Numeraire

Numeraire (NMR) refers to a crypto coin or token native to the Numerai, a blockchain software. Numerai is a hedge fund operating on Artificial Intelligence (AI) and Machine Learning (ML) models. The primary objective of using this platform is to trade equities using the Ethereum 20 (ETH20) token hosted on the Ethereum blockchain.

Numeraire, a crypto token, is a payment method used to trade on the Numerai platform. It coin was named after the popular San Francisco, California-based hedge fund "Numerai." Founded in 2015, this quant hedge fund aims to predict stock market movements using algorithms. Users use a model and data-backed forecasts to stake coins and make predictions.

• Numeraire (or NMR) refers to the crypto coin released in 2015 by a San Francisco hedge fund called Numerai. It is based on the Ethereum blockchain, which uses the Ethereum 20 (ETH20) token. 
• NMR has three features: Signals, Tournaments, and Erasure Protocol. Users predict the stock market trends and submit their signals. 
• The protocol that governs the process is called the "Erasure Protocol." Based on it, the minting and burning of coins occur. Participants whose predictions are chosen by the platform receive coins, while users whose predictions are incorrect are required to give up their stake.
• The ecosystem depends on the Meta-model driven by Artificial Intelligence (AI) and Machine Learning (ML).

Numeraire (NMR) refers to a crypto coin that helps users make predictions about price movements in the market based on an algorithmic model. Accurate predictions lead to users earning crypto coins. However, if they fail or predict wrongly, users might lose a portion of their stake. Data scientists and analysts can predict stock market movements and benefit from the Numeraire blockchain.

The founders of Numerai claimed it was the first hedge fund to launch its crypto asset in the market. Founded in 2015, Numerai is a data science competition where users prepare prediction models. The users choose and apply machine learning models to predict stock market movements and stake NMRs against their predicted outcomes. Correct predictions result in participants earning more Numeraire and vice versa.

The prediction method depends on the AI model called the Meta-Model, which functions as an aggregator. The model collects predictions from various users and enters them into the in-built network. Based on these predictions, the Numerai fund invests in the stock market. Users get access to the required prediction models via applications called Signals and Tournaments.

During its initial circulation in 2017, the Numeraire price was $35. However, a few days later, the NMR price touched $168.49. Since the Numeraire blockchain is closely related to equities, there is a high volatility exposure. Therefore, the slightest change in market trends can strongly influence the NMR coin supply. Currently, there are 6.1 million coins in circulation. Initially, the supply limit was around 21 million, which Numerai reduced to 11 million in 2019.

Since the Numerai ecosystem is decentralized, various features are attached to the Numeraire coin. Let us study them and understand their uniqueness.

#1 - Signals

As the name suggests, Signals refer to the trend projections participants submit for specific equities trading on the stock market. Signals is a software application that participants use to submit their market strategies based on predictions backed by AI. These signals are compiled and fed into the meta-model, which follows logic governed by AI to select the right or accurate predictions after reviewing each entry. If any of the selected strategies match any of the stocks in the Numerai universe, it is a win-win situation. In total, almost 5000 stocks are available to users worldwide.

Participants submit the details in a uniform format. The prescribed format includes stock tickers and target values in numbers. Thus, based on their predictions, they will either receive NMR or have to burn their partial stake.

#2 - Tournaments

Tournaments are competitions held once a week for participants to make predictions. With the help of a staking mechanism, users can easily make strategies. Although the contest is held weekly, payouts are issued at intervals of four weeks. The right prediction will result in participants minting more NMR coins. Similarly, a wrong one can lead to the burning of coins.

Users sign up for the tournament and create their prediction models. They receive datasets that can be directly used to develop the prediction models. Once completed, they can send signals (or predictions) to the fund.

#3 - Erasure Protocol

The Erasure Protocol refers to the ecosystem created by the Ethereum-based Numerai blockchain. It allows the staking of cryptocurrency and its use. If the prediction fails, the protocol will permanently destroy a participant’s staked NMR coins. In short, the Erasure protocol decides how NMR coins will be issued based on the accuracy of the predictions fed into the software.

Let us look at the examples of Numeraire to understand the concept better.

Example #1

Assume Collard and James are two traders in the crypto market. Both have an equal interest in data and stock market analysis. They learn about the Numeraire tournaments. To participate in one of the tournaments, they prepare models and start predicting stock market trends. They develop strategies to predict stock market movements with the highest possible accuracy and send them as signals to the Numerai hedge fund.

Of the 70,000 predictions received, only 50,000 proved accurate. James's prediction was one of them. However, the remaining 20,000 participants failed to provide the required results through their predictions. Thus, per the protocol, those participants, including Collard, were compelled to burn their NMR coins. In this case, Collard's 20 coins (staked earlier) were destroyed.

Example #2

An August 2022 post about Numeraire reports a decline in its price by a significant margin of more than 25.48%. This fall in the NMR price was attributed to market conditions, where overall bearish movements were predicted and observed in the days that followed the relevant market trend predictions. The declining numbers made the previous earnings seem almost insignificant to participants of the Numerai tournament.

Let us look at the steps that explain how to buy Numeraire coins from the cryptocurrency exchange or platform.

#1 - Open An Online Brokerage Account

The first step is to open an online account on any crypto exchange. A few well-known platforms are Binance, CoinDesk, Kraken, etc. Account opening is free. However, transactions need funds. A user can purchase coins after the account is verified once the user provides the required details.

#2 - Create A Crypto Wallet 

Once an account is created, individuals can add funds to their cryptocurrency wallet. Every crypto platform provides a crypto wallet for transacting coins. However, to start using it, there must be funds in it. Therefore, the platform allows adding money through various payment methods like PayPal, debit cards, bank deposits, and credit cards, among other options.

#3 - Purchase Numeraire coins

With sufficient funds in the account, users can purchase NMR coins against dollars or any other currency they hold.

This article has been a guide to Numeraire and its meaning. Here, we explain the topic with its features, examples, and how to buy it. You may also find some useful articles here -

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