Sharpe Capital is an interesting crypto project aimed at the capital markets. The project’s goal is to bring together various technologies from blockchains to neural networks in one platform. The team hopes to achieve success in the market by way of superior data in the short-term, especially around sentiment surrounding the assets.
They have designed the Sharpe Capital protocol in such a way that it rewards the token holders who are right. The users of the system can therefore earn ETH if they are right. The users provide their sentiment towards a number of assets, specifically global stocks and crypto-assets.
Sentiment is an important intangible in the world of investing. After all, traditional game theory predicts that it isn’t what your view of the market is that determines what you buy, but your view about the view of every other participant. This can branch out over multiple depths. The idea is that traders can gain a lot of advantage if they’re able to correctly predict the prevailing market sentiment, which indicates what other traders are thinking.
Sharpe Capital Token and Value
Unlike many other projects, Sharpe Capital’s token, the SHP, is valuable due to many reasons. From a purely financial perspective though, it requires work from the holders, and rewards them accordingly. This means the protocol is able to transfer ‘real life work’ on to the blockchain. The rewards from the token are obtained from being right in the real world. SHP will become one of the dividend paying cryptocurrencies which isn’t proof of stake. This means the ‘dividends’ that the token provides comes not from inflation but from usage.
The sentiment data the the users and SHP token holders provide is coupled with other well known technologies from Natural Language Processing (NLP) to Artificial Neural Networks (ANN). Presumably, the team hopes, that a combination of all these technologies would help them beat the market and generate some alpha for investors. In return, when the users who provide sentiment as one of the inputs are right, they get rewarded with ETH. To participate in the network, however, you require SHP tokens.
Sources of Return
Unlike proof of stake gains, the value that accrues to Sharpe Capital token holders comes from the external economy. The dividends are then distributed to the SHP token holders. The team will operate a proprietary fund, which will utilize the intelligence provided by the SHP token holders. In addition, the team plans to sell the sentiment data generated by the holders to third parties. The team also mentions fees from consultancy and other analysis. However, this may be separate from the token holders profits, and is not auditable on the blockchain.
The main source of return would come from profits generated by a proprietary fund. In that aspect, it is similar to some of the crypto asset management tokens like TaaS and ICONOMI. However, the Sharpe Capital token holders are not passive investors. They actively provide sentiment data, which is used to generate returns. They provide the data both for traditional assets as well as crypto-assets. The team plans to invest in both sorts of markets, and share the profits with the token holders.
Also note that the sentiment analysis is just one part of the trading algorithms that the team would use to make investment decisions. However, it lets the team reward stakeholders appropriately. Also, it is possible that because the token holders need to do some work to get their rewards, it is not going to be seen as a security investment by regulatory agencies like the SEC.
Photo Credit: Rafael Matsunaga