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Why Numerai’s New Data Marketplace Matters

December 6, 2018


Numerai is not exactly new to the Cryptocurrency space. In fact, it has been around since Bitcoin had its’ first truly successful year in 2015. Until recently however, the Numerai project has been quite centralized in terms of who controls its’ token supply and who has access to its’ data.


Now, since October, things have arguably been changing for the better with the team’s announcement of its’ decentralized data marketplace called Erasure. In an overarching sense, Erasure is a place where anyone can post a prediction about anything and show their confidence in it by staking crypto on its’ veracity. If you know anything about Numerai’s history, then you know that this is the same sort of marketplace that they’ve had from the start with two differentiators.


In the past, Numerai essentially only catered to data science teams. To understand why this was the case, it’s essential to recap where Numerai’s uniqueness lies, beyond its’ data marketplace.


Numerai began as the first AI hedge fund with its’ own proprietary cryptocurrency. In order for its’ AI system to continuously improve in terms of its’ market performance, it still depends on crowdsourced predictions from a horde of data scientists. These professionals, in turn, are incentivized to continuously provide predictions because they earn Numeraire tokens when they do so.


Going forward, these professionals will still be able to participate in evolving the network as they always have. The only difference will be that now, anyone else can join them. Underpinning all of this is a consensus protocol based on what is called Proof of Existence, which has a very clear utility. Essentially, since Numerai is based on the Ethereum blockchain, storing thousands of predictions would be extremely expensive in Gas fees. Because of this, Numerai plans to store the predictions on the InterPlanetary File System, which is similar to a new version of HTTP for the web. Once someone wants to access a prediction, all they would need is the prediction’s hash, which will be stored on the Ethereum blockchain. In effect, it can help to think about the hash like a compressed version of the full prediction set. 


On top of this innovative storage solution, Erasure also timestamps all predictions as they are submitted, which commits the user to his or her prediction from that time. If you’re interested in knowing more about how this works out on a technical level, check out the research on the Proof-of-Existence protocol, which has actually been around since 2013. According to the Numerai team, these timestamps are public and allow anyone to check the accuracy of anyone else’s predictions at any time. The ultimate goal here is for professionals to build up a reputation based on the verifiable accuracy of their predictions. Over time, once this scales and Numerai hits a critical mass of users, it may become the most accurate hedge fund in history. Before it gets there however, the team will need to think hard about the difference between incentivizing data scientists to help a hedge fund grow and incentivizing the general populace to do the same.



By: BGN Editorial Staff


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