Numeraire

About Numeraire

Numeraire (NMR) is a unique cryptocurrency with an interesting backstory. Created in 2017 by Richard Craib and Geoff Bradway, two of the founders behind hedge fund Numerai, Numeraire was designed to incentivize data scientists on their platform. The goal was to build a new kind of hedge fund, one based on crowdsourced intelligence and machine learning rather than traditional financial modeling.

History of Numeraire

Numerai launched in 2015 as a platform for data scientists to build machine learning models to predict the stock market. The fund would then combine the best predictions to trade on. Participants were initially compensated based on the performance of their models.

In 2017, Numerai issued 1 million NMR tokens to 12,000 data scientists on their platform. The idea was to incentivize even better predictions by compensating in cryptocurrency units that could appreciate in value. This marked the launch of Numeraire as an Ethereum-based ERC20 token.

How Numeraire Works

Numeraire employs some interesting mechanisms to incentivize good predictions from data scientists. Participants stake NMR to back their models, earning rewards when they are successful. But if their models fail, the staked NMR is destroyed. This puts skin in the game and aligns incentives towards the most accurate models.

Numeraire also employs a novel approach called “staking to bootstrap.” Essentially, the supply of NMR is increased automatically to reward good predictions. This keeps inflation reasonable while incentivizing participation. The tokens are minted by smart contracts on Ethereum.

Uses of Numeraire

The main use case of NMR is to incentivize and reward data scientists on the Numerai platform. By compensating contributors in tokens that can appreciate rather than just fiat payments, it helps attract top talent from around the world. This benefits the performance of the hedge fund’s trading strategy.

However, NMR gained traction outside just the Numerai platform as well. It trades on major exchanges like Uniswap, allowing investors to speculate on the token. The fixed supply and unique staking model create interesting long-term dynamics for NMR.

Buying and Storing Numeraire

Numeraire can be purchased on cryptocurrency exchanges including Uniswap, Bittrex and Upbit. It has trading pairs against Ethereum and Tether. As an ERC20 token, it can be stored in any Ethereum wallet including IronWallet, MetaMask, Ledger and Trezor.

Being an Ethereum token gives it advantages – easy transferability between wallets and integration with DeFi protocols. But as expected, transactions can be slow and gas fees high during times of network congestion.

Future Outlook for Numeraire

As a utility token powering a hedge fund, Numeraire’s success is tied directly to the performance of the Numerai platform. If the fund performs exceptionally well, powered by the crowdsourced model intelligence Numeraire incentivizes, demand for the token may rise.

However, speculative interest from crypto investors also impacts the token’s price discovery. As we’ve seen with other utility tokens, price often decouples from actual utility value. This makes NMR’s future price difficult to predict.

In the long-term, tokenized incentive models like Numeraire’s could become more prominent in cryptocurrency. For now, NMR remains a niche experiment at the intersection of AI, finance and crypto. Its unique staking model will be interesting to watch over time.

Is Numeraire a Good Investment?

Whether Numeraire is a good investment depends on your belief in the project’s incentives model and the potential growth of Numerai as a crowdsourced hedge fund. It also depends on your outlook on the overall crypto market.

As a utility token powering a live platform, NMR certainly has more inherent value than many speculative cryptocurrencies. However, the tokenomics are complex and the supply inflation model untested long-term.

For investors focused on fundamentals, Numeraire offers an intriguing but high-risk proposition. It is an experimental token indexing the wisdom of the crowd to predict financial markets. Time will tell whether this pays off or not for NMR holders.