I have been puzzling over several issues important to Numer.ai and its contributing data scientists:
- The need of Numer.ai to have highly staked and consistent predictions for the indefinite future.
- The need of staking data scientists who are confident in their models to not have their gains wiped out by NMR price fluctuations.
Given that NMR price fluctuates to the market, neither of the above needs can easily be satisfied.
Well there is a way to basically guarantee that at least 100 confident data scientists will stake 10,000 NMR and I am not talking about an air drop. That would defeat the purpose. We want data scientists to have skin in the game. Yet we want to guarantee them high price stability. There is a very easy way to do all of this.
Sell NMR crypto contracts for $1 per NMR. The contracts stipulate that all of the NMR is held by Numer.ai in the model name of the data scientists choosing for 3 years before the data scientist can make any withdrawal. After the special sale, the price of the NMR is determined by the market. If a data scientist fails to make any weekly submission then that week counts as a loss of 1 percent of the stake exactly as though the model had achieved a correlation score of -0.01. Otherwise the earnings are just normal nomi earnings. Can these rules be squeezed into the NMR contract?
- The actual value of the sale price TBD, but a valuation of between $1 and $5 would be fair.
- The actual holding period of 3 years TBD. But anything much more than 3 years may be difficult to achieve in practice. Also, the price and the time period of the holding are coupled, but $1 for 3 years is acceptable, maybe $5 for 2 years scaled logarithmically if more choices desired.
- The actual weekly default loss for a missed round should probably be closer to 3 percent for reasons I will discuss in the answer to @nasdaqjockey, below.