Crypto Asset Statement: NMR (Numeraire)
Last updated: June 21, 2023
About this Statement
CatalX CTS (“Catalyx” or “we”) strives to provide our users with information to assist in understanding crypto assets that are offered for trading on the Catalyx platform (the “Platform”). One of the crypto assets we offer on the Platform is Numeraire (NMR). This summary sets out certain key information about NMR as well as some of the risks involved in trading it. While we tried to describe the key features of NMR here, this summary doesn’t provide all relevant information on NMR. We encourage users to perform their own research in order to understand any crypto asset that they intend to trade on the Platform.
About the Numerai Network
Numerai is a hedge fund that uses crowd-sourced financial modelling to predict financial markets. The network was founded by Richard Craib in 2015. Prior to founding Numerai, Craib built a global equity fund powered by machine learning at Prudential (M&G).
Data scientists use the data researched and gathered by Numerai to create predictive AI models to be used in investing. The scientists compete with one another in tournaments to see who creates the best models. Numerai then creates a meta model by combining the predictions from the best models in the tournaments to influence its global equity hedge fund. The scientists are incentivized to participate by the chance to control the capital of Numerai’s hedge fund, have their names on the network’s leaderboard, and earn financial rewards (and additional NMR).
What is NMR?
Numeraire was first introduced as the native token on the Numerai network. The maximum number of NMR is limited to 11 million NMR.
It is an ERC-20 token used for power staking and payouts on the Numerai network through: (a) Tournament, an application on the platform where data scientists can submit their algorithmic models to a weekly contest and express their confidence in their models’ ability to perform well with new financial data by staking NMR on their predictions; and (b) Signals, an application that permits users to upload stock market predictions and strategies related to one of the stocks in “Numerai’s stock universe” and stake NMR on the prediction. Correct predictions are rewarded with NMR and if a prediction is inaccurate, the staked NMR are burned. Successful participants in Tournament are paid money out of a prize fund based on the amount of NMR they staked and their staked NMR are returned.
The Numerai network uses a protocol called Erasure to facilitate its crowdsourced intelligence. Originally, NMR was used only by Numerai. However, in 2018, Numerai announced its intention to make Erasure open for use by any platform where information is shared and using NMR as the platform’s staking token. Erasure allows its users to make stock market predictions or submit other information (and stake NMR on the predictions/information) for any hedge fund or other information-seeker to use, not just Numerai.
This overview provides a summary of certain risks associated with NMR. We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading NMR, and in addition, does not take into account an individual’s particular situation or risk tolerance. Purchasers are encouraged to conduct their own research prior to trading any crypto asset on the Platform. Catalyx users should read the Risk Disclosure Statement for additional discussion of general risks associated with crypto assets made available through the Catalyx platform.
Adoption. The Numerai network was built for the purpose of facilitating crowd-sourced hedge fund applications. The future value of the NMR token will be based on some degree on the adoption of its technology by individuals and entities, since NMR is used on the Erasure protocol and Numerai network to engage in predictions. Failure of the Erasure protocol to obtain satisfactory levels of adoption could be detrimental the value of the NMR token.
Dependence on Developers/Founders. The future success of the Numerai network is likely somewhat dependent on the ongoing participation in network development by the founder and the network’s core developers, especially in regards to the collection and delivery of the market data used by the Numerai network’s users in building their models. If these entities cease their support for the network such actions may be detrimental to the project going forward. If these entities stop operating the Numerai tournaments the main utility of the token will be lost. Such an action could have a significant impact on the market price of the token.
Concentration Risk. As of the date of publication, a large percentage of the total supply of NMR appears to be held by a relatively small number of holders. In particular, as of June 2023, the top five NMR holders hold approximately 54% of the total supply of NMR. With this level of concentration of ownership, the actions of a very small number of holders can significantly and quickly affect the price of NMR.
Please note that these risks and the associated summaries or overviews provided for each in the Risk Disclosure Statement are not intended to be an exhaustive discussion pertaining to all such risks and, in addition, there may be other risks that come with exposure to NMR. We encourage all Catalyx users to perform their own due diligence to assess the risks associated with NMR and to determine whether this level of risk is acceptable to them.
How Catalyx determines which Crypto Assets to List
Catalyx has established robust policies and procedures to review each crypto asset offered for trading on the Platform. Among other information, we review available public information relating to the crypto asset on the following topics prior to making a determination on whether a crypto asset will be listed:
The history and characteristics of the crypto asset including whether the crypto asset was launched by ICO;
Analysis of the founders or inventors of the crypto asset/related network and a review of their ongoing involvement with crypto asset/network;
How the crypto asset functions including a review of its utility or purpose;
The market liquidity for the crypto asset;
The current and proposed governance of the ecosystem on which crypto asset operates with a focus on the level of decentralization of such ecosystem; and
The position taken by any regulator with respect to the crypto asset including any enforcement action taken against the crypto asset, the related network, or the founders.
In addition to the above we also conduct an analysis of factors weighing in favor or against the crypto asset being deemed to be a security based on Canadian securities laws.
No securities regulatory authority in Canada has expressed an opinion about NMR or any of the other crypto contracts or crypto assets made available through the Platform, including an opinion that NMR itself is not a security and/or derivative. Changes to applicable law may adversely affect the use, transfer, exchange, or value of any crypto contracts or crypto assets you hold on the Platform.
Certain statutory rights under securities legislation in Canada do not apply in respect of this Crypto Asset Statement.