The Graphcoin project recently had the opportunity to list its cryptocurrency with a new exchange — CoinExchange.IO. Listing on a second exchange would provide a much-needed backup solution for those who needed liquidity while our listing at Crypto-Bridge was having technical or support issues. Customer support problems are increasingly more common as they attempt to scale their operations.
A second exchange listing would also provide new arbitrage opportunities for those interested in trading the currency. Spreading the available coin supply across two fronts allows for better price action and mitigation of large buy or sell walls. We had the exchange listing on our roadmap so it was natural we’d execute this next step in our path to rapid currency adoption.
After CoinExchange.IO’s respectful and thorough due diligence process with their knowledgable staff, they were gracious enough to extend an offer to list Graphcoin. Graphcoin, being a young project with limited resources, was able to include its own currency GRPH as a supplement to the BTC listing fee. The supplement was not a small number of coins — 20,000 GRPH to be exact.
Do we pull the 20,000 GRPH from our pre-mine, close the deal and move quickly on this opportunity?
First, some considerations –
- Pulling 20,000 GRPH from our pre-mine reduces our overall foundation budget for meaningful projects to be funded in the near future.
- By using more of our pre-mine, we are essentially “printing” new money, increasing the overall circulating supply and in effect setting off an inflationary event.
- Giving 20,000 GRPH to a single entity causes additional supply concentration in our network. We always seek fair, even distribution as we scale.
- By handing over 20,000 new GRPH, we increase the masternode count by 4 new masternodes, which in effect reduces the profitability for all existing masternodes by 4% (MN count was 100 at the time). And the compounding effect of the 4 new nodes further reduces profitability at an accelerating rate. By default, earnings from the new nodes stake in 30 minutes thus reducing staking profitability for those without nodes.
After careful consideration we decided to take a different approach in order to better serve our community as a whole.
We launched a community-based fundraiser.
- The foundation budget for meaningful projects remains largely intact. This allows us to fund community-submitted proposals that will drive the adoption and value of the currency.
- By not “printing” new money, we’ve effectively maintained organic growth of our circulating supply. This allows our original network parameters for the block reward to naturally inflate the currency at the predictable, long-term pace prescribed at the genesis block.
- Our overall masternode count may go up incrementally, but the coins are from existing supply which you can deduce will prevent other nodes from springing up from the community hoarding their coins. The 4 new nodes would come into the network as they normally would have if the community either put their coins in a shared masternode program or created one themselves.
- We further mitigate the expected coin dump that ensued after we performed a coin swap and re-opened exchange deposits.
- MOST IMPORTANTLY — we’ve proven the Graphcoin community can come together to accomplish a significant task without the need for a central governing authority to step in and pay.
The value of a cryptocurrency should be determined by the capability of its participants to work together to solve real-world problems. Think GDP but community-based. GCP.
- By running a fundraiser, we delayed our second exchange listing by 2 weeks.
- The fundraiser came with opportunity costs. Community members were required to invest their time and energy into the fundraiser and not other meaningful projects.
- Further concentration in coin ownership resulted from a large community all pooling their resources together to give their coins to one single coin holder.
- We unfortunately pissed off a few community leaders who decided to part ways with the Graphcoin project due to how we decided to fund the exchange listing.
Indications things are working well
When you look back at how our network persisted and continued to scale through a PoS attack and a coin swap, you’ll see the signs of a healthy currency.
The number of new masternodes joining the network is increasing at a steady pace suggesting long-term viability for our masternode owner’s investment. We carefully designed the block reward schedule to allow for a slow, steady masternode increase by splitting the block rewards evenly between stakers and MN holders for the first 100,000 blocks. Healthy growth can be seen through the PoS attack and subsequent coin swap in the chart below.
Because our block times were dramatically lower, sub-20 seconds vs 60 seconds by design, we had to quickly spool up over 20 foundation-run masternodes to prevent hyper-inflation of the currency. Once our core development team successfully executed the coin swap, we destroyed the foundation masternodes to allow the network to resume natural growth. We burned all the foundation masternode earnings incurred during this phase.
An important factor when considering if something is a good currency is if it works as a medium of exchange. A medium of exchange must have a relatively stable, widely-known value associated with it. Imagine paying for a nice dinner with a bitcoin in 2013, and then using a Bitcoin to buy a car in 2017. The price volatility of Bitcoin does not make it a good medium of exchange. The stability of the U.S. dollar helps its case for being a good medium of exchange.
Since the Graphcoin swap, the price of GRPH has been extremely stable for such a young, small cryptocurrency. Stability typically comes when larger volumes of users and money come into the network.
In the torrential dark, stormy waters of the crypto ocean, Bitcoin is the cruise ship and Graphcoin is the inflatable raft. # of participants+volume = stability.
The stable price between $0.15–0.20 USD is a sign the network is without manipulation and profit-driven motives. Granted trading volumes are not robust enough to tell the full story, it’ll be interesting to see how the value of Graphcoin progresses as our network continues to grow.
Having observed steady masternode growth from new investors, price stability and a continuously engaged community, it’s obvious Graphcoin is headed in the right direction with integrity, trust and confidence.