Price of Grin (pre-launch)

Price is purely the result of the interaction of supply and demand, where buyers meet sellers and agree to trade at a certain price. Before the launch of Grin I wanted to present some speculatory prices calculations. None are correct. None are wrong. It’s a matter of estimation and art and making a ton of assumptions. Economists make a lot of assumptions and as some of you may recall from the wonderful movie Lock Stock and Two Smoking Barrels by Guy Ritchie: “assumption is the mother of all f**k ups,” which is why economists mess up so often.

Price formation

In the early stages of a market’s formation where supply will only be coming to market (ie being mined and gradually brought to market) prices will be disparate as liquidity is low and exchanges are silo’ed liquidity pools. As infrastructure is being built around Grin this will improve. However, Grin is meant to be used as a peer-to-peer (p2p) currency rather than an exchange-traded one, a lot of the actual ‘exchange’ should happen through wallets. For prices to be established in such an ecosystem price transparency is a must. We’ll see how that happens given the privacy features (eg. people quoting prices on forums, telegram, elsewhere outside of exchanges?). Exchanges (centralized, and with time decentralized) should again be a good place for price formation — where supply will meet demand.

A few exchanges have already announced they’ll be trading Grin:

  1. Galleon exchange
  2. Bisq
  3. Bitmesh
  4. Nexex

Information I used for estimating Grin’s price:

  1. Information from public blockchains available on onchainfx and pages describing their issuance etc.
  2. Grin’s John Tromp (Grin core dev & founder of Cuckoo Cycle POW) estimated that there are c. 2 mln GPUs out there used for mining, of which c. 1mln GPUs are powerful enough (ie. 6GB/8GB+) to mine Grin.
  3. Eric Meltzer from Primitive Ventures wrote in the GrinFans Telegram group (check it out) “hate to break it to you but there are like one hundred million angry dollars raging at the bit to be dumped into grin mining ops”
  4. Grin’s prediction market on Augur = market cap will reach $500 million within 6 months (ie. daily issuance of $2.7 mln).
  5. Beam’s prices hover between $0.83/Beam to $1.48/Beam. I took $1.15 as the mean for Beam’s price. Extremely low liquidity doesn’t really allow for real price formation and discovery, as Beam’s market is still in development.
  6. With Ethereum moving to POS we can speculate how many qualified GPUs will be redeployed to mining Grin — many GPUs for sure might move to Grin this week, but I lack data to estimate this.

The core problem is that we do not have information on (a)# GPUs being deployed to mine Grin or (b) on investments across countries by mining farms, miners, VCs etc. to mine Grin. No one really has these numbers and we’re all guessing. Love decentralization! :)

Top 10 POW cryptocurrencies by daily issuance:

Price, Market cap, Supply, and Daily Issuance for the top 10 POW coins by daily issuance. Source: onchainfx

We can best estimate the price of Grin — a new POW cryptocurrency mimblewimble implementation that is privacy-focused — by comparing it to the top privacy-oriented cryptocurrencies Monero & Zcash, to Bitcoin, and Beam that’s recently been launched by a private company’s MW implementation. This analysis will still likely be way off, is pure speculation, and please do not use this data or think of it as investment advice — it is not — please do your own research. Moreover, there’s some rounding errors & simplifications in getting the data out fast & calculating it, thought they shouldn’t be far off.

Look at the above table with market capitalizations and daily issuance ($) numbers, as well as supply issued. Compare it to the sensitivity tables below of Grin’s price and daily issuance vs market cap & total supply. Make your guess based on your beliefs.

Price of Grin at at specific market caps and supply levels. Source: own calculations

Say, if Grin is valued at around $400mln (market cap) in 1 year’s time it should be priced at around $12.7 and have a daily issuance of $1.095 mln — making it the #3 POW chain behind Bitcoin & Ethereum.

If it is priced at c. $3 (c. $100mln market cap in 1 year’s time) that could be more realistic. Given that $100 mln might probably be invested in mining operations in the coming 3 months this means a price of c. $1.3 at the end of the 3 months would give Grin a market cap of c. $102 mln — enabling miners to break-even. At a price of $1.5-$2 per Grin I’m positive miners stand to make a profit, and it’s unlikely most will sell their newly mined Grins if they can’t make money. This is the most likely bottom price I expect we will see within the first 1–2 weeks of trading at c. $1.5-$2.

Daily issuance value for Grin at specific market caps and supply levels. Source: own calculations

We can also estimate Grin’s potential price based on the mining effort commitments (GPUs / hashpower) that will be committed. If Grin gets the equivalent hashrate / security / market cap that Monero and Zcash have today, it’s market cap and price can be estimated. When taking into consideration that several days after launch Beam has acquired over 50% of Monero’s hashrate. I believe we should expect Grin to reach much above that level of 50% of Monero’s network hashrate.

Monero’s hashrate and implied market cap, price & daily issuance for Grin. Source: own calculations
Zcash’s hashrate and implied market cap, price & daily issuance for Grin. Source: own calculations

The above is a weak backwards analysis but it’s some way of comparing — at today’s prices and network mining activity — what Grin’s price relative to XMR and ZEC could be. Why is it weak? Because it is actually counterintuitive, as hashrate follows price, not the other way around. And I exclude difficulty adjustments, algorithm and miner hardware specificity (hashing/mining isn’t really comparable across algorithms, diverse in hardware, nor linear with network size and activity, use of ASICs in Zcash is common etc.).

The below is my another take at estimating Grin’s and Beam’s market cap, daily issuance at various price levels. Take these figures for what they are — estimates based on weak assumptions eg. that Grin could reach ATH prices of Monero or Zcash.

Market cap, price, daily issuance and ATH at various supply levels for Grin & Beam

Grin’s launch

We don’t know how Grin’s first weeks, months or years will play out. However, Grin’s launch process as explained by the lead team is unique and clear. It will be slower vs “ICOs” due to no pre-mine. It is likely that each Grin coin will be highly valued initially — there will be few around and there’s much interest. Grin’s price could overshoot after mainnet launch, not necessary immediately but even in the months after opening. At the outset Grin will have low adoption, much friction in usage, and lack of infrastructure and services around it. But due to expectations and the hype around it, it will have speculation. Contrast this with Bitcoin — no interest at the start, growing among a niche group of cypherpunks, hackers and libertarians.

The amount of grins to speculate with will be small, thus, if many people/funds each want to speculate with their endowment of $100 or $100,000 they will do so. The early speculation rests on expectations around Grin’s future, and the quality of the project and team behind it. It will all be peer to peer and speculative at start.

Expectations around fiat currencies change, and this will be the case with Grin, as it is with Bitcoin et al. While we know supply for Grin and Bitcoin, demand for Grin and Bitcoin is much harder to estimate than say demand for euros of dollars, where demand is certain and economic activity can be forecasted quite well. Once Grin goes live and gets priced via exchange trading will we know more about demand.

Grin will have high capital inflows and much interest. Grin, with unlimited supply, should attract people who actually want Grin to survive. Grin’s supply, despite being more predictable and easy to grasp, will still see big fluctuations in its price.

In the first years it is mass distribution and adoption by merchants and services will be the key over time to realizing Grin’s vision, and over a long time horizon Grin can likely become a store of value. Perhaps that which will drive demand will be a single privacy- or micropayment-focused service “killer app” (the holy grail so highly sought out in the “crypto” space) that will propel usage of Grin. Perhaps it’ll be an array of applications or use-cases focused on privacy. It might be in the developing world, in some authoritarian regime, in emerging markets, or in the West.

There’s a lot of questions and many answers are not available yet and won’t be long after launch. Whether speculation around Grin is shorter or longer depends on demand and actual adoption for real, economic purposes other than speculation.

You can follow me on twitter at @kowalskr

Disclaimer: this analysis does not represent any institution or employer I’m affiliated with in any capacity, and it does not constitute investment advice. It is a very theoretical analysis — an exploration into Hogwarts’ wizardry monetary kingdom to be formed. :) Do your own research. Always.