Understanding Grin mining benefits and early investment strategies in one article

With the release of the mainnet of the popular anonymous coin Grin, whether to mine Grin or whether to buy this new currency has become a hot topic of discussion in the community.

Grin is a project that features privacy and portability. It is the first application of the privacy protocol MimbleWimble. It uses the PoW consensus mechanism, has no ICO, no pre-mining, no founder rewards, and emphasizes complete fairness. As an open source project, the main creators of the Grin team are anonymous and only rely on donations as a source of funds. Its development and operation are carried out by the community, and it is highly decentralized, which has become Grin's most praised feature.

In addition, Grin's monetary policy adopts a rare mode of unlimited supply and linear release, and the inflation rate decays year by year to infinitely close to zero. This rare monetary supply policy also makes the value analysis of the project difficult, because many cryptocurrency investors criticize this design for causing the project's early inflation rate to be extremely high.

Before the launch of the Grin mainnet, TokenInsight, a global token data and rating agency, published an in-depth report on the mining revenue and early investment strategy of the Grin project, and authorized ChainNews to publish it exclusively.

The TokenInsight research team made detailed calculations on the costs and revenues of Grin mining under different algorithms and scenarios, and boldly adopted a model to predict the mining difficulty and price trend of Grin after the mainnet launch of BEAM, another cryptocurrency project that also uses the Mimblewimble protocol, by observing the changes in price and computing power difficulty after the mainnet launch. This is quite innovative.

First, let me present the core conclusions.

By measuring the mining costs and revenues under different algorithms and scenarios, the TokenInsight research team believes that:

• For the Grin project, it is almost impossible to make a profit if you buy a new mining machine for mining;

• In Grin mining, NVIDA cards have advantages over AMD cards in terms of computing power and power consumption;

• After the Grin mainnet is launched, the ar_scale value controls the revenue of the C29 and C31 algorithms. Miners need to choose the algorithm with the highest revenue based on the current ar_scale value and their graphics card type.

• Assuming that the electricity fee is 0.4 yuan/kWh, we calculate the mining income and cost of GTX1080Ti under the C29 and C31+ algorithms respectively. It can be seen that when the Grin coin price-to-difficulty ratio (in M) is greater than 4.2 thousandths, mining Grin can at least earn back the electricity fee.

For readers who are more concerned about the Grin project, TokenInsight provides corresponding investment strategies for different groups:

• For those who are optimistic about Grin in the long term:

You can ignore the secondary market price and gradually build up your position.

• For individual investors who do not have mining equipment and just want to hold a small amount for a short period of time:

Avoid rushing into the market; wait until the price stabilizes and falls before trading on the exchange.

• For institutional investors who do not have mining equipment but just want to hold a large amount for a long time:

You can pay attention to the price/cost indicator to avoid being accidentally hurt by miners' selling and smashing the market, and gradually build positions when the price/cost indicator is in the range of 0.5-2.

• For GPU miners who are optimistic about Grin in the long term:

If you are optimistic about the project in the long term, you can sell the mined Grin at the initial high, pay attention to the price/cost indicator, and cover your position in time when your own mining cost is lower than the exchange price.

Next, let Lianwen help readers understand TokenInsight’s research on Grin mining revenue and early investment strategies:

Starting from the basics: How does Grin mining work?

If you want to understand Grin's mining strategy, you must start by understanding the mining principles of this project.

In order to balance the relationship between CPU/GPU mining and ASIC mining, Grin created Cuckoo Cycle, an algorithm system that is compatible with both mining modes, including the GPU-friendly C29 algorithm and the ASIC-friendly C31.

The Grin team hopes to control the ratio of blocks produced by the two algorithms so that miners using different equipment can get similar returns. The purpose of doing so is to prevent the project from being monopolized by mining tyrants in the early stages of the project, while providing a controllable entry channel for the inevitable emergence of ASIC mining machines in the long term.

Grin attempts to solve the problem of high computing power and decentralization of computing power that endangers blockchain security through this dual algorithm solution. This is highly consistent with the "harmonious mining" concept proposed by Zcash in the Bloom stage. At the same time, the Grin team plans to hard fork and upgrade the algorithm every 6 months, and change the block ratio of the two algorithms based on the distribution of computing power.

• PoW Algorithm: Cuckoo Cycle

Grin uses a PoW algorithm called Cuckoo Cycle, which is an ASIC-resistant algorithm. Compared with the SHA256 algorithm used by Bitcoin, its calculation process requires higher memory bandwidth than the operation frequency.

In the future, by upgrading the algorithm and increasing the memory requirements, we will gradually change from anti-ASIC to ASIC-oriented. Compared with CPU and GPU, ASIC is easier to obtain larger memory through customization.

• Dual PoW Algorithm

Grin will use two Cuckoo Cycle-based algorithms: CuckARoo for GPUs and CuckAToo for ASICs. Among them, the combination of C29+C31 will be used when the mainnet is launched. The C29 algorithm requires 6GB+ of memory, and the C31 algorithm requires 11GB+ of memory.

In the initial stage of going online, the block ratio will be set to 90% of the blocks mined by the GPU-oriented C29 algorithm and 10% of the blocks mined by the ASIC-oriented C31 algorithm. According to the current plan, it will be gradually adjusted to 0% for GPU and 100% for ASIC within 2 years.

Cuckaroo29 is adjusted every 6 months to maintain GPU-oriented mining. Cuckatoo31+ is a long-term supported PoW algorithm that adjusts memory parameters every 2^k years, gradually increasing memory requirements. This will cause most consumer-grade GPUs to be unable to meet the requirements, and thus switch to ASIC machine computing.

How to choose Grin mining equipment?

• You can choose NVIDIA graphics card with 6GB+ video memory

Currently, there are two mining software available: Grin Miner and GrinGoldMiner. Grin Miner supports Linux and MacOS systems, supports CPU mining, and NVIDIA and AMD GPUs require the installation of CUDA or OpenCL plug-ins. GrinGoldMiner only supports Window operating systems and supports NVIDIA and AMD GPUs.

In the absence of ASIC mining machines, the calculation of the C31 algorithm requires a GPU with at least 11G video memory. Too much video memory does not help much in improving efficiency. The latest Turing architecture graphics cards have a greater impact on sales.

Grin Miner supports two mining modes: Mean and Lean. Mean has high memory requirements and will run at maximum speed, while Lean can run on machines with relatively low memory through multiple operations, but the speed will be greatly affected.

• GPU Mining

CUCKAROO

Both NVIDIA and AMD GPUs can be used for mining, requiring at least 5.5GB of video memory, and 6GB of video memory is recommended. Different plugins need to be configured in Grin Miner.

CUCKATOO

Mean mode: Use a GPU with 11GB+ video memory, support Pascal and Turing GPU architectures, with representative models being 1080TI and 2080TI respectively. For Pascal architecture graphics cards, use the cuckatoo_mean_cuda_gtx_31 plugin, and for Turing architecture graphics cards, use the cuckatoo_mean_cuda_rtx_31 plugin. During the mining process, due to the shortage of video memory, all other tasks of the graphics card need to be turned off. The project owner recommends disabling the use of this graphics card to drive the display.

Lean mode: Although both NVIDIA and AMD can mine using OpenCL in this mode, and the memory requirements are small, the speed is very slow and it is not recommended.

• CPU Mining

Both CUCKAROO C29 and CUCKATOO C31 can use CPU for mining. There are two plugins, Lean and Mean, which can be configured in grin-miner. The Lean plugin can use a smaller memory for calculation, while the Mean plugin requires at least 4G of available memory to obtain the fastest possible computing speed.

How to choose an algorithm: C29 or C31?

The revenue of the two algorithms is determined by the mining equipment’s GPS31 hashrate, GPS29 hashrate, and mainnet ar_scale.

C31 mining income = (GPS31 / 42) * weight(31) / difficulty

C29 mining income = (GPS29 / 42) * ar_scale / difficulty

weight(31) = 31 * 2^8 = 7936

The ar_scale parameter is adjusted every block based on the block production ratio of the two algorithms in the past 60 blocks. Through the adjustment of ar_scale, the block production ratio of the two algorithms reaches the target value. The setting when the main network is launched is: C31 accounts for 10%, C29 accounts for 90%.

Users can calculate according to the current network ar_scale and the GPS31/GPS29 value of their own device and select the appropriate algorithm. The calculation method is as follows:

ar_scale/weight(31) < GPS31/GPS29

When the right side of the formula is greater than the left side, the C31 algorithm has a higher yield, otherwise the C29 algorithm is more suitable.

The following table lists the GPU models that have higher benefits when choosing C31 algorithm than C29 when ar_scale is 700, 1000, and 1200 respectively.

What will the revenue be like if the C29 algorithm is adopted?

The TokenInsight team took the Cukaroo29 algorithm (referred to as C29) and Cukatoo31+ (referred to as C31) as examples. When miners hold a GTX1080Ti graphics card, the graphs provided under the two algorithms are similar to the hash rate in BTC, which is 4.08 and 0.522, and the power is about 220W.

When the C29 algorithm is used, according to the data on January 11, ar_scale fluctuates within the range of 1000, and ar_scale values ​​of 700, 1000, and 1200 are taken for measurement.

According to the above formula, we can get the 1Graph/s hourly profit curve of C31 algorithm and C29 algorithm at different difficulty levels:

What will the revenue be like if the C31 algorithm is adopted?

You can see the income calculation using the C31 algorithm through the chart:

What is the cost?

The TokenInsight research team calculated the estimated cost of using different algorithms.

Among them, if the C29 algorithm is used, assuming that the graphics card used is GTX1080Ti, and its electricity cost is 0.4 yuan/kWh, the electricity cost consumption for each Grin mined at different difficulties can be obtained as shown in the figure:

If the C31 algorithm is used, assuming that the graphics card used is GTX1080Ti and the electricity cost is 0.4 yuan/kWh, the electricity cost consumption for each Grin mined by the C31+ algorithm at different difficulties can be obtained as shown in the figure:

Where is the balance point between cost and revenue?

According to the above analysis, when the electricity fee is 0.4 yuan/kWh, the mining income and cost of GTX1080Ti under C29 and C31+ algorithms respectively, the TokenInsight research team came to the following conclusions:

When the Grin price-to-difficulty ratio (in M) is greater than 4.2 per thousand, the mining income and electricity costs are balanced, and mining Grin can at least earn back the electricity costs.

Prediction: Where will Grin’s price and difficulty go?

Everyone wants to predict how the mining difficulty and price of Grin will change after the mainnet is launched. TokenInsight used a bold model to find indicators that can be used as a reference by observing the changes in price and computing difficulty of another cryptocurrency project BEAM, which also uses the Mimblewimble protocol, after the mainnet is launched.

The following is the difficulty increase rate and exchange price performance of BEAM compiled by the TokenInsight team:

Through analysis, the TokenInsight research team believes that:

After Grin goes online, its price may rise first and then return to a reasonable level. The difficulty will remain at a stable level after a rapid increase.

The TokenInsight research team pointed out that the Grin block reward is about 60 per block per minute, while the BEAM block reward is 100 per block per minute, of which 20 belong to the team. The initial circulation of BEAM is 1.67 times that of Grin.

Inferring Grin’s relevant information from BEAM’s price, difficulty, and price/cost patterns over time:

Regarding difficulty: At the beginning, Grin will have a large influx of computing power like BEAM after the mainnet is launched. The difficulty will increase significantly on the day of launch, and after a certain period of time, the difficulty will gradually stabilize.

Regarding price: In the current bear market environment, it will be difficult for digital currency to maintain a high price. The initial circulating supply is small and it is a seller's market. As supply and demand gradually balance in the later stage, it is expected that the Grin project will return to rationality after maintaining a high price for a period of time.

Regarding mining costs: As the difficulty of Grin increases, the cost of Grin mining will also increase. When the mining difficulty stabilizes, the cost of Grin mining will also stabilize.

Regarding the price/cost rule: In the early stage of the PoW project, the main sellers in the market were miners, so Grin price/Grin cost is a very important indicator. We can see that the price/cost of BEAM has dropped from 200 at the beginning to 0.7. It is expected that Grin will also have the same situation as BEAM, and the price/cost will return to a reasonable level.

What is the Grin mining economics strategy?

In response to the above analyses, the TokenInsight research team gave answers to several of the most concerned questions.

• When should I start mining with the GPU mining machines I already have, and when should I sell them?

Referring to the performance of BEAM, Grin's difficulty was relatively small on the first day of the mainnet launch, and the price was relatively high in the early stage. It is relatively a better choice to start mining immediately on the first day of launch and sell in time. It is recommended that miners always check their theoretical income and electricity costs, calculate the mining cost and compare it with the exchange price in real time.

• Do I need to rent a cloud GPU for mining?

Lease a GPU for one week: It is not recommended to rent cloud GPU products with a minimum lease period of more than 1 week. With the influx of GPU computing power and the increase in difficulty, Grin will most likely become unprofitable like BEAM in a shorter period of time.

One-hour GPU rental: Based on the rental price of 5 yuan/hour for a GTX1080Ti11G graphics card, and referring to the difficulty and price performance of BEAM, within one hour of the mainnet launch, its rental fee and income can only be just balanced. If the difficulty and price trend of Grin's launch are close to BEAM, renting a GPU by the hour is a good choice if there is no GPU mining machine or CPU.

• Should I buy a computer/mining machine for mining?

It is not recommended to purchase a computer host for mining.

Because computers have a large number of components that do not generate computing power, they are not superior to professional mining hosts in terms of computing power generated per unit hardware cost, nor are they superior in terms of power consumption per unit computing power. So is it recommended to buy GPU mining machines for mining?

It is not recommended to purchase GPU mining machines for mining.

Although GPU mining machines have great advantages in mining efficiency and hardware costs, it is almost impossible to make a profit. The logic is as follows: There are currently a large number of graphics card mining machines in the market. If you want to make a profit by purchasing GPU mining machines, you need to compete with these existing mining machines in the market for mining income. If the price/cost of Grin is too high, it will lead to an influx of computing power from other miners, increasing the difficulty and causing the mining cost of Grin to rise, and even a situation like BEAM's price/cost ≈ 1 will occur. In this case, miners can't even make a profit, and it is even a problem whether the coins mined can cover the electricity cost.

Summary: Grin Investment Strategy

• For those who are optimistic about Grin in the long term:

You can ignore the secondary market price and gradually build up your position.

• For individual investors who do not have mining equipment and just want to hold a small amount for a short period of time:

Avoid rushing into the market; wait until the price stabilizes and falls before trading on the exchange.

• For institutional investors who do not have mining equipment but just want to hold a large amount for a long time:

You can pay attention to the price/cost indicator to avoid being accidentally hurt by miners' selling and smashing the market, and gradually build positions when the price/cost indicator is in the range of 0.5-2.

• For GPU miners who are optimistic about Grin in the long term:

If you are optimistic about the project in the long term, you can sell the mined Grin at the initial high, pay attention to the price/cost indicator, and cover your position in time when your own mining cost is lower than the exchange price.