Numeraire Constructs the First Artificial Intelligent Hedge Fund on Blockchain

Now a new virtual currency, the first from a hedge fund, is set to play a key role in perhaps conjuring a new invisible hand. This synergy is expected to emerge, as with Smith’s version, from a multitude of individuals – but this time from collaboration, not competition – driving value for both the individuals and the company. With marquee backers, this “open-source” hedge fund has attracted notice, and, if it succeeds, it could introduce a revolutionary new ethic into ultra-Darwinian Wall Street.

The company is San Francisco based Numerai, founded by South African technologist and Cornell maths major Richard Craib, who is CEO. The currency is Numeraire, a cryptographic token intended to incentivize the modelling of the Artificial Intelligence (AI) that directs the hedge fund’s trades. On June 21, the Numeraire smart contract was deployed to Ethereum, and more than 1.2 million tokens were sent to a distributed network of 19,000 data scientists around the world. Already trading successfully for over a year now, the company is refining its approach and hopes the Numeraire will bring them further along the path to establishing a fully decentralized, software-powered hedge fund.

The staked Numeraire is held in the smart contract while the model’s performance is assessed, the amount staked contributes an extra data point regarding user confidence in the prediction. If the predictions perform well, the user earns ether, and his Numeraire is returned. If unsuccessful, the user loses their Numeraire which is destroyed. Each week, all who participate receive a portion of new Numeraire minted that week. “Over time, the Numeraire will perfectly incentivize the users to do the one thing we want them to do, which is to make the fund go up.” While Numeraire has no stated value in itself, it is predicted to trade on secondary markets. Likely buyers will be successful data scientists who wish to stake more in search of bigger ether rewards. However, even those simply holding Numeraire, without making bets, will see its value grow if the fund succeeds and secondary demand increases. Numeraire (NMR) is traded on Bittrex, CryptoDerivstives and EtherDelta. !