Is Grin Bitcoin 2.0? $100 million has entered the Grin mining market

Grin, a new privacy-oriented cryptocurrency that has long attracted the interest of cypherpunks, is getting another group of people to mine it when it launches on Tuesday: investment firms.

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“We’ve been watching drama today. This may be the most expensive genesis block in history,” said Dovey Wan, founder of Primitive Ventures.

CoinDesk contacted several investors who were also closely watching yesterday’s launch of the privacy-focused cryptocurrency, which was developed using a technology called Mimblewimble.

Eric Meltzer, Wan’s partner at Primitive, wrote about Grin’s launch:

“We conservatively estimate that $100 million of (mostly venture capital) invested in special purpose vehicles went into Grin mining for profit. This is strange in many ways: it turns a group of people who would have been buyers of Grin into sellers, it changes the composition of the early holder list, and it means that the chain will launch with extremely high security through extremely high PoW hashrate.”

Chris Dannen of mining-focused Iterative Capital expressed similar interest.

Dannen told CoinDesk in an email (Beam is another network):

“Interestingly, we know that many GPU farms in China have invested in both Grin and Beam networks.” Dannen confirmed that Iterative is engaged in Grin mining.

Why is there a demand for Grin?

“Grin is the closest thing to Bitcoin,” said a partner at a cryptocurrency investment firm who asked not to be named. “In the minds of a lot of investors, Grin is kind of like ‘Bitcoin 2.0.’”

The investor said “a perfect storm” is fueling demand for Grin. For starters, it’s a technology that has many early adopters excited, and there’s also excess GPU and data center capacity, with miners eager to direct their hashing power toward the Grin network.

However, the investor highlighted potential downsides, noting that Grin is designed to cause high inflation in the first few years on the network.

Despite investing in the Grin ecosystem, Primitive Ventures told CoinDesk it is not mining Grin. Wan said Grin’s economics don’t look good yet.

Mining entrepreneur Josh Metnick similarly said, “I think Grin is overmined.”

Metnick’s company, Random Crypto, is investing heavily in mining PoW coins, with the theory being that the bear market is the right time to get in. That being said, he has also made it a personal mission to increase transparency in assessing mining profitability, releasing a new mining rewards calculator to the public late last year.

Still, there is a lot of interest in the Grin platform. Blockchain services startup BlockCypher, which has been a supporter of a Mimblewimble implementation for some time, confirmed this to CoinDesk.

“There is a lot of investor interest in Grin,” CEO Catheryne Nicholson wrote in an email.

Several large funds are buying hashrate ahead of Grin’s launch, people familiar with the matter told CoinDesk. But they may be disappointed — while Wan is excited about the huge interest in a protocol, she doesn’t think early Grin mining is a smart move.

She wrote:

“Grin mining will not be profitable, especially early on.”