Generating Value – A Simplistic take
One thing that always comes to mind and troubles me about many cryptocurrencies is the fact that in effect they have little utility other than as wealth storage and as a trade medium. Therefore demand for the coins will always be limited.
In my simplified understanding of economics:
- When Demand is greater than Supply an upward pressure on value results
- When Supply is greater than Demand a downward pressure on value results
Bitcoin
In the case of limited issue coins such as Bitcoin, they attempt to generate value by limiting supply, as there is a small latent demand for cryptocurrency in its base usage as a wealth store this means that they will increase in value until an equilibrium is found and the demand is satisfied. At this point any gains are likely to only come with any demand generated by the growth of the global economy.
Gridcoin
The issue we have with coins such as Gridcoin is that the supply of coins is not limited, well, this is not entirely true, the rate of generation is limited through network difficulty. The point I wish to make however is that more coins will always be being created.
This means we have a constant supply of Gridcoin but we share the limited demand as a wealth store with coins like Bitcoin.
As described previously Bitcoin will generate value through lack of supply which means that in the long term you are more likely to generate better returns on investment wither Bitcoin rather than with Gridcoin.
So as a supporter of Gridcoin how can we generate value?
There are two ways to generate value, we can increase demand or reduce supply. Now Gridcoin is designed in such a way that reducing supply is not something we would want to do as we still want to reward people contributing to science. This leaves increasing demand.
The Idea
To create a demand for Gridcoins we need to give people a reason to buy them other than to store wealth. This is because as pointed out earlier, we will always lose out to limited issue coins.
One way of doing this is to create a way for organisations to be able to pay for distributed computing power using Gridcoins. This would be a great way to use coins therefore creating demand and the circulation of Gridcoin as a currency.
Projects would be split thus:
Volunteer Project List
These projects would be non-profit and would work just like BOINC projects do today. They can be managed using the existing whitelist and Gridcoin rewards would be issued the same as today.
Purchased Project List
These projects would generally be for profit and could work through the BOINC platform. Normally they would not get many volunteers to process there data on BOINC as people would rather donate to good causes than profit making businesses. However more “crunchers” could be encouraged to do work on these projects if they were rewarded. To do this the project would purchase Gridcoin and set a reward rate for work done (Measured as BOINC credit received). These rewards would then be transferred to the crunchers based on the users project credit in the Superblock.
E.g:
- Organisation applies through Gridcoin for a project to be included for rewards.
- If accepted by vote, a wallet address for funds is set-up.
- Organisation creates BOINC project. Gridcoin adds project to paid reward list (Opportunity here for devs/foundation to earn some GRC assisting in project set-up.)
- A project acquires funding in GRC by buying on the open market and transferring into the wallet address.
- Users attach to the project as normal, credit earned is captured in the SuperBlock and automatically transferred to the users based on work done.
As said new coins can still be minted through work on the whitelisted projects which are mainly non-profit. But this enables a (profit making) organisation to buy computing power as well, they do this by buying Gridcoins.
Please also see this post which prompted me to write this:
https://steemit.com/gridcoin/@dangermouse77/deep-space-computing-a-garage-mining-company
Thanks for taking the time to read my ramblings. If you have found this post useful please consider upvoting, resteeming and/or following me.
Demand for Gridcoin can increase for three reasons:
BOINC altruistic - once we remove mandatory team requirement, plenty of BOINC users will join because they love BOINC and feel PoW is incredibly wasteful. Those users will enter crypto through Gridcoin, because they are already familiar with BOINC and they are likely to show their support by purchasing a small GRC stake.
Crypto altruistic - as people get richer and more familiar with crypto, some of them will dabble in Gridcoin, because it's so different and computing for science is engaging for many people (especially when you can afford it comfortably). Again, purchasing a small stake out of support or speculation or both.
BOINC commercial - an enterprising scientist might set up his own BOINC project(s), raining some GRC onto his crunchers to encourage participation. That would sit well with crypto investors who usually like such commercial applications (or mere notion of it, look at Golem).
I was thinking more of long term stability.
In the short term we can indeed create demand through adding more users, but the worldwide pool of crunchers is limited, especially altruistic crunchers. The question in the short term is, "Can we take on more users faster than we create the initial GRC that they require?
If yes, value will go up.
If no, value will go down.
Your third point is along the lines of my thinking and yes, Project rain could be a tool that is used. For a commercial entity however I would think an "x GRC per y Project Credit" rain would be more popular as that way they can reward those that do more work with more rewards.
If we keep the base minting the same, a commercial project could set-up and promise an x GRC per credit rain per month for all crunchers as an incentive.
As a side affect any "Gridcoin" devs could earn a side income through either assisting, consulting or hosting Boinc projects. Hey, we could have a Gridcoin project that hosts the commercial applications.
I agree that these 3 items could be drivers to increase the value of GRC. For the first item I only see this as a temporary value increase.
We currently have 35.000 active team members not part of Gridcoin. In case each new Gridcoin miner would buy on average $15 (500 GRC) to hold and stake, this would represent 17.500.000 GRC (= 4.5% of the circulating supply).
Initially this would create a shortage but once everybody has bought some coins the market will settle again, with current miners having to compete with 10x more new miners who will basically continue to BOINC as before but can make some extra money. Ultimately this may increase the suppy of GRC to the market resulting in downward pressures.
I wonder how many dedicated BOINC team members will also become dedicated GRC miners. It is my view that people who consciously take the decision to join the Gridcoin team are more likely to be more dedicated GRC miners as well. Consider this for example with the SPARC coin. Next to Gridcoin, I'm now mining SPARCs as well with zero dedication or effort. If I could extract some value out of this coin I would be pleased but if not I don't mind.
We have half a million active BOINC users and 4.3 million registered. And those are users who are running BOINC completely for free, paying for electricity and hardware out of their own pockets. Those numbers will likely increase even more, with Gridcoin covering most of the costs (or even yielding some profits). Of course, markets always settle in the end, but with millions of BOINC users available for recruiting, I wouldn't worry about it yet.
According to BOINC stats we have at this moment 175.000 active users. Of them around 35.000 are part of a team (not Gridcoin). When the mandatory team requirements disappear they can then start mining GRC without leaving their team. I don't really understand why we should consider 4.3 million registered users for BOINC altruistic specifically?
Number of active users is usually fluctuating between 200k and 500k. Will likely increase again as the winter arrives to Northern Hemisphere. For example, snapshot taken on March 25, 2017 shows 430.892 active users:
https://web.archive.org/web/20170325010254/http://boinc.berkeley.edu
Also worth mentioning, an active user is a user which has returned at least one result within the last 24 hours. However, many BOINC tasks take much longer than that, so it's a conservative number to begin with.
4.3 million users have shown enough interest in BOINC to install it on their machines, meaning they are considerably interested in computing for science. With a monetary incentive (Gridcoin), a significant part of them would probably become full users and are more likely to support a science-backed crypto, then a Proof-of-Work one.
Makes sense now, thanks for clarifying.
I have some notion about deflationary/inflationary coins but you got me wondering. Why would anyone want to use gridcoin above another coin?
This is indeed a very good question, what is our USP?
If I look at some of the other coins I see statements like:
Now if I compare the above with Gridcoin:
None of the other coins talk about the mining aspect, it can't be the goal of the coin from a value proposition perspective, it is 'just' a means to sustain the network security like the sha256 calculations in Bitcoin unless you specifically sell the capabilities like for example Golem.
So what is Gridcoin really offering coin buyers? What makes it attractive for people to buy this coin and not another coin? I believe this information should be on the Gridcoin.us website to attrack buyers.
This is essentially what I was getting at.
Currently there is no reason to use Gridcoin over the other coins for people who don't BOINC and Boincers will just want to sell. I believe we need to create demand for the coin to get people to have a need and want to use it.
Gridcoin has some technical advantages over Bitcoin. Namely cost and speed of transactions. Lots of other cryptocurrencies have similar advantages though. Why use Bitcoin over Gridcoin except that at the moment it's easier to spend it (more vendors accept it)?
Totally agreed. This proposal and similar others need to be studied by the community in order to encourage the use of the coin and its value. Good post!
I've joined Gridcoin less than month ago and also recently wrote about quite similar ideas. Later on I have checked and indeed, paid services were discussed long ago on Gridcoin forums. The problem is how to implement such services. Glad to see discussions and hopefully we'll be able to move it on.
Limited supply does not generate value. The value of something will rise as the ratio of demand vs. supply increases. I can mint a single coin. It would be extremely limited but also worthless because there would be no demand (well, probably :)).
With Crypto's though, there is some demand as an anonymous wealth store and long term that is about it. If we just target this market we are competing against a whole host of limited supply coins that have not reached their equilibrium price.
Being an unlimited coin puts us at a disadvantage in the long term, relying on new users buying coins is a short term solution.
We need another way to generate demand and give the currency a lifecycle.
We can already kind of do this with the GRC Rain feature, if you want to encourage people to work on a specific project, buy some GRC and rain funds on the crunchers of that project.
I would love to see masternodes in gridcoin :) I think this would increase demand and price :)
It could work, but I think it could be a little complicated. Here's my approach. I'd like to see what you think.
I say we keep everything as it is now, with whitelisted projects being voted upon, but with the added feature of private projects being able to buy being whitelisted(whitelisting?), with Gridcoins.
Now in this model all projects are "equal", with private projects having the ability to be voted into the whitelist, in theory. Now that most likely wont happen. So a company could buy whitelisting for 6 month for lets say, 10,000 GRC. (Not saying how much we should charge, just saying a random number.) Then the funds would be taken from the company's GRC wallet and burnt, or permanently wiped from the total amount of GRC which would increase the price per coin. And to prevent too many Gridcoins from being burnt at any time, we could scale the whitelisting rental to the amount of current coins in circulation on top of limiting the total number of private projects. The rewards for researching could remain the same for all future projects, Private or Non-Profit.
So Gridcoin could not only hold wealth and buy products, but also give private companies access to BOINC's vast processing power, which burns the coins, increasing the price of each individual Gridcoin.
Just me spit balling a few ideas I had, don't take it too too seriously. Let me know what you think @guk
I don't like in general 'coin burning' idea. Money is a means of exchanging goods and services, not for burning! It's not a coal.
I see it like this:
Company is buying N GRCs. Their project is launched with a separate bounty of N. If payout for miners is attractive they will join and start crunching this project. Now let's assume it will take 4 months at steady pace. Half of N coins will be locked for more than 2 months. This and other forces are limiting amount of GRCs available on the market. Simple, intuitive, allows market to directly evaluate GRC value.
Bitcoin supply increase is if I'm not mistaken at 4% at the moment. It is very close to what we have at the moment in Gridcoin. Also, Bitcoin is a father of all, the first one, the special one. It's a base coin to exchange other coins on all the exchanges etc. It makes many comparisons with Bitcoin to be inadequate.
Gridcoin would still serve as a currency when burnt. It would serve the typical role as a means to purchase goods, as well as a resource for organizations to be whitelisted. The whole burning idea is a way to counteract the inflationary nature of a unlimited coin.
So if a company spends X GRC to be whitelisted for a month, then X coins are being burnt from that transaction, which increases the price per GRC. If we were to set a price per month for whitelisting, lets say $100 worth of GRC for example, then the subsequent whitelisted companies would spend the same amount of USD, but less GRC each time do the increase in the price per GRC. So the amount of GRC burnt would lessen and lessen with every company added, and with every month of whitelisting paid for,while the price per GRC would rise.
With this we can keep the current work/reward system for GRC. The only thing that would need to be added is a way for companies to apply for whitelisting, and a way for the blockchain to be able to burn the GRC from said company.
Then again, I'm kinda new to all this and i'm just throwing some ideas out there that I had. I bet there's plenty of problems with this idea, but I'm always trying to help out and learn in the process.
Burning coins in return for providing processing power to a project was what I thought of originally, with new coins being minted to reward the crunchers.
I changed that to merely recycling the coins as I thought it may be easier. Either way if we are constantly creating coins we need to constantly create demand.
Personally I think burning could be helpful. I've expanded upon it in my most recent post. Here's the link. I mentioned your post as inspiration.
https://steemit.com/gricoin/@b-reis/burning-the-value-into-gridcoin