Tag: bitcoin

How to short Grin?

Grin launches

Back in early 2017, I got excited about an anonymously posted whitepaper proposing a blockchain that would increase both privacy and scalability: MimbleWimble. This was around the time that Ignotus Peverell published the technical introduction to MW (the consensus mechanism) and Grin (the cryptocurrency).

Grin was attractive for obvious reasons. Amidst the early innings of the 2017 mania, most “next Bitcoin” projects didn’t smell quite right; huge premines rewarding untested teams using unproven technology. On the other hand, Grin looked the part: anonymous author, fair launch, no dev-fee, genuinely novel approach.

At the time, I was GPU mining from my apartment and was eager to start mining Grin. Now I can.

But two years later, I don’t want to mine Grin. While I’d like to see the project succeed, speculatively mining Grin has gotten so crowded that it’s hard to imagine the economics making sense. Eric Meltzer from Primitive estimated that over $100M has been invested into Grin mining operations. Based on the hash rates observed over the last couple days, others estimate that roughly 100K GPUs are mining Grin now.

Unlike Bitcoin, Grin was quickly recognized as a promising investment. And the ample time between spring 2017 and today have given anybody with an interest in investing in Grin the opportunity to do so.

What’s more, Grin’s monetary policy is designed to combat hoarding. Unlike Bitcoin’s new coin issuance which goes down over time and eventually goes to zero, Grin plans to issue new coins forever. At its current rate, two Grins are mined every second (roughly 30 second block times). The target rate is one block per minute, or one Grin mined per second. From the MimbleWimble Github:

Bitcoin’s 10 minute block time has its initial 50 btc reward cut in half every 4 years until there are 21 million bitcoin in circulation. Grin’s emission rate is linear, meaning it never drops. The block reward is currently set at 60 grin with a block goal of 60 seconds. This still works because 1) dilution trends toward zero and 2) a non-negligible amount of coins gets lost or destroyed every year.

Prices go up when there are more buyers than sellers and vice versa. Given the dollars invested into mining, the relatively low retail interest in new coins, and historical evidence that the market doesn’t really value privacy yet, one should expect more sellers than buyers as miners look to recover their expenses.

Anyways, we shall soon see. Dovey Wan did a back-of-the-envelope estimation of how much it costs to mine a Grin and came up with a highly conservative $1 assuming $0.05 kwH electricity and ignoring the cost of hardware. I’ve seen others estimate that it’s substantially higher. If market interest for the more centralized version of MW, Beam, is any indication, investors in Grin mining operations might be in for some hurt.

Which leads me to my final question: how do I short Grin?

Shorting Grin

If you wanted to bet on Grin’s price, you could do it a few ways:

  • If you’re long Grin, you could mine it or buy it from an exchange
  • If you’re short Grin, you can try and borrow it (but I don’t think anybody is lending yet) or participate in a prediction market on Augur or something

Or you could try Veil, which also launched to Mainnet (I wonder if they planned their launch around Grin’s?) and created a market for “What will be the price of Grin in USD on March 16, 2019?”

It doesn’t have much open interest yet (only around 1 ETH), but it’s pretty cool that these markets can exist. Though, as a US resident, I want to be clear that I did not participate in the market because you know it might be illegal. Or alegal?

So should you short Grin here? Assuming 1-2 Grin mined per second, the circulating supply of Grin should be somewhere between 5 and 10 million (closer to 5 million), so under $4 means lower than $20M value of circulating supply.

Ehhhh.

It really depends on whether the market cares about the emission rate. If they don’t, $20M might look pretty cheap. I mean, if they really don’t care about emission and think $20M is cheap, then the price at this moment (161K Grin mined) is $124. But if they do care about emission, nobody should want to hold Grin as an investment. I don’t know which one sounds more insane: ignoring the inflation or thinking that the market will care about the inflation.

I’m just gonna sit this one out for now.