My Thoughts on the Value of Gridcoin

in #gridcoin3 years ago

I've been planning on writing this post for a while now and I figured since a number of other community members have posted similar things I should get off my butt and actually write it. Some bits here may be re-hashes of the other posts but hopefully I'm able to provide a bit of my own unique perspective and provoke even more thoughtful discussions. For reference the other posts I'm referring to are: 

Long Term Goal of Gridcoin

Response to Long Term Goal of Gridcoin

Also, please note that some of these points are presented as points of discussion and are in no way meant to hate on Gridcoin. As I've stated previously I love the idea of the coin and only want to see it grow but sometimes growth means taking a critical look at your faults. Anyway, with the foreword out of the way let's get onto the topic at hand. 

What is the value of Gridcoin? That's the question I'd like to get you all thinking about. To start off let's examine what gives FIAT currencies value. The aforementioned posts touch a bit on the higher-level concepts behind what gives the money we use on a day to day basis value and what they're backed by. For this post I'd like to take a viewpoint closer to the everyday person. Why does the (in my case) Canadian dollar have value for Joe and Sally down the street? To answer that we can look at how Canadian dollars pass around the system. Inherent in every exchange is a perception of value. Say Joe owns a shop and his floor needs to be moped daily. Joe can either mop his own floor or give me $20 to do it for him. In the case where I mop Joe's floor for $20 the value for Joe is that he does not need to do it himself, thus freeing up that time and energy for him to do something else. Joe attributes the value of his time and energy to be roughly equal to (probably greater than) $20.  

The basic level of value exchange, trading time for money

But why do I accept a $20 bill in exchange for moping Joe's floor? I accept it because I know that I can go down the street to Sally's coffee shop and use it to get a sandwich and a coffee. Sally accepts my dollars because she can then use the dollars I've given her to pay someone to mop her floor or buy herself goods. The cycle continues and we have a very rudimentary and simplistic view of an economy, at least from the perspective of trading time for money. My apologies to the economists in the crowd. Of course, rooted in all this is the high-level backing of the currency by debt or gold or beaver pelts or whatever else society deems as THE determiner of value. 

Who would want to use this cute little guy's hide as currency?
This isn't even close to the most obscure form of currency to have been used. 

Going back to our original question on the value of Gridcoin let's look at how Gridcoins are earned and generated. Gridcoins are issued in two ways: 

1. As 1.5% interest on Gridcoins already held. 

2. In exchange for completing scientific computations on the BOINC network. 

Neglecting the interest part for now fundamentally Gridcoin is proof that you used your computational power to do science. Does the science you did have value like Joe's time did in our example? Of course it does! It has incredible value! Does Sally down the street recognize that value and is she wiling to give you a coffee in exchange for that proof of science completed? Unless Sally works for one specific coffee shop in Germany, probably not. This is the sticking point with Gridcoin. The science done arguably benefits all of mankind to various extents. Sally might love wine and the work done on TN-Grid may very well one day influence the price or quality of her wine in one way or another but she doesn't know that. The value associated with Gridcoin right now is fuzzy, hard to pin down and extremely niche. 

Maybe one day we will live in a society where scientific advancement is valued as a valid backing for a currency, like our precious time, gold or debt we can trade it for goods and services. As of right now we unfortunately do not live in that society. Society today needs to see tangible near-direct benefits to perceive value; so, with that in mind, let's look at the value of Gridcoin through that lens. 

What are the tangible near-direct reasons to want to buy Gridcoins? The most obvious one is the 1.5% interest. This is a minor reason to buy and hold the coin but it is also linked to the value of the coin. If I'm getting 1.5% more of something that has no value what's the point? Not to say that Gridcoin has no value, just an example. 

Another reason to buy it might be because, like me, you want to live in a society that values scientific progress over gold or beaver pelts so you buy some to hold onto it. You see the potential in a currency that is backed by science. I think most of us are probably in this camp. This is a very amicable long-term goal and a lot of things are going to have to happen before we get there. There would have to be a monumental shift in the world's value judgements as a whole. I hope that one day we do get there, but again that day is not today. 

Society's perceived value: Small. Actual value: priceless. Unless you're preventing male pattern baldness.

You'll notice both of the reasons to buy Gridcoin also involve holding it. This doesn't make for much of an economy. Currency needs to move around for a true economy to develop around it (again, sorry economists for gross oversimplifications). From that observation we have to ask, what are the other reasons to buy (and spend) Gridcoin? Some people have touched on perhaps making it so that people can use Gridcoins to utilize the computing power of the Gridcoin network for their own projects and as @Dutch has pointed out we have a basic level of that functionality now with the rain feature. I think this is worth exploring further.  

The rain feature is a great start but I think progress can be made from there. How can we make it so that someone can come along with a massive set of data they need crunched and motivate the Gridcoin network to compute it for them? On the basic level we have them buying up a bunch of Gridcoin and promising to rain it at certain intervals. This seems to be the next logical step in the development of Gridcoin. Some way for people to get their projects on the platform and get them extra attention and computational power by promising higher rewards of Gridcoin. I think the rain functionality can be improved on to support this concept better and I have some thoughts on the topic but this post is already getting lengthy so I'll save that for a follow-up post.  

I'd like to stress that I'm not suggesting we remove the volunteer aspect of Gridcoin, I think that the volunteer part is the soul of Gridcoin and fundamental to the overarching goal of valuing science over gold etc. I also think we can have that part co-exist with a more for-profit style of number crunching. Some people have suggested that if we had a profit motivated part of Gridcoin that would take over and we'd lose the soul of Gridcoin. I do not think this is the case. After all, there's a large amount of people in this community who were doing BOINC for free long before Gridcoin was around. I don't think there's any risk of that aspect ever going away no matter how much money a corporation, individual, dog, etc. may want to throw at their specific problem. There will always be people who just want to crunch SETI and get a few Gridcoins along the way. 

As I said, this post is getting a bit long so I'm going to end it here. Hopefully I gave you all something to think about and we can get plenty of meaningful discussion going around the value of Gridcoin and how to enhance it. I think that successfully coming up with reasons to want to buy and spend Gridcoins is important for the future of the coin and bettering society as a whole through science. 

Sort:  

One thing we need to clear up; BOINC is not and does not only need to be used for altruistic scientific research. There is of course a reason that this is the mainstay of publicly accesible BOINC work, and that is security, of the data. You could launch any kind of parallel compute task onto BOINC and reward it with Gridcoin; we just need organizations willing to trust the crunchers (this is incidentally why efforts like Golem have an incredible uphill battle; they want the companies to pay AND absorb the risk!).

So really we can see BOINC/Gridcoin as a masively parallel, free to use, supercomputer; I think there is massive value in that. The currency of Gridcoin will succeed when the node count and local node density gets high enough for merchants to start accepting Gridcoin. Even Bitcoin is strugging to acheive this, so I wouldnt be too hard on Gridcoin just yet.

The currency of Gridcoin will succeed when the node count and local node density gets high enough for merchants to start accepting Gridcoin.

I don't see any reason why this would give gridcoin value. All it seems to have is inflation with no particular reason for people to ever buy it.

free to use, supercomputer

This hits the nail on the head... it is free and therefore has no inherent value. Holding the tokens multiples your tokens reducing the low and decreasing value they already have. AFAICT here is nothing substantial creating demand for this token. Any idealism I might connect with "helping" some scientific projects (which isn't enough) can be undermined by the reality that the system is open to be abused by anyone and everyone.

NOTE: I am totally new to Gridcoin, so please correct me if I am missing something.

Why do dollars or euros or yen have value, they are just imaginary tokens backed by debt. They have value because certain groups agree to use them to exchange other items of value, that's it. So if any currency gets into the hands of a critical mass of users either locally or globally, it will become valuable. Of course it needs to be secure, fast, and ethically sound for people to prefer using it over a similar competitor.

How a currency is brought into circulation has little to do with its value.

There is a mechanism built into Gridcoin called "rain" that allows a research project to give additional rewards to people doing the work, but as commercial enterprises don't do distributed computing at the moment it's not much used.

Great post

A very well-written and thoughtful post. (How dare you?! j/k)

I have had all of those same thoughts, and no great answers. On the other hand, the entire crypto space has the same problem. Except for a few rare exceptions, there's nothing I can really do with Bitcoins at the moment. And yet it's closing in on $4000/coin. Does this make sense? No. Does it need to? Apparently not.

People are throwing their money into ICOs like madmen these days. Everyone is trying to get rich quick. Gridcoin, at its heart, seems to be an altruistic endeavor. And altruism doesn't really make one wealthy, so the coin languishes where it's at.

Personally, I want it to be worth at least enough to cover the cost of my electricity use, which is a non-trivial amount. But I honestly don't know how or if that's gonna happen.

Using my rig, I could be mining lots of other PoW altcoins, and making some amount of profit, even after electricity costs. But I just can't bring myself to do it. Sitting there grinding out meaningless hashes, 99.99% of which will be thrown away? No thanks. I'd rather fold proteins to help cure Alzheimer's, or find prime numbers which will help some future scientist/mathematician make some new discovery.

There are 3 "science" coins I know about at the moment; Gridcoin, FoldingCoin, and CureCoin. None of them are doing particularly well as a "coin", meaning as a store of value. What would be great is if somehow the scientific community themselves made these coins valuable, through suggestions like your own, paying for projects. Because then the rest of the world would say "Hey, those coins are worth something, so I'm gonna throw some mining hardware at a science project and get some!" And the coin, in a way, would end up "tricking" people into doing the right thing. They get money, science gets done. Win-win.

The fundamental technology behind Bitcoin, the blockchain, is replacing entire industries. Think about it this way: Bitcoin was developed with the specific goal of supplanting Visa, Mastercard, Paypal, Venmo, Banks (literally banks), and it is succeeding. When you add these entities together you're looking at hundreds of billions of dollars worth of economic value. There are some very definitive reasons for the rise in the assumed value of Bitcoin -- the question is just what is the real price. It is almost certainly far higher than it is now. The next questions are: how long does it take to fully replace 3rd party financial institutions? and what will happen along the way?

I'm writing a longer response but I couldn't wait to put that out there =).

I completely agree it will have value in the real-world. But for now, it's really not "useable" in any sense, except speculation. None of these coins really are. But then again, these are early days, and much like pre-Internet, everyone is still figuring out what to do with this technology. The next few years will be really interesting.

idk captain, I buy more things with btc every day. Its adoption as a currency is moving along fairly quickly.

Wow, thanks, I stand corrected. I just did a lookup on who accepts bitcoin and I was shocked how many places did. I wasn't expecting to find that. So I suppose, getting back to the article, as long as bitcoin has value, and as long as there's a market to exchange GRC for BTC, then by association, GRC can have value too.

IMO bitcoin is a bit of a unique case in this sort of conversation. It was the first and every exchange uses it. It's the way most people enter the crypto world without mining. As a result it's essentially the gold standard for crypto (depending on who you talk to) which is where some of it's perceived value resides. It's the primary means by which you do other crypto business in the crypto sphere and as such has use as long as crypto has a use.

You are making a lot of good points here!
I agree with you that there will always be some users running projects that do not rain GRC. However, if the number of users starts to increase by, lets say, 10 fold, there will be more and more people crunching for the sole purpose of acquiring GRC. This would then cause an imbalance between the projects, as I mentioned in another post already.

I really don't have an idea how this problem could be solved. I thought about it for almost 2 days now and my limited mind can't solve it yet.

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Well thought out and a bit of humor I like this post. You also informed me about another coin I have seen but never looked into so thanks for that I am interested. like the post. keep it up.

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