Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche


Is the Golem (GLM) Network making money from Computing Power?

The Golem (GLM) Network is a blockchain designed to monetize computer power by enabling users to sell or lease idle computer space. In other words, to allow ordinary people to host applications, databases, projects, and networks on their computers.

The hope is that individuals and organizations that need more computer power will rent that computing power on Golem’s blockchain with the Golem (GLM) ERC-20 (Ethereum request for comment) token. The GLM replaced Golem’s earlier token, the GNT in 2020.

They claim Golem’s platform can support machine learning, data analytics, video transcoding, CAD (computer assisted design) simulators, chemistry simulations, image rendering, and video rendering, among other uses. For example, a chemist could use Golem to simulate formulas before she tests them in the laboratory. Similarly, a company could build a machine learning solution on Golem.

Golem switched to ERC-20 to access the popular Ethereum blockchain. Notably, ERC-20 is the most popular standard for utility tokens. Investopedia estimates there were around 442,647 ERC-20 tokens in existence in August 2021.

How Much Money could Golem Make?

I think Golem (GLM) is trying to build a decentralized alternative to centralized commercial web hosting providers such as Amazon Web Services (AWS).

Web hosting is a growing business. Statista estimates global web hosting revenues will grow from $70.22 billion in 2021 to $81.54 billion in 2022, and $93.99 billion in 2023. Global web hosting revenues could grow to $108 billion in 2024, $123.30 billion in 2025, and $140.30 billion in 2026.

Hence, global web hosting revenues could almost double over the next five years if Statisa’s forecast is reliable. Furthermore, Statista estimates global web hosting revenues grew by 18.7% in 2021 and could grow by 16.1% in 2022.

Web Hosting is Growing Fast

In contrast, Firstsiteguide forecasts the total global web hosting market size could grow from $56.7 billion in 2019 to $171.40 billion in 2027. Similarly, quarterly revenue for Amazon Web Services (AWS) grew from $6.679 billion in the third quarter of 2018 to $16.22 billion in  the third quarter of 2021, Statista estimates.

Plus, average global web hosting spending per employee could rise from $20.45 in 2021 to $23.56 in 2022, $26.95 in 2023, $30.74 in 2024, $34.81 in 2025, and $39.37 in 2026, Statista forecasts. Hence, I calculate average web hosting spend per employee could grow by $18.92 in the next five years.

Thus, web and cloud hosting is one of the fastest growing industries in the world. Hence, Golem (GLM) serves a growing market.

What is the Golem Network?

The Golem Network (GLM) is a protocol that builds a flexible open-source data storage and hosting platform on the blockchain.

They claim Golem’s network is open-access and censorship-resistant. In addition, they call Golem a flexible open-source platform that provides democratized access to digital resources. Golem powers the platform by offering a lightweight protocol that offers anonymous access to the platform.

In addition, they claim Golem could offer fast and cheap micro-payments with the Golem (GLM) token on Ethereum’s Layer 2. Layer 2 is an additional layer they add to the Ethereum Layer 1 blockchain.

Can Golem Scale with Ethereum Layer 2?

Layer 2 makes Ethereum scalable by sharding. In Sharding, they split a database to spread its contents over many nodes. Ethereum Layer 2 creates shards by creating new small blockchains or sidechains known as shards.

Theoretically, scaling through sharding could increase Golem’s capacity to support an enormous payment platform. If true, Ethereum Layer 2 solves the blockchain scalability problem. To explain, all the encryption on blockchains limits their size and speed.

Layer 2 adds size and speed to blockchains by creating shortcuts around the encryption for purposes such as payment. For example, Layer could increase the speed of Ethereum transactions. Cryptocurrency payment is notoriously slow because of all the encryption.

For example, traditional Ethereum could only process 15 transactions per second (TPS) in November 2021, Coinbase estimates. Hence, an Ethereum platform could crash or freeze up if tries to process 16 TPS.

Ethereum’s builders claim Ethereum 2.0 or Layer 2 could process up to 100,000 TPS. If that’s true, Ethereum Layer 2 could support large-scale payment solutions.

How Golem Works

Golem (GLM) needs something like Ethereum Layer 2 because its builders hope to pay thousands of people and organizations all over the world to host its network.

They claim computers with some Linux operating systems, including Ubuntu 18.04 LTS and 20.04 LTS, will support Golem. To support Golem, users need to download and install Golem’s software development kit (SDK). This will enable Golem provider on the mainnet. The provider also offers access to the Golem Testnet.

Golem users will use the GLM token to rent digital resources. Digital resource owners will receive GLM as rent payments.

What Value Does Golem (GLM) have?

Mr. Market gives Golem some value. For example, CoinMarketCap estimates Golem (GLM) was the 120th largest cryptocurrency on 14 March 2022.

CoinMarketCap gave GLM a Coin Price of 46.25₵, a Market Capitalization of $462.497 million, a $462.497 million Fully Diluted Market Cap, and a 24-Hour Market Volume of $29.948 million on 14 March 2022. They based those numbers on a Circulating Supply of one billion GLM, a Maximum Supply of one billion GLM, and a total supply of one billion GLM.

In contrast, Coinbase gave Golem a 46₵ Coin Price, a $462.70 million Market Capitalization, and a 24-Hour Market Volume of $30 million on 14 March 2022. They based those numbers on a Circulating Supply of one billion GLM. I consider Golem an unstable cryptocurrency because Coinbase gave it an all-time high of $1.25.

I think Golem (GLM) could achieve enormous value if they build a platform that can host powerful apps, such as artificial intelligence. Golem could make money by entering a $171.40 billion market. I believe Golem is a cryptocurrency speculators need to watch.