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Numerai Cuts Total Supply by Half and Embraces Decentralization

What originally started as a centralized data marketplace used by Numerai’s hedge fund to make investments is about to become something more. In a recent statement, Numerai, the AI-powered predictive data network, announced a radical new plan of going ‘decentralized as fuck.’ The company will be cutting the maximum supply of its Numeraire (NMR) token by nearly half, from 21 million to 11 million, and giving up the keys, allowing them to mint new tokens.

With the introduction of Numerai’s new decentralized data marketplace, Erasure, the company will allow anyone to make predictions, stake them with cryptocurrency, develop a track record that can be verified by anybody as well as earn money in the process.

What is Numerai?

The company’s history dates back to 2015 when Richard Craib, founder of Numerai, wanted to make a hedge fund that offered a better way of selling good data analysis. Since its launch in June 2017 up until now, the hedge fund has been using its software to leverage the collected data for its own benefit, and it appears to be working effectively.

Source: Numerai

To date, Numerai has received about $7.5 million in funding and is backed by some the tech and crypto industries’ renowned names, including Howard Morgan, co-founder of Renaissance Technologies and First Round Capital, Peter Diamandis, founder of the Singularity University and the IBM Watson AI XPRIZE, Ash Fontana, board Member at Kaggle, as well as Union Square Ventures, among others.

Are regulations closer than we think?

Instead of launching NMR with an ICO, Numerai decided to go the airdrop route. The NMR tokens were distributed through their platform as payment for its users and airdrops, probably in the hopes of staying off the SEC’s radar. As regulations cloud the market now, more than ever, this sudden radical decentralization plan has gotten some people to believe that regulation might be coming.

In a recent interview for CoinDesk, Richard remarked that “Nothing we are doing now is a reactionary thing.” According to him, the SEC’s focus has been focused primarily on ICOs that exploited the unregulated market too much. When asked if Numerai is in contact with the SEC about its operations, Richard declined to comment. Nonetheless, according to the publication, he appeared relieved that they never decided to go the ICO route for the launch of NMR.

Welcome NMR 2.0

Instead of using it for its own profit, Numerai is opening its predictive marketplace for everyone to use. Similar to the current operating model, on Erasure users will be able to stake crypto on their prediction and win or lose its stake, depending on their score.

Richard remarked that the current supply of NMR is about 7 million, contrary to what CoinMarketCap shows. He added that 3 million tokens are closed for a decade, but that still leaves 1.7 million NMR in the shadows.

In an email for CoinDesk, Richard noted that he doesn’t really know what CoinMarketCap’s source of data is.

Since the maximum supply of NMR becomes 11M and the company is giving up on the ability to mint new ones, the launch of Erasure means the creation of 4 million. Given the rising regulatory concerns, Craib had appeared confident that Numerai’s new decentralization plan, giving its protocol in the hands of its users, will be enough to satisfy the SEC. Whether his beliefs last to become a reality remains to be seen.

Numerai – The Top Secret Hedge Fund That Everyone Knows About

Every now and again, you come across a project in cryptocurrency that makes you very keenly aware that you’re living in “The Future”.

It’s not necessarily a good feeling or a bad one, just a strong awareness that if you had your great-grandfather standing in front of you there would be absolutely zero chance whatsoever of you explaining it to him.

I’m talking about projects like Decentraland, where people are buying tracts of virtual land to make potentially profitable virtual business. I’m talkig about Unibright where people are gonig to rent their excess CPU power to be used by companies from thousands of miles away while they’re still on the computer – and yes, I’m talking about Numerai.

Numerai is one of those projects. It’s a competition, it’s a hedge fund, it’s a top-secret, ultra-transparent, highly technical  financial instrument that the analysts don’t need to have any finance skills to excel at. That’s Numerai.

Because Numerai abstracts its financial data, data scientists do not know what the data represents and human biases and overfitting are overcome.

Numerai is probably the only hedge fund in the world that release their data transparently (kind of). The data is publicly available, but they don’t tell anyone what it relates to – not even their own analysts. The data is encrypted so that analysts and other participants can’t mimic the trades carried out by the hedge fund itself. The analysts simply process the encrypted data, model it, and send it back.


Here’s what the founder Richard Craib has to say about the process of modelling algorithms:

We don’t say what it is. Although we share the data with everyone, it’s completely obfuscated of anything to do with finance. […] It doesn’t look like anything you would recognize, and is a totally abstract kind of mathematical problem as opposed to a finance problem, and that’s why if you’re an MIT math professor, this data… even though you don’t know what it is, you can still build a machine learning algorithm on it.”

After the analysts receive the data, they have a week to return the model.

Numerai’s methods are so radically different that it’s hard to even categorize the company, but it technically falls under the umbrella of being a quant (quantitative analyst) fund. Instead of hiring analysts the conventional way, NMR has thousands of analysts from around the world who can choose to participate or not – 15,000 at the last count. That’s literally thousands of times higher than other firms, with some billion dollar companies only having a handful of quants at their disposal.

To prevent competitors from deliberately sending in bad models doomed to failure, there’s an interesting failsafe – the quants have to stake NMR tokens with each submitted analysis model, meaning they’re essentially betting on the accuracy of their data. This makes it prohibitively expensive for someone to sabotage, and gives the token a utility beyond fundraising.

The Token (NMR)

The token (called Numerarie or NMR) is an interesting one. It undeniably has a strong use case, but it’s not actually connected to the success of the hedge fund in the way one might assume. The profits from the fund are separate to NMR, which is used purely as a means of staking analysis models and rewarding the successful quants (they usually receive USD and NMR for successful models). Tokens staked on failed models are burned/destroyed.

The fund itself is top secret, it’s unknown what funds are being invested in, and the profits are not connected to the platform token. The project is essentially an open-source crowdsourced platform built through the efforts of thousands of remote analysts using machine learning.

It’s kind of cool.

NMR has a circulating supply of just 1.3 million, is trading at the time of writing at $18.23 per token, and had a 24 hour volume of about $430,000.

The Founder and the Founder

Richard Craib is a South African technologist and the founder of Numerai. He succinctly explained the whole project as follows:

Numerai is a competition to predict the stock market. But the predictions can only be made by using artificial intelligence which finds patterns in our data.

So people come to Numerai and use machine learning to make AIs that predict stocks, and Numerai then trades those stocks in a fund to try to make money. If the predictions from the people work real good then the people are sent Ether but are also sent our own token called Numeraire.

The idea of a hedge fund that is also a crowdsourced competition is slightly mindboggling, and all the more because it seems to actually be working. Craib is not allowed to reveal the exact figures involved, but the project is gaining traction and publicity.

There are 14 team members at the moment, but technically they have tens of thousands of analysts as well. Gotta love crowdsourcing!

The project raised $7.5  million in traditional VC seed and Series A rounds. They gave away > 1.2 million Numeraire to existing data scientists the moment it went on the chain. The current market cap of $25 million for the token that doesn’t even reflect the value of the hedge fund – that just indicates how often people participate in the data modeling, which, given that it’s data modeling, is still kind of a lot.

One of the most interesting things about the project in my opinion is that it encourages thousands of people to hone their skills in developing stock market AI – developing the machine learning industry on the ground level without even letting the analysts know what their machines are working on. That means two things.

1: We live in the future. Called it.

2: That could have powerful ramifications on the stock market machine learning industry as a whole. Companies are spending big bucks on trying to develop an AI that can accurately predict the market, and fo all we know it might end up being one of the numerous Numerai number crunchers that pulls it off.

You can check out the founder discussing the project in a short video interview below.

Interested in other cool crypto posts….check out Mining Wars: Bitmain vs Dragonmint and The Price of Bitcoin vs Cost of Mining.

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