Numeraire (NMR)

Incentive and Reward System

Numeraire is mainly used to reward data scientists who participate in Numerai’s weekly prediction tournaments. These data scientists build machine learning models to predict stock market movements. They stake Numeraire tokens on their models, and if their predictions perform well, they earn more tokens as rewards.

Staking Mechanism

Users stake Numeraire tokens on their submitted models to show confidence in their predictions. This staking system encourages high-quality models because better predictions lead to higher rewards, while poor predictions can result in losing staked tokens.

Payment and Payout Utility

Numeraire tokens serve as a payment method within the Numerai ecosystem, making it easier to distribute rewards and incentivize participation without relying on traditional currencies.

Integration with Erasure Protocol

Numeraire works with the Erasure protocol, a set of smart contracts on Ethereum, which manages staking, rewards, and token burning based on prediction outcomes.

Unique Hedge Fund Model

Numeraire supports Numerai’s hedge fund, which crowdsources AI-driven trading algorithms globally. The token helps align incentives between the hedge fund and data scientists, improving investment strategies through collective intelligence.

Pros

• Numeraire is the first cryptocurrency created by a hedge fund, Numerai, which uses AI and machine learning to improve stock market predictions.
• It rewards data scientists who submit accurate models by allowing them to stake NMR tokens and earn more tokens if their predictions perform well.
• The token is built on Ethereum as an ERC-20 token, making it compatible with many wallets and exchanges.
• Numeraire has a unique staking mechanism that encourages high-quality predictions and aligns incentives between data scientists and the hedge fund.
• It has a limited supply of 11 million tokens, which can help maintain value over time.
• The platform has a growing community of data scientists and active trading on major exchanges like Coinbase and Binance.

Cons

• The token’s value depends heavily on the success and adoption of Numerai’s hedge fund and data science tournaments, which may limit broader demand.
• Users must stake tokens on their models, risking losing their tokens if predictions are wrong, which can be a barrier for casual users.
• The token’s price can be volatile and influenced by speculative trading rather than direct cash flows from the hedge fund.
• Some critics note that the token lacks strong demand mechanisms outside the Numerai ecosystem.
• The complexity of the platform and staking system may be difficult for beginners to understand or use effectively.

For more details, visit Numerai’s official website.

Founders of Numeraire

Numeraire was founded by Richard Craib in late 2015. He is a South African technologist and the CEO of Numerai, the hedge fund behind Numeraire. Some sources also mention Geoff Bradway as a co-founder involved in the early development of the project.

Investors in Numeraire

• Venture Capital Firms: Union Square Ventures is a notable investor that backed Numeraire early on.
• Hedge Fund Founders: Howard Morgan from Renaissance Technologies, a major hedge fund, is among the investors.
• Prominent Individuals: Paul Tudor Jones and Naval Ravikant have invested in Numeraire.
• Private Investors and Hedge Funds: Numeraire has raised funds from various private investors and hedge funds since its launch.

These investors support Numerai, the AI-driven hedge fund behind Numeraire, which uses crowd-sourced data science to improve stock market predictions.

Halal Status of Numeraire

• Yes, Numeraire is generally considered halal because its staking mechanism acts as a quality control system rather than involving interest (riba), which is prohibited in Islamic finance.
• The core protocol design avoids riba, and the token is used in a real-world application (a decentralized hedge fund and prediction market), which supports its halal classification.
• However, as with all cryptocurrencies, individual scholars may have different opinions, and it is recommended to consider the specific use and context.

For more detailed analysis, you can visit Practical Islamic Finance's Numeraire report.