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Despite being launched to considerable fanfare in early 2019, grin, the first cryptocurrency to test the MimbleWimble privacy protocol, shows no signs of life.
At its launch, professional investors invested funds – by some estimates, $ 100 million – in mining the cryptocurrency, with some even calling it a kind of “Bitcoin 2.0”.
Privacy without sacrificing scalability is MimbleWimble’s main advantage, according to the developers at grin. The first grin coins were also issued via a so-called “fair toss” whereby, similar to bitcoin, all coins are minted by miners instead of being generated before the network is activated.
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“Grin was probably the busiest venture capital business of 2019,” said Ryan Gentry, chief analyst at Multicoin Capital.
Data on the chain suggests that once anxious investors have soured on the young cryptocurrency. Grin’s hash power, a measure of computing resources dedicated to protecting the network, and mining difficulty, which measures the amount of power required for mining, began to collapse in August 2019. After nine consecutive months of decline, the trend shows no signs of reversal.
Grin’s planned hard forks, or system-wide upgrades, could also be responsible for its declining network activity. Every six months, the network runs these updates that change grin’s mining algorithm to dissuade expensive specialized mining equipment from dominating its hash power.
After the first fork, the hashrate and grin difficulty went up, but the second fork coincided with the steepest hashrate drop in the network’s short history. Grin is gearing up for yet another drop in hashrate after an upcoming third fork scheduled for July.
See also: Monero’s “Fluffypony” resigns as chief maintainer of the Privacy Coin project
Grin’s transaction count, a metric that could easily be manipulated to mask declining use of the network, has also declined about 20% year to date, according to Coin Metrics. This minor decline follows a decrease of more than 70% in daily transactions through February and March 2019.
Grin’s developers say the cryptocurrency is not designed to satisfy short-term speculative investors.
“Cryptocurrency is primarily a game of speculation,” said grin developer John Tromp. “Grin is hurt in the short term because he is hostile to speculation.”
Privacy issues
In addition to the grin problems, San Francisco-based Dragonfly Capital published research six months ago describing an “attack” that could reveal the identity of 96% of active grin users.
To date, the grin team has not fixed the vulnerability.
Ivan Bogatyy, who wrote the report, said grin’s core developers are “among the strongest engineers in space.” However, they have “faced a very difficult cold start problem with incumbents” such as monero (XMR) and zcash (ZEC) due to the lack of grin of “a robust privacy mechanism” to challenge major privacy cryptocurrencies.
According to the people behind grin, Bogatyy’s report contains “many logical leaps” and the exploit of anonymity is a known and “well documented” problem.
Traders are not smiling
The traders also seemed to have lost interest in smiling. Since last June, the price of the privacy currency, quoted in dollars and bitcoins, has only fallen.
When it first launched, for example, the New York-based crypto fund Iterative Capital briefly advocated grin on its over-the-counter trading desk and considered mining. But it didn’t take long for the company to lose interest.
“The purchase demand was so low and the technology was in such an incipient form that we quickly stopped worrying,” said Chris Dannen, founder and managing partner of Iterative Capital.
Grin was launched during an “altcoin bear market,” grin developer David Burkett said. The fact that the price has “so far only moved down” is a “movement very similar to many coins being launched at the same time”.
Every new cryptocurrency struggles to gain adoption early on. But for the privacy currency that promised to be the next big thing, replacing speculators with real users proved to be an uphill battle.
