Render Token: A Possible AI Crypto Winner? (RNDR-USD)

Back in August, I shared Render Token (RNDR-USD) as one of my “Top Token Ideas” with BlockChain Reaction subscribers. At the time, RNDR was 53 cents per coin. Since then, quite a bit has happened involving RNDR and it’s now one of the best performing assets in crypto year to date; up over 400% and dwarfing the returns of Bitcoin (BTC-USD), Ethereum (ETH-USD), and the overwhelming majority of broader crypto assets:

The core thesis behind that call was Ethereum’s merge from PoW to PoS and the negative impact it would have on ETH miners by eliminating the return on GPU machines from Ethereum’s block reward. The thinking at the time was GPU machines could instead be used for some of the HPC services that Web3 and metaverse projects would need to truly be decentralized:

While I think most of these rigs are going to ultimately have to shift to non-crypto related businesses, there is an interesting case to be made for displaced Ethereum miners to attempt to continue contributing to crypto/Web 3 initiatives. One possible winner from the availability of GPU machines is the Render Network.

How The Render Network Works

The Render network aims to be a decentralized system of computers that provide mercenary-like high-performance computing services for entities that need rendering power that can’t be handled primarily by local systems. People who have idle GPUs that they’d like to monetize can submit for cloud computing jobs through protocols like Render Network. Another example of a protocol that benefits from distributed compute services would be Livepeer (LPT-USD).

But while Livepeer’s offering seems to be more suited for typical video streaming, 3D rendering for things like video games, movies, and virtual reality need far more robust computing systems than simple video transcoding. Render Network is a potential player in that market and is an important part of what cloud computing developer OTOY is trying to build. From Render’s 2017 white paper:

When founder and CEO Jules Urbach started OTOY eight years ago, the only way to perform a complex render job for massive projects such as Avatar or Transformers was at an expensive visual effects studio. Rendering took massive amounts of time, money, and storage space, none of which the average game developer, student, or designer could have access to.

Through its product offerings, OTOY is trying to boost the rendering capability of individual creators without the need for expensive rendering hardware. This is something that could be very appealing to filmmakers and graphic artists. In my opinion, the OTOY board is impressive and includes film industry heavyweights Ari Emanuel and J.J. Abrams. Also on the board are 3D NFT artist Beeple and Brave (BAT-USD) founder Brendan Eich.

RNDR Tokenomics and Distribution

From a functionality standpoint, RNDR is both a governance token and a utility token that is used within the Render system for payments between GPU job posters and GPU job accepters.

The protocol utilizes the blockchain to calculate the cost of the GPU job based on the intensity of the proposal and locks RNDR in escrow until the GPU job is finished. This is referred to as a “proof of render system.”

• Max Token Supply: 537 million
• Circulating Supply: 364 million (68%)
• Token Price: $2.12
• Market capitalization: $772 million
• Fully diluted cap: $1.1 billion
• Market Cap Rank: 59

According to CoinMarketCap, there is a max token supply of 537 coins, of which 68% are circulating. While there could be a certain element of inflationary pressure on the surface, the community passed RNP-001 in January. That vote approved a “burn-and-mint equilibrium,” or BME model, that will potentially result in deflationary pressure down the line.

What is Driving RNDR’s Price Action?

RNDR is likely benefitting from a handful of factors that are all happening in tandem. First, RNDR transactions have drastically risen over the last several months:

The number of daily transactions averaged 805 in April, that’s up 21% from March and over 400% year over year. This surge in both transactions and price has led to a 40% year to date increase in non-zero wallet addresses from 21k to over 28k according to on-chain data from IntoTheBlock:

While I believe most of that action is more hype-driven than anything else, there is genuine usage growth within the Render Network ecosystem. According to the RNDR Team Medium blog, the total frames rendered through the platform grew 58% in 2022 from 5.9 million to 9.4 million. Sequentially, frame growth continued in Q1 2023 and RNDR tokens used in the protocol grew modestly over Q4 thanks to a big uptick in usage during March:

But beyond these small usage improvements, sentiment online has been noticeably different this year with daily Twitter mentions going from nearly nothing in 2022 to several hundred per day in late January.

Some days RNDR is generating thousands of mentions on social media. In addition to my original thinking that RNDR was a solid bet on distributed Web3 technology, RNDR has also found a bit of a narrative wave as an artificial intelligence coin. You can’t miss the AI hype on Twitter these days with new AI usage threads going viral seemingly every few hours. Hype aside, there is some validity to the idea that RNDR could be used in AI graphic generation. Render now offers a feature called “Stable Diffusion” that allows users to create AI images through simple text prompt in the Render ecosystem:

This expansion to include Stable Diffusion’s easy prompt creation suite natively into the Render Network creator portal is the first of many future-facing steps into the AI space in the years to come.

The reality is AI generated images and videos require rendering and as a cloud-based compute protocol, Render Network is an ecosystem that could benefit from a larger movement to AI-generated content. Thus, RNDR has been catching a bid over the last several weeks.

Risks

I think the most obvious risk with RNDR is that it is being driven more by hype than by fundamentals at this point. That’s a valid concern if your time horizon is shorter. If you have a longer time horizon, RNDR might still be interesting at $2 as it is still 76% off its all time high of over $8 per coin back in November of 2021. Beyond the hype, the next biggest risk is Render Network had an ICO and raised roughly $50 million from various funding rounds. 65% of those funds are allocated toward growth phases and development:

The most recent round included investment from Alameda and the Solana (SOL-USD) Foundation. Interestingly, the Render Network community voted in favor of using the Solana blockchain rather than Polygon (MATIC-USD) during a recent improvement vote. One final risk to note, since Render did have an ICO, there is a significant risk of regulatory pressure as RNDR could be argued to be an unregistered security by the Securities and Exchange Commission.

Summary

Render Network is one of the most intriguing protocols in the crypto industry and by extension the RNDR token is also a very interesting. There is a clear utility that gives the token value and demand growth for the products that Render Network users are providing could dramatically increase if any number of outcomes play out.

RNDR theoretically benefits from adoption of a decentralized metaverse. RNDR also benefits from adoption of AI image and video creation. I lean the latter is actually more likely than a widely adopted VR metaverse at this point but in either case HPC is necessary. RNDR is a speculative coin but it’s one of my favorite plays in the crypto market at this point. While it hasn’t played out exactly how I saw it going last August, it’s still a coin that I plan to hold for a long time.