Hedge fund and predictions market startup Numerai’s has launched its open-source “Erasure Protocol” on the Ethereum mainnet, according to an announcement.
The company, which launched in 2017, is built around an AI system that chooses which trades to make. Numerai encrypts some trading data and publishes it on its dapp, Erasure. As part of the competition, now called Erasure Quant, several thousand anonymous data scientists then compete to create the best trading algorithms. Numeraire then implements the best trading algorithms—and scientists win the company’s native currency, Numeraire for their efforts.
At present, it’s difficult to verify the claims made by data scientists who develop algorithms on the platform. For example, someone might develop a prediction algorithm that has a certain success rate and they may wish to sell the predictions it delivers to other parties–but buyers might want to be sure that the predictions aren’t tampered with. Base an investment on a false piece of intel, and there goes your pension fund.
Decentralize the whole thing, and you’ve got a consistent record of who said what, and when. There’s no one point of failure in the system, or a central overlord who controls the fate of the network. This is the world Erasure Protocol wants to create.
The protocol uses the Ethereum blockchain to track and record the history of predictions, proving that the user had the success rate they claim to have, and that any information a user wants to sell isn’t edited by some neer-do-well. It also adds in a staking element–the algorithm creator has to be willing to put their money where their mouth is. The idea is to create a self-policing marketplace where the most honest get rewarded, and the dishonest, lose their staked crypto.
As part of the announcement, Numerai has announced that two of its platforms will use Erasure:
- Erasure Quant, the tournament that crowdsources data, where users are rewarded for predicting the price of US stocks.
- ErasureBay, an open marketplace for any kind of information.
The Erasure Protocol has elements that look and feel similar to those found on Augur, the failed gambling marketplace where you could bet on anything. But, unlike Augur, it doesn’t seek the wisdom of the crowd by having users bet against each other to determine the odds. Rather, it offers individuals users to stake their claims—literally, they have to put down money that they can lose—to the information they provide.
But the plus side is that traders can accurately show their success rate, and buyers can rest assured that its backed up by the blockchain. And given the horde of traders offering technical analysis—where lines speculatively point to the moon—who claim near-perfect success rates, putting such claims to the test is worth a shot.