What is Numeraire? (NMR)

The Beginner’s Guide

Numeraire is an Ethereum-based platform that enables users to trade equities.

The idea is that people can trade based on predictions made by artificial intelligence and on predictions staked on certain predictions using blockchain technology.

Numeraire has both an iOS app and web application for traders who want to trade cryptocurrencies.

  • Strategies – A way to upload stock market strategies for a specific stock or trading strategy.
  • Tournament: A weekly competition where users compete by submitting their own trading algorithms about the stock market. Anyone can place bets on the most likely outcome of these algorithms.

To make everything work, Numeraire‘s native cryptocurrency, NMR, is required as a way to stake on outcomes, pay tournament participants, and reward them for their efforts.

Furthermore, the ecosystem relies on the Erasure protocol, which is a set of smart contracts that enable Numerai to either pay out rewards for correctly predicting outcomes, or destroy them if they were incorrect.

Who Created Numeraire?

Numerai, a startup that creates a decentralized prediction market for AI, was founded in San Fransisco, California, in 2015 by Richard Craib and was funded through four separate funding rounds spanning from April 2016 to June 2017, raising a total of $21.5 million. (Source) Notable investors include Union Square Ventures (USV), Paradigm Capital Partners, Placeholder, and the founder of Renaissance Technologies, Howard Morgan.

In 2017, the Numeraire token (sometimes referred to as a coin) launched on Ethereum mainnet without an Initial Coin Offering (ICO), rather Numerai issued one million NMR tokens to 12,000 data scientists based on past contributions in Numerai Tournaments. 

How Does It Work?

Numerai operates a meta model that aggregates all the predictions it receives through its application network.

The hedge fund then uses an algorithmic trading strategy to trade stocks in the stock market. It also allows anyone who accesses its network to use its products by accessing its suite of services.

Numerai Tournament

Numerai is an online platform where people submit their predictions for future prices of assets. Numerai then pays out NMR tokens to the winners.

Users submit their predictions about an event through a voting mechanism. These predictions are analyzed and scored according to how accurate they are.

Participants who staked NMR tokens to the correct prediction will earn newly minted NMR tokens, and, if not, the staked NMR will be burned, or permanently destroyed.

Of note, while weekly contests are held, the scoring and payout periods occur every four weeks.

Numerai Signals

Numerai Signaling is an ongoing application hosted at Numerai where participants submit stock market predictions for a small chance to earn NMR token rewards.

Users submit signals for stock prices, which are then evaluated using Numerai’​s algorithm. The algorithm calculates a score for each signal indicating its likelihood that the user has found an undervalued stock. The scores are then used to determine whether the user has identified an investment opportunity.

Once submitted, participants are scored and rewarded similarly to Numerai Tournament, where target predictions determine whether a user will either be rewarded in NMR or their stake will be burned.