A new hedge fund called Numerai calls itself a “super intelligent stock market” by utilizing scientists and machine learning to further expand the investment. According to the fund’s founders, some data scientists are paid in bitcoins to build algorithmic models that bolster future predictions.
Numerai Incentivizes Data Scientists With Bitcoin
When the internet boom took place algorithms became widely popular making machine learning an efficient way to predict events based on probability. Numerai gathers intelligence from over 7,000 data scientists harnessing stock market prediction accuracy. In a recent editorial from the tech publication Wired, the company’s founder detailed the scientists are paid out in cryptocurrency.
Currently, the software backed by data scientists has worked with over 29 billion equity predictions. Numerai founder Richard Craib told Wired that one hundred scientists have been paid for their services in bitcoin. According to the company $150,000 USD worth of bitcoins has been dispersed to data scientists for their work. Additionally, data from the researchers are gathered within a leaderboard collecting intelligence to create a collaborative powered prediction model.
“No data scientist on Numerai has a machine learning model that is better than all the other models combined,” explains Numerai’s Medium blog. “So Numerai is not a search for the ‘best’ model; it is a platform to synthesize many different models with many different characteristics. Although data scientists compete to place on the leaderboard, the competition is designed to collect models. Numerai is not really a competition; it’s an invisible collaboration to build the meta model.”
Cryptocurrency Will Help Fuel Machine Learning and Prediction Markets
Prediction markets and cryptocurrency solutions are believed to have a significant effect on the future of markets. While Numerai pays its staff in bitcoins for building machine learning data models, there are other cryptocurrency powered prediction platforms coming. For instance, two well-known projects in this field are Bitcoin Hivemind and the Augur prediction market.
Hivemind (or Truthcoin) is a peer-to-peer oracle system and prediction marketplace developed by Paul Sztorc. The project aims to allow prediction market participants to buy and sell shares speculating on selected worldwide events. Sztorc’s model is tethered to the Bitcoin network, and the founder believes prediction systems will be far more effective than traditional markets today. The Hivemind founder told us back in January:
“Prediction markets are ‘rule of the experts.’”
Another project called Augur is a decentralized prediction platform built on Ethereum. Augur also uses collective data to formulate forecasts on upcoming events. The project uses game theory, and cryptocurrency incentives to better enhance the intelligence. Theoretically, as the platform becomes popularized predictions concerning any worldwide events become more accurate. Augur was designed by Joey Krug, Tony Sakich, Jack Peterson and is currently still in beta. The project expects to its live release at some point in 2017, and the platform’s native token REP is already being traded.
Voluntary Data Collection Will Pave the Way for Worldwide Learning Models
Numerai and the many analytical data and prediction market projects might be game changers within the global economy. Furthermore, voluntary data collection seems more favorable than entities scraping data without permission. According to Numerai’s founder machine learning and portfolio management combined can procure lower error rates and higher returns.
“We are building the largest ensemble of stock market machine learning models in the world,” Craib said.
What do you think about projects like Numerai? Let us know in the comments below.
Images via Shutterstock, Numerai, Augur, and Hivemind websites.
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