To date, countries that have issued their own cryptocurrencies include Ecuador, China, Senegal, Singapore, Tunisia, though these countries will not be standing alone for long with Estonia, Japan, Palestine, Russia and Sweden looking to launch their own national cryptocurrencies. Some of these countries are likely to take it a step further and replace paper tender altogether with China being one nation that is looking to take one step beyond a virtual and paper version.
Of the countries looking to introduce their own cryptocurrencies, the world’s largest economies could force the hands of smaller nations and we would expect momentum to build in the years ahead. Central banks now looking closely at the successes and constraints faced by those who have already stepped into the light, though only in early September, ECB President Draghi stated in a press conference that no member state of the Eurozone can introduce its own digital currency, with the currency of the Eurozone being the euro.
Numeraire Cryptocurrency?
With cryptocurrencies having gripped the markets and with equity markets close to or at record highs, the savvy fund managers have been in search of a new alternative, with many looking for similar returns to those enjoyed by the early holders of Bitcoin.
One of the key benefits of cryptocurrencies that tends to be lost in the returns is the fact that cryptocurrencies can be used to incentivize, with the programmability of cryptocurrencies making it possible to embed rules that can influence the holder of a particular cryptocurrency.
In 2016, Numerai launched as a ‘new kind of hedge fund built by a network of data scientists.’ Traditionally, funds make trades based on human decisions and a mass of research, while Numerai allows anonymous programmers to write open source trading algorithms based on data provided by Numerai.
The programmers /data scientists are then paid Bitcoins depending on how well their respective algorithms fare in the market.
In a bid to take yet another leap forward, Numerai launched its own cryptocurrency called Numeraire. Numerai initially distributed one million Numeraire tokens to 12,000 data scientists, who are then able to bet their tokens on how well their respective algorithms will perform. The distribution of the tokens was based on the past performance of the data scientists’ algorithms.
As before, if an algorithm does well, the data scientist will be paid with Bitcoins, but will also have their Numeraire stake returned, then programmers having sent their Numeraire token stakes to Numerai’s smart contract on the Ethereum blockchain. If the algorithm does poorly, then the data scientist won’t receive any payment and will also lose their Numeraire stake, the lost Numeraire tokens being permanently destroyed.
The launch of Numerai and the eventual creation of Numerai tokens is certainly one that hasn’t been seen before, with data scientists not only incentivized to do deliver strong algorithms but also to bring in new programmers to improve the performance of the Fund. The better Numerai’s performance, the more value assigned to Numeraire and the more profit to share amongst the programmers still in possession of Numeraire tokens.
It’s said to be the first hedge fund to harness network effects and the theory being that value is gained through strengthening effects, but the jury is out on what lies ahead for Numerai and the data scientists holding the Numeraire tokens. The hedge fund looking to break down the competitive nature in finance by incentivizing collaboration for gain.