Chatter in the crypto-circuit these days- in Telegram groups, Whatsapp channels, discords, and in real-world conferences invariably turns to Grin. There is no denying that Grin is an exciting privacy coin, and yet Grin is also so much more than a privacy coin.
We did a piece on Grin earlier this week. Such is the hype that we believe it warranted another one.
Not many cryptocurrencies share the same humble beginnings of Bitcoin. Grin’s ethos almost perfectly mirrors Bitcoin’s low-key beginnings, where the project was founded, developed and maintained by a group of anonymous actors in the fringes of the ecosystem. Grin decided to skip an ICO in a world where ‘all-hustle-zero-substance’ projects with no clear plans other than to make a quick buck riding the crypto hype raised millions of dollars. This clearly shows that a great project can still attract a strong community of followers by sticking to the essential spirit of the blockchain, without having to do a pre-mine or an ICO.
Essentially grin is a lightweight version of the bitcoin blockchain that gets rid of all the large-footprint, bloated components of the latter to provide privacy and compactness. Grin also builds upon the best features of Monero and Z-Cash. We briefly covered features of Grin (and Beam) in an earlier post. Here we further explore how grin offers superior privacy and compactness relative to Bitcoin; let’s take a simple example:
Consider a small transaction that has a and b as inputs and c and d as outputs. To prove that no new money was minted during the transaction ( to solve the foundational double-spending problem), ignoring transaction fees, we have to prove that
a + b = c + d
Because the Bitcoin blockchain is transparent and you can see the values of both inputs and outputs, we can easily verify that the sum of inputs is equal to the sum of outputs. To implement privacy, Grin transforms the above equation into a different equation, say A+B = C + D, where it is practically impossible to deduce what the original inputs are by looking at the new equation. How this actually works is as described below.
A = r*G + a*H where G and H are blinding factors (large mathematical numbers whose factors are hard to determine). Here ‘r’ is the private key, r*G is the public key and a hash of r*G is the address, exactly as in the case of bitcoin.
In reality, say, a transaction with 3 grin and 5 grin as inputs and 2 grin and 6 grin as outputs should look like this on the blockchain without any privacy features.
3 + 5 = 2 + 6
Now Grin makes the same transaction look like this on the blockchain
238949405849405 + 2424827397470743 = 11393939393 + 2663765409380750
It’s practically impossible to work backwards from the above equation and arrive at the original one. This makes Grin’s privacy so simple. Grin does not even need a wallet address.
Now that all the transactions are private by default, there’s no need to maintain the trail of each and every UTXO generated on the blockchain. So, UTXOs are aggregated and this makes the blockchain really small and compact. All full nodes do not have to download the entire UTXO set whenever it connects to the network. They only have to download the most recent UTXO set after aggregation.
To contrast and compare the extent to which Grin’s novel design reduces its blockchain size versus Bitcoin, some numbers are helpful; The entire size of the Bitcoin blockchain is around 185 GB and it has over 500k addresses. When Grin grows to Bitcoin’s size in terms of the total number of addresses, Grin’s blockchain would still only be 4GB.In terms of monetary policy, Grin’s perpetual issuance of constant block rewards is more egalitarian than Bitcoin’s in that the miners who join the network after 15-20 years still enjoy that same reward of 1 Grin per second that early movers enjoy. Unlike Bitcoin’s capped issuance of 21 million coins, Grin’s perpetual issuance makes it theoretically unfit to become a digital SoV currency due to its lack of perceived scarcity. This should, at least theoretically discourage hoarding and speculative behaviour. However, this has not prevented an active secondaries market for Grin emerging on various exchanges. As expected, price movements have been volatile.
To extend the Bitcoin analogy, there is still considerable polarization in the community on what exactly is the value of Grin. Because it is a lightweight bitcoin that also has the security features of ZCash and Monero, the potential use cases are very exciting. Combined with the fact that the monetary policy discourages speculation, there is something almost utopian in the ideals of the project. However, given the law of unintended consequences, the simplest prima facie use case, as it was with bitcoin, might be to build underground networks such as the Silk Road, with the grin version offering true anonymity as opposed to bitcoin’s pseudonymity. While it seems like all use cases that drive up the value of grin are unsavory, dystopian situations in the extreme or atleast situations that are distinctly unregulated, it is also worth pointing out that there were identical arguments being made about bitcoin as well, and continue to be made.
Additionally, while many investors are actively mining Grin, a number of investors are preferring to wait and watch, given the highly inflationary monetary policy. Given that this is the only game in town in the depths of a bear market with proven, working technology, it is probably fair to expect a pump, perhaps post the Chinese new year but the smart money is probably waiting on the sidelines for a while, given that it is currently valued at ~$4 billion, basis 2050 supply, which is more than the valuation of ZCash and Monero combined. Basis current market cap, however, the valuation for grin drops to approximately $3.6 million.
“S10 to Offer Crypto Wallet?” Leaked images of the Galaxy S10 provided evidence that Samsung could be ready to launch a crypto wallet to store cryptocurrencies like Ethereum, and a blockchain explorer service called Samsung Blockchain KeyStore. While the leaked images aren’t yet confirmation that Samsung will indeed ship with the crypto wallet in tow, if it does, Samsung will be exposing crypto and blockchain to millions of its most tech-savvy smartphone users.
“Coinbase Partners with Intuit Tax” Coinbase customers who need to file taxes in the U.S. this year can get a boost from TurboTax, the tax-filing software offered by Intuit Consumer Tax Group. The companies announced that they were teaming up to allow Coinbase and Coinbase Pro clients upload their transactions, gains and losses in 2018 directly to TurboTax Premier. Coinbase customers can upload as many as 100 transactions at once. The integration will work directly through Coinbase’s retail platform, or its Android and iOS apps.
“JPM Maintains Negative Outlook on Crypto” Analysts at JPMorgan Chase have predicted that Bitcoin (BTC) could fall below $1,260, while banks will not benefit from blockchain for at least three to five years. According to Reuters, analysts from the major global investment bank think that the true value of cryptos is still unproven, and that they only make sense in a hypothetical “dystopian” event, wherein investors have lost faith in major traditional assets like gold and the USD.
“Over 240 Stores Register with Eligma”Eligma, a Slovenian blockchain startup has built an app offering immediate payments with selected cryptocurrencies, free transfers between users worldwide, balance and transaction history, and loyalty rewards as well as the app also now enables enhanced store navigation and discovery. More than 240 locations now accept Elipay as a payment method.
All the Ways Grin and Beam Take Crypto Back to Its Roots by David Z. Morris
Portfolio Management for Crypto Investors featuring Matt Galligan