
It follows that there are three important challenges that the machine learning realm is dealing with, which Numeraire attempts to solve. These are insufficient hardware power, a centralized (closed) participation and lack of new machine learning algorithms.
Numeraire is out to make the stock market more efficient. In fact, efficiency in the stock market as we know it today is not abstract. The problem with inefficiencies is the risk exposure where they exist. It gets even worse where these inefficiencies have become so embedded in the system that they become institutionalized.
Inefficiency is not a good thing, not for the society. Capital allocation should be done correctly the world over. However, achieving this becomes a very difficult problem.
To deal with this, hedge funds and asset managers have the option of employing people who are skilled in machine learning. In fact, this is the one thing that all the concerned parties do. Given their capital outlay, they can also afford to purchase some amazing hardware, very powerful GPUs.
However, with all this, one of the most important things that is missing is open participation in the stock market, and this is where Numeraire comes in. On the face of it, it might look as though access to market data is more streamlined and easy today than it was back in the day, but this is not always the case.
A lot of market data is available on different tools online such as Yahoo Finance. However, what most people do not realize is that this is just a tip of the iceberg. The bulk of market data is never made available publicly.
Hedge funds greedily create and manage data monopolies when it comes to stock market data. The problem with monopolies is that they create a new order, one that becomes very difficult and expensive to dislodge. Over time, high-quality sets of data on the stock markets will become more expensive
How does Numeraire Solve the problem?
Without access to stock market data, data scientists are unable to train their algorithms. Data scientists in Wall Street are also unable to become a part of the process that leans toward an efficient stock market.
Numeraire tackles this problem by creating a solution where the high quality and expensive market data is available freely. With free access to data comes the challenge of security. To make sure this data is not disclosed carelessly, Numeraire also introduces secure encryption.
Technically, when data is encrypted, it is useless to anyone who comes across it. This is the best way to protect data that has since created monopolies, and probably help to break down those monopolies, and open markets for active participation.
There have been developments in cryptography over the past that allow users to share datasets without interfering with the utility of the said data sets to scientists.
This is how Numeraire came about, making use of homomorphic encryption to share important data with other data scientists out there, in the hope that with a collaborative spirit, someone might come up with better, more efficient data sharing and machine learning models in the future.
Numeraire is essentially a hedge fund. However, unlike other hedge funds, Numeraire gives away data to data scientists for free, but through encryption that preserves the structure of that data. Therefore, data scientists from any part of the world are able to interact with this data and help foster the machine learning concept.
Numeraire has taken advantage of recent advancements in encryption forms and technology to create a platform where data scientists are able to engage one another in order to come up with a machine learning algorithm that solves problems that have been inherent in the stock market for years.
What makes Numeraire better than the competitors?
There are a number of projects that are currently involved in trying to decentralize the stock markets, just like Numeraire is.
However, Numeraire is a cut above the rest because of the structure. From the word go, Numeraire was built to be different from all the other hedge funds in the world. Most hedge funds simply copy what is available, make a few tweaks and push something that is supposedly new into the market.
Free data
The idea behind Numeraire was to give away all the data for free. In a world where data is the new gold, this is a serious claim. However, Numeraire took the risk.
By giving away data for free, anyone who has access to some machine learning algorithms is able to train their algorithms on the data available from Numeraire. Based on their experiments with the said data, they can then submit their submissions to Numeraire and see if their predictions pan out.
Monopolize Intelligence
Among other things, Numeraire wants to monopolize intelligence. This is by creating a platform where data scientists get to challenge one another, learn from one another and in the long run create a large pool of thinkers. The Numeraire currency (NMR) was created for this purpose.
This was not just as a means of expanding the data scientist community invested in growing Numeraire, but also to encourage them to improve the nature and quality of intelligence that they are currently making available to the Numeraire ecosystem.
In reality, an attempt at monopolizing intelligence is simply about bringing together some of the most brilliant data scientists in the world to work on one of the largest hedge funds in the world instead of having them keep duplicating their work in different hedge funds all over the place.
All the hedge funds that contain duplicated work from data scientists eventually just end up contributing to a zero-sum game.
Other than creating one of the largest communities of data scientists, creating an intelligence monopoly also means that the quality of intelligence that is available on Numeraire is one of the best, highest order. This is important because it is necessary for Numeraire to have the predictions provided by data scientists to be very useful especially for the trading strategy of the hedge fund.
Numeraire is not exactly a currency, but a token. Therefore, it is used only in getting access to the staking tournaments that are run on Numeraire from time to time.
The data scientists who participate in these tournaments stake their tokens to show how confident they are in the models that they have created and their belief that these would perform superbly especially against live data in the real world market.
Value Addition
Numeraire adds value in different ways. After the first stakes were made by data scientists, it was evident that the staking strategy was effective. As a result, this inspired confidence in the Numeraire project and there was an increase in the number and quality of predictions.
It is from this that the team behind Numeraire were able to identify some of the best models that are presented by data scientists and use these models to create a larger model that borrows from the best there is in the market
When combined, the staked predictions have a power unmatched and unrivaled by the internal trading models. Therefore, this combination essentially creates a superior machine learning model and pushes Numeraire to the forefront of advancing machine learning in the stock markets.
Through staking, data scientists eventually earn money off Numeraire. Therefore, in their own right, this is a value addition. There are millions of dollars that have been paid out to data scientists especially if we consider the value of the rewards. It is no secret that Numeraire currently runs the best paying data science tournament all over the world.
As a result of the financial incentive behind Numeraire, the project has been witness to unprecedented growth. Engagement by data scientists on the different communication platforms is also at an all-time high.
Numeraire currently has more than 30,000 data scientists working hard to prove their machine learning models are the best there is.
This population of data scientists means that Numeraire gets more than 40 billion predictions. With more than 30,000 data scientists, Numeraire has more than 100 times the number of data scientists than any hedge fund can have the world over.
Decentralization
Decentralization is an important part of the Numeraire masterplan. It is virtually impossible to have hedge funds decentralized, especially because the assets and stocks do not trade on blockchains.
The prime brokers who are behind these stocks also do not give blockchain technology the attention it deserves. This, coupled with the slow adoption of blockchain technology, poses a challenge. However, Numeraire is working on decentralizing the hedge fund market and connecting trades to the NMR token.
How can Numeraire be categorized?
Numeraire is a protocol that was built to link the stock market to machine intelligence.
Numeraire aims to be an API that can be used by artificial intelligence to manage and control capital in the economy.
What’s Numeraire’s vision on Security?
Numeraire was essentially built for data scientists. Therefore, it is only fair that it is made accessible to data scientists. This is also one of the ways of making it a secure protocol.
To make this possible, Numeraire is available to data scientists because they are the people it was created for, and the ones who find it useful.
The initial allocation of Numeraire was distributed for free among data scientists. This allocation was done based on their performance in the previous Numeraire tournaments.
As a result, this protocol uses Proof of Intelligence (PoI) to reward tokens. The tokens are offered as rewards for proving that a machine learning model developed by a data scientist is intelligent enough to add value to the Numeraire ecosystem.
You cannot earn Numeraire tokens from any other way other than competing in the Numeraire tournaments that are held from time to time.
Given the technical nature of the tournaments, Numeraire has effectively managed to keep away individuals who have no understanding of what the Numeraire project is all about, and would be interested in getting into the ecosystem perhaps to spam it or for any other ulterior motives.
Numeraire runs live on Numeraire. The data scientists who hold Numeraire tokens can, therefore, withdraw them at their convenience.
Data scientists can stake their tokens to make predictions, and earn money if their predictions are performing well. However, if their predictions are performing poorly, the tokens are destroyed altogether.
Through this staking mechanism, Numeraire creates a very powerful stimulus for data scientists, encouraging them to work tirelessly to build one of the best ever intelligent machine learning models.
Examples of Numeraire use cases/applications
From the beginning, Numeraire was built in such a way that it was taking and making payments only through Bitcoin. However, Numeraire is a project that is built on Ethereum. The problem with this is that Bitcoin is on a different blockchain than what Numeraire is on, which makes it very difficult to handle payments smoothly.
Besides, the nature of the interaction between decentralized apps built on Numeraire and the payment systems because most of these applications can only receive and use Ether, but cannot get payments in Bitcoin.
Since Numeraire is all about decentralized autonomous organizations (DAOs), Bitcoin payments are not relevant to this ecosystem. Bitcoin payments are inherently ideal for people, not for DAOs.
In light of this, Numeraire abandoned Bitcoin and moved to Ethereum. As a result, all payments on Numeraire are handled in Ether. This also makes work easier because the D’Apps that are on Ethereum can easily use the Ether earned from Numeraire to fund different elements of their operations.
Resources
https://coincheckup.com/coins/Numeraire