Grin has generated a fair amount of hype and interest — in large part due the founding story, fair launch, and its use of novel technology. But beyond these narratives, how is Grin actually structured? What’s the decision making process look like? What sort of supporting infrastructure exists for Grin? These questions are all essential to its long term sustainability and viability. In this piece, I dive into Grin’s novel governance approach, and explore future directions it may take.
Table of Contents
- Governance Overview
- Fair Launch
- Anonymous Developers
- PoW Changes
- Risk Management
Grin is a new Mimblewimble-based cryptocurrency that offers privacy and scalability improvements. An ideal digital cash offers fungibility and scalability, both of which are focus points with Grin. Apart from its technology, Grin is differentiated by its community driven implementation, with no ‘founders reward’ or value taken directly from the protocol. Additionally, Grin has a constant block reward, meant to encourage usage of Grin, increasing its potential utility as a Medium of Exchange. This is deliberately unique from Bitcoin, which has a fixed supply that incentivizes holding. The market size for a private, digital cash is enormous, and Grin plans to address that market.
Tom Elvis Jedusor posted the Mimblewimble paper on a Bitcoin IRC channel in 2016. Andrew Poelstra formalized the approach, releasing a paper in the fall of 2016. Soon after Poelstra released his paper, an anonymous developer named Ignotus Peverell started working on a Rust implementation.
Momentum around Igno’s Mimblewimble implementation grew over the next few months, and there was more and more interest in the project, named “Grin”. Over the course of 2017–18, Grin would release 4 testnets, progressively adding in more advanced features with each successive deployment. Developers continued to work on Grin, with a regular set of contributors emerging during this time. By the summer of 2018, there was some serious buzz around Grin, as developers and investors alike began positioning themselves around the protocol.
Grin launched on January 15th, 2019, with many eyes watching it. It’s arguably the highest profile launch of a new PoW chain ever; Previous launches like Bitcoin or Ethereum occurred in vastly different eras. The first few weeks have gone relatively smoothly, with no technical hiccups among the core protocol. Successful Grincon conferences have been held in Berlin, SF and Asia.
Overview of Grin Governance
The Grin community has spent a considerable amount of time on the topic of Governance. The Governance forum is quite active, with many threadsaround governance norms and frameworks. It’s clear that developers have been thinking about this topic for some time. Grin is less structured than other projects with formal companies or foundations, so it’s more important to think about how to organically grow the community around it.
In addition to their development meetings, Grin has bi-weekly governance meetings that anyone can participate in. Much of the focus has been on the same topics — project values/vision, funding, proof of work, audits, etc. The entire process has been transparent and accessible to anyone; the proof-of-work mining debate was completely open sourced, with anyone able to contribute their thoughts and opinions to it.
Overall, open source protocol governance is something that’s constantly iterated and improved upon. There is no shortcut or short-term fix. It’s strengthened through awareness, education, and active community participation. It’s clear that Grin developers understand this and have approached it through that lens. Along with technical improvements for the protocol, iterating the governance process is something that is top of mind for Grin moving forward.
Grin likes itself small and easy on the eyes. It wants to be inclusive and welcoming for all walks of life, without judgement. Grin is terribly ambitious, but not at the detriment of others, rather to further us all. It may have strong opinions to stay in line with its objectives, which doesn’t mean disrespect of others’ ideas.
We believe in pull requests, data and scientific research. We do not believe in unfounded beliefs. — Grin
Grin has garnered a lot of excitement around its fair launch structure. The only way to acquire Grin coins (“Grins”) is through mining or purchasing — no one has a structural advantage or special access. Part of the buzz about this fair structure is a reaction to 2017–18, when many founders and investors raised enormous amounts of money for half-baked ideas. The Grin approach — to raise no funding, rely on volunteers, and have an organic launch, is starkly different. Additionally, the fair launch has ingrained a set of core values into Grin itself — one of fairness, equal opportunity, and access. This narrative — grounded in facts — has attracted many developers and entrepreneurs to work on Grin.
Eric Meltzer describes this phenomenon well –
“The lack of a premine does magic things to human psychology; when you are doing free work for something that someone else gave themselves a huge bag of, you feel like a chump! When you do free work for something that everyone has a fair chance to mine, you feel like you’re part of a tribe, and that effect is in full swing with Grin. Wallets, decentralized exchanges, stats pages etc are all popping up, and our Grin community channel has smart devs asking what they can build every day.” — Source
There has been some controversy over whether this is really a ‘fair launch’ — when large scale miners and investors have been able to set up massive mining operations with low-cost electricity. While it’s true that economies of scale exist for GPU mining (up to a point), GPU mining generally is a pretty fair landscape — there are only incremental efficiency advantages — not exponential.
Arjun Balaji and Hasu conducted analysis on fair launches — and ultimately found the issuance process to be quite fair and meritocratic. They argue that the fairness is “evaluated by the market on two dimensions: a lengthy issuance — so the market can discover a fair price for each token — and price equality, so no one can buy a token below this fair market price. Grin’s launch excels in both dimension.”
Overall, Grin’s fair launch structure is a promising start for the protocol. It was done in a fair and transparent manner, which is all one can ask for. The cryptocurrency industry is vastly different from 2014 or 2009, and the amount of capital and interest is orders of magnitude larger. Any new launch is known, analyzed, and scrutinized carefully. Though the protocol is only a few weeks old, the fair launch is a key focal point that has attracted many developers and contributors to the project.
There are no current or future plans to create an official Grin Foundation or legal entity. This is intentional — foundations for other projects like Bitcoin, Ethereum, and Tezos have been mired in controversy over various issues. They’ve also been the focal point for regulators and forms of legal action. While Foundations can be helpful in providing direction, support, and funding, they can also develop conflicts of interest within the very community they were designed to support.
The Grin team has considered the pros and cons of an official foundation — to manage assets, offer legal support, and offer education and supporting services. At this point, the Grin developers are moving forward without a foundation, reasoning that it creates too much overhead, centralizes power and authority, and doesn’t fit well with their objectives. Additionally, the existence of a central company or foundation is a potential area of compromise for a cryptocurrency — especially one focused on privacy.
Various types of supporting infrastructure will emerge for Grin over time — it just won’t be an ‘official’, centralized entity run by a core team.
Like any open source project, Grin has many contributors, most of whom are not paid and volunteer their free time to the project.
“Everyone is free to join and participate in this process, but their voice will carry different weight depending on the respect and trust they command among the council’s current participants. You gain trust and respect by making meaningful contributions to the project, with a heavy emphasis on code contribution.” — Source
There are over 100 contributors to Grin, many community projectsemerging over the past few weeks. There are around 10–15 contributors who have a majority of commits on Github, and have consistently participated in the governance and development meetings.
The Grin Technical Council is currently composed of 8 members:
The Council’s main responsibility includes management of the Grin General Fund, as well as stewardship of the protocol through the open development and governance meetings.
One could argue the Technical Council currently represents a point of centralization — that the council represents a small group of people who have outsized influence on the protocol. However, this structure is not too dissimilar from Bitcoin in its early days, when Satoshi, and a small number of contributors later on, were responsible for a majority of the decision making for the protocol. Grin developers understand this argument, which is why protocol discussions are held in the open, and council members don’t hold formal control of power over others in the community.
To build effective software in a timely manner, it’s important to iterate quickly and have efficient decision making. This is especially important in the early days, when there are many improvements, technical upgrades, and potential bugs. As the protocol becomes more mature, it makes sense to have a more rigid protocol that’s harder to change. This is an evolution that Bitcoin has made over the last 10 years, and Grin could follow a similar path.
Moving forward, it will be important to establish traditions around how council members are added or removed, and what decisions fall under its scope. Grin is still a young a project — but these norms are important as the community grows and the number and types of stakeholders widen.
Overall, Grin has a wide and healthy base of contributors. Some participate more than others, as is the case with any open source software project. Going forward, it will be important to establish norms and expectations around the decision-making frameworks.
The anonymous founding team is a key aspect of Grin. The real life identities of both Tom Elvis Jedusor (author of the original paper), and Ignotus Peverell (largest contributor to the Grin codebase) are unknown.
A project aspiring to be a global, electronic money should have an anonymous founder or founding team. A publicly known founder would have outsized influence on the direction of the protocol, to an unhealthy degree. Even if he/she stops working on the project, their opinion will always have an unhealthy amount of sway. Any project aiming to be the base layer for digital value transfer should be as neutral as possible, and resistant to a single person’s sway or opinion.
At some point, I wouldn’t be surprised if Igno left the project in a Satoshi-like manner. This transition won’t happen for a while, because Grin is still in the bootstrapping phases with a long technical roadmap ahead. At some point in the future, there will be enough developer interest, outside support, and infrastructure in place that Grin can live well beyond any single person. It’s unlikely Grin is at that point today.
This ability for a founder to quietly exit in an uncontroversial manner is an advantage unique to very few cryptocurrencies. In the long run, this could be an important differentiating factor.
As mentioned previously, Grin launched in a fair manner, and project founders and developers don’t receive any funding directly from the protocol, or from investors.
As such, Grin relies primarily on two different means of funding.
- Individual project based fundraising — in which individual campaigns are proposed and funded by donors. Examples include Yeastplume’s funding campaigns, as well as the Security Audit Funding. The money raised goes directly into an account controlled by the person making the request. This is a similar model to Monero’s Forum Funding System, where anyone in the community can propose a project and request funding.
- General Funding for Grin’s Development — Grin has a General Fundthat’s always open for donations, and goes towards a miscellaneous set of costs related to Grin development, including service fees, marketing materials, travel, developer funding, or legal support.
The General Fund is managed by the Grin Technical Council, composed of eight developers. General donations go into a ‘m of n’ multisig wallet. Over time, it could be interesting to explore alternative models. There are a few options here, from the Dash treasury model, to Decred’s DAO model. MolochDao and Gnosis are also experimenting with their own unique structures.
All of these DAO-esque funding models are still in the experimental phase. Grin does not have to trailblaze on this front — if Decred, Moloch or another project can figure out a DAO-like structure for funding, it could be worth considering in the long term.
Many early ecosystem participants (miners, funds, pools) have chosen to contribute to Grin. Grinmint has chosen to donate a percentage of pool proceeds to the Grin developer team. Additionally, Obelisk has committed to donating a portion of their revenue from their Grin ASIC to supporting Grin development.
Like any open source project however, Grin is still susceptible to a tragedy of the commons, where key infrastructure and contributors go unfunded. This struck Grin recently, with Igno expressing disappointment at the lack of funding for Yeastplume’s campaign. Yeastplume is a key Grin contributor, and is responsible for some core infrastructure for the protocol. Igno’s efforts were successful — in the 24 hours following his post — donations poured in and the funding campaign was successful. While ultimately fulfilled, the campaign didn’t work until some serious efforts from the lead developer.
So why has Grin related fundraising struggled relative to alternatives like Monero’s FFS? Most Grin miners have not seen large appreciations in their holdings yet, whereas Monero donors in the last few years are generally early miners donating ‘house money’ from the 100x gains they saw. Additionally, early Monero miners were generally individuals, while many Grin miners are larger professional operations or fund managers with a fiduciary responsibility.
Going forward, it’s critical that key infrastructure and personnel are properly funded. There’s been some early struggles, it’s not too surprising given current crypto market conditions. It’s unclear what the optimal long term model is — but funding continues to be an important topic to think about.
Grin uses a Proof-of-Work system composed of two algorithms:
- Cuckatoo Cycle (C-31+): A variation of Cuckoo Cycle designed to be ASIC mined.
- Cuckaroo Cycle: (C-29): A variation of Cuckoo Cycle designed to be ASIC-resistant.
90% of the Block Reward will initially go to C-29 miners, with 10% going to C-31 miners. Over the next two years, C-31 will receive a greater proportion of the block rewards, linearly increasing 3.75% a month In effect, this means that GPUs will dominate the network early on, before fully giving way to ASICs by January 15th, 2021.
At first glance, it might seem like Grin is anti-ASICs. In reality, Grin developers have taken a much more nuanced view meant to introduce a more competitive and healthy ASIC market. There are a few underlying beliefs that lead to this unique approach.
- ASICs are inevitable. Grin developers understand that resisting ASICs is futile in the long run, something I’ve written about. More specialized hardware can always be built for any algorithm. Any attempts to generate sustained ASIC-resistance will result in secret ASICs — which are problematic.
- The only antidote against ASICs is consistent hard forks to change the algorithm, which introduces developer centralization. Developers become kingmakers — opening up the door to lobbying and backroom deals. Thus, it doesn’t make sense to create a GPU-only chain indefinitely. ASICs are great for the long term success of the protocol, because miners who’ve invested tens of millions are aligned with the protocol in terms of security.
- In the early days of a proof-of-work chain, ASIC mining is very centralized among one or two manufacturers. This can result in unfair competitive dynamics, and result in secret mining, excess control over the hash rate, and more. Thus, ASICs should be introduced over time, with everyone knowing the details of the algorithm well ahead of time. This ensures a more level playing field for manufacturers, and a more competitive ASIC environment.
Ultimately, the logic behind this approach is reasonably sound, though a bit complicated. A few years is necessary to objectively evaluate the success of this approach, as opposed to just using a simple algorithm like SHA3.
A few weeks into Grin’s lifespan, there have already been interesting developments around the mining landscape.
- The GPU hash rate has increased dramatically, sucking in hardware from other chains like Ethereum
- Production on ASICs is already underway, with Obelisk and Innosiliconannouncing their machines.
Moving forward, Grin has scheduled hard forks every 6 months — for protocol upgrades as well as potential algorithm changes for C-29. Developers have committed to keeping C-31+ constant, something essential to incentivizing manufacturers commiting long term capital to ASICs.
Grin Risk Management
Blockchain governance is most relevant in times of disaster, distress, or conflict. Bitcoin Governance demonstrated its strength during the Segwit2x hard fork. Ethereum demonstrated its governance system during the DAO event.
Grin developers have written a lot about their risk management system, and have brainstormed the specific downside scenarios, and ways to respond. It’s generally good practice to brainstorm various scenarios, and think about contingency plans and potential responses. Many of the scenarios they’ve outlined, such as the possibility of a critical bug, secret ASICs, or a 51% attack are very real scenarios that have happened to many other blockchains.
Grin is a unique project with different approaches in both its technology and project structure. Most new protocols have raised massive amounts of funding for a central company or foundation — with the idea that having a large warchest can help incentivize people to build on their protocol. Grin’s approach is different. Instead of trying to compete on the warchest and monetary dimension, Grin has a completely open approach where anyone can contribute and influence the protocol’s direction, depending on how much work they put in.
When analyzing Grin’s incentive structure, I’m reminded of Ray Dillinger’s excellent piece on the early days of Bitcoin, in which he describes the unique setup of Bitcoin compared to its more recent competitors.
The standard of behavior that installs no toll booths and no Trusted roles — leaving the creator with the same opportunity to mine coins as anyone else — is seldom seen among altcoin creators. The standard of behavior set by Satoshi — not even taking any personal wealth from his creation — has not appeared again as far as I know.
To be clear, there’s pros and cons to Grin’s approach. The lack of formal structure means that funding for Grin must come from donations — a less reliable source in the current crypto markets. On the other hand, Grin has been able to bootstrap a large set of users, miners, and developers in a very short timeframe.
Time will tell what approach is optimal in the long run, but both approaches are worth paying attention to. Grin makes the bet that altruistic, mission-driven contributors are the most valuable asset for an open source project , and that targeting them is the top priority, rather than amassing a large warchest for a central foundation. This dynamic is worth paying attention to- it’s quite possible that the combination of fair launch, anonymous team, and lack of formal structure ends up enabling a sustainable, long term approach that goes beyond any one developer or group of developers.
Disclosure: Blockchain Capital has potential exposure to future Grin assets.
Thanks to Spencer Bogart and Nic Carter for feedback.
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About the author: Derek is on the research and investment team at Blockchain Capital, an early stage venture firm based in San Francisco, CA.