Exactly.

If hashrate was really a "cost" to the network such that any reduction in this "cost" made the network more efficient in a way that fed through to value, don't you think we'd have seen that by now ? We should have skyrocketed above litecoin eons ago with such an advantage.

The reason we haven't is because that whole characterisation was extremely faulty.

Ryan characterised it as one would a business with costs of production. He said the "miners are our contractors and they're costing "us" too much". Notice the consistent use of the first person pronoun throughout those characterisations without any specific definition of who "we" is. It's a casual projection of a contracting entity from the corporate world onto a blockchain model which is completely un-instructive since they're nothing like each other. At best the analogue is philosophical. At worst, such an analogue is dangerous because if you use it you arrive at the opposite conclusion of what priorities should be ideally followed in configuring the blockchain protocol.

We are not a "coin producing factory" trying to produce coins as cheaply as possible and hashrate is not an "overhead".

To see why, lets go right back to the Satoshi mining model. Lets for a moment forget about secondary markets (where coins change hands AFTER they've been initially acquired) and focus on how the ongoing emission is bought. The Satoshi mining model is very clever because it's a trustless market. No fiat needs to change hands, no trusted "Coinbase" counterparty is needed to broker the exchange. The market is trustless with its own price discovery mechanism where mining difficulty represents the current "price" of acquisition since it responds dynamically to competing bids for the new supply. If the primary market was trusted instead of trustless then we'd be using dollars instead of hashrate but the blockchain protocol doesn't understand dollars so it has to be converted into a medium that it "recognises" and that can vary according to demand like an exchange orderbook would.

TERMINOLOGY: COST vs PRICE

Let us now also clarify two important terms that are always getting conflated: PRICE and COST are effectively the same thing. Price is simply COST/PER UNIT. So if I contract 5 people to dig a 10 metre ditch and it cost me $1000, then the price per metre of digging that ditch was $100. The price per hire was $200. I can slice it any way I want to do determine a price but it all stems from dividing the cost by the number of units I want to price. If I buy a tube of toothpaste, someone can say "how much did it cost" ? I say $3. Because the price is the cost in that case as there were no hidden extras. By comparison, the the price of acquisition at any given moment in the primary market for coin emission is given by (cost of mining/coins mined).

PRICE BY ASSOCIATION

Now Dash issues part of its supply at zero cost to the initial holder. It is distinct as a mined coin in this respect because only part of its supply is "bought" in the primary market and the rest is simply "issued". Note that it is not issued to pay for anything, it's simply a free gift to masternode holders for the most part which is why in capital flow models, a masternode can be characterised as a zero-difficulty miner. Instead of buying mining equipment, just buy a masternode and you get to mine at zero difficulty. The reward is the same - Dash for mining and Dash for running a masternode.

So the blockchain "issue price" for masternode rewards is zero. But then those rewards may be sold into secondary markets (where supply is bought form existing holders). Here the coin only has a price by association with the rest of the supply that was mined. The seller in this case paid zero for the supply so can afford to sell for any price above zero. There are 3 reasons why this is corrosive for the long term marketcap:

1. if a miner sells below price at acquisition, the miner takes the loss, not the network (because the miner had to purchase directly from the primary market and "invested" in that market to the extent of supporting the price at acquisition). On the other hand, if a masternode sells reward below price at acquisition, then the network takes the loss (as net reduction in marketcap). The masternode is still at a profit

2. a full half of the coin supply does not benefit from high difficulty. What this means that as price rises, an increasing tension is created between two halves of the coin supply where one half is at enormous profit and the other (the mined half) isn't. (This is why variable difficulty was invented in the first place. To keep profitability scaleable as price rises so the price doesn't collapse down to zero in a profit-take).

3. if we simply do a straight valuation of the primary market emission price then we have to take into account ALL the coin supply, not just half of it. So for, say the next 100 coins to be issued, roughly 50 will be mined at a cost of ~ $200 each and 50 "issued" at a cost of $0 each to the initial holder (the masternode rewards). So the evaluation comes out at $10,000 which is 50% below the projected valuation based on market price. Any realisation of that value causes loss of capital out of the chain since it manifests as pure profit for masternode holders instead of higher difficulty ("price") in the primary market which would be the case in a fully mined coin. (This is how that theoretical undervaluation slowly feeds through to real exchange prices IMO)


POINTS MADE ABOUT POS CHAINS

Some responders above seem to take the view that the blockchain's purpose is just to get the coins "out there". Who cares how they get there, what matters is the amount of hype and hand waving you do after that to pump the price. I'm afraid I most definitely do not subscribe to this point of view. These things are far more nuanced and subject (in the longer term) to fundamental capital flow characteristics than that IMO.

In particular, smart contract chains aren't comparable with the mining model because they're a service platform. That service platform hosts on-chain dapps that consum token supply as it "froths up" from the staking system. The "froth" as I tend to think of it is assigned to existing holders by the staking system and then the burning of supply by dapps completes the cycle. So work is done by the token which serves as "fuel" for the dapps.

A mined coin on the other hand is a scarcity analogue. The "work done" here is in enforcing scarcity to a measurable value (signalled by the cost of effort required to extract the next block from the chain). You can't say that because POS chains "give away tokens" then it's ok for Dash to do it. That's just lazy, un thought-through reasoning IMO. Even in a bank you don't get interest for just having a deposit there. The interest accrues from some economic activity that the deposit was invested in.

Masternodes are potentially an immensely powerful dimension to Dash because they allow us to maintain a highly competitive mining model WHILE making the coin much more useable than bitcoin. My contention is that this advantage is being wasted because we've reversed the logic of prioritising the reward ratio correctly and are therefore losing large amounts of budget that would otherwise be preserved in boosting capital gain and propelling us back to where we should be according to our feature set and market profile.

I've explained this many times. POS coins have an on-chain "sink". It's a completely different monetary model from Dash. A different basis for value. You can't compare the rewards from staking on a smart-contract chain with diverting half the mining supply to existing holders.

I also challenged the basis for Dash's current protocol as presented last year. I indicated that this basis was flawed. Miners are not net sellers, they are "brokers". Nobody even addressed this. It's a huge hole in the reasoning.

So I am only "appearing" to be negative. The issues are there and they are reflected in ranking. I'm sure there are plenty of holders with their heads not in the clouds wondering why Dash's feature advantages over LTC, XMR, BSV, DOGE etc result in no ranking advantage whatsoever. The explanation for this I've presented is consistent and reasoned. Competing explanations offered up here amount to no more than shoulder shrugging, "it's the stupid markets". I don't think that's very satisfactory.

The numbers always have their say in the end.

Sure there are pump & dumps and crapcoins popping up like mushrooms after a rainshower but the reason we've been going in the wrong direction for 3 years despite boasting features and useability performance galore is simple math.

You need to see mining as a market. Forget about the word "mining". It's a market where buyers compete for the supply, that's all. Having the protocol issue coin at $0 undermines the price of the paid for ("mined") half of that market.

Hey, you're the one with the explaining to do, not me

Last time we spoke Dash was at least holding its own against said "joke coin".

While you're probably right that mining in a "technological sense" doesn't necessarily add any value, "buying" does. And mining is simply buying in a trustless market.

I'm not anti-Dash. I'm pro-optimising its protocol so it doesn't keep losing marketcap to any random competitor that happens to mine its full supply and not give half of it away at zero-difficulty.

The core issue is we have 2 markets and we have to compete in both. Ryan's analysis was incomplete. Miners are not sellers, they are brokers. They only make TINY profits because they are BUYERS of Dash at the most commercially critical point - the new supply.

Satoshi prices are all that matter for assets that claim to be more investible than bitcoin.

This isn't 2014. Dash spends half its supply on a network resource that costs peanuts. That is not an investible proposition and the investing "institutions" will be even less impressed by your arguments than I am.

The way to sort this is to reduce the masternode reward ratio. Even masternodes will benefit from such a protocol change because the capital gain from their collateral will simply blow away any marginal reward they would have received by getting "more Dash".

That's where it's headed in ranking terms if it continuous to waste 50% of its coin supply on pure dividends. Would you expect anything else ?


It hit $1400 on a spike and then settled at a sub $100 level.

The only coins that will survive from here are the ones that can see themselves as their non-holders do. That is a challenge that goes beyond 2014 tribalism. What's needed now is reasoned argument. We are in the next wave and Dash was the first "governed" coin.

Go check the blackoin thread on bitcointalk.com from 5 years back and others like it.

All this "trend based" reasoning died there already several years ago.

Investments only have "legs" because they do useful work. They don't have legs just by holding.

One half (50%) of Dash's supply goes to the drain. That is to say it is spent on a network resource that does no work, or at least work that costs only around 2% of the Dash budget that's spent on it.

When you deposit your money in a bank you earn interest on it (or used to). But that interest did not simply accrue by virtue of your money sitting there. Somebody had to "put it to work" which is very difficult. They had to find companies actually produced goods and services that people want. Those companies had to be profitable. That profit had to be sustainable.

Only after all that evolutionary effort and growth was there any interest to be had on a bank deposit. While cryptos are synthetic assets, they still have to have a genuine economic basis for their returns. You can't simply "divert" the mining supply to large holders and pretend it's an analogue of the legacy banking system when those investments aren't doing any measurable work.

Dash masternodes are good, but the quantity of core coin emission they draw is simply ridiculous. Half of the entire supply - for what ? A node ? That barely needs to spend any money to keep the network going ? Look how Doge p*ssed all over us because of this zealotry.

It makes us un-investible even for masternode buyers. We're only investible for bitcoin buyers who want to use alts as a pump & dump proxy to get more bitcoin at the moment.

We'll never be competitive with the reward ratio crippling Dash's mining market to such an extent while monetary velocity is so low. We need to set the operating profits at near parity for miners and masternodes for a start. That will at least make us competitive again with our commercial peers (in the mining sector).

Only then can we start to promote features which will put us ahead of our peers.

Do this calculation. Compare it with Litecoin. Litecoin spends nothing on its nodes. But what monetary velocity does it get for that "nothing" expenditure ? I haven't done that calculation because you need to multiply the daily transaction count by the value of each transaction to get it and I haven't done that. Has DCG done that ? Have they produced any figures to justify spending half the entire coin supply on such a cheap resource ?

No. Of course they haven't because if they had done that the conclusion would have been that we'd have had to drastically move the slider in favour of miners to make Dash competitive again and that would not get past the MN voting system that is currently killing this coin because it would require turkeys to vote or christmas.

Masternode voting system is strangling this coin by preserving the elephant in the room at the moment and we need to find a way out of it as it has much potential if its ongoing emission isn't drained in such an unproductive way.

Be happy to oblige. Some of us have been here before.

Dash is being bought by investors who are seeking to gain more bitcoin, not to gain more Dash. It is not being used as a vehicle for "store of value" but rather as a proxy for one that does.

As our price rises, so does the tension in profitability between the two parts of the Dash coin supply. (Miners who's profitability is always adjusted by the network difficulty, and masternodes who's profitability is unrestrained in a price rise).

Once the "fever" subsides and the pumpers take their profits, fundamentals will set in again and we'll have another wave of de-ranking, especially amongst the mined coins. There is a way to prevent this which is to optimise the way the supply is "spent" so that it preserves the wealth of those who invest in it rather than pour it all into the pockets of a tiny minority of holders who do not re-invest it at all.

 • If you're interested in the long term future of Dash then engage in genuine challenges over its store-of-value mechanics

 • If you're interested in earning more bitcoin, then stay invested during this pump and get out with the whales who are using Dash to accumulate bitcoin

@Wh1teKn1ght just to elaborate for a moment.

I do not enjoy being contentious. It's definitely not any more fun that getting exhausted reading other people's posts, but someone has to point this stuff out.

Here is a question for you to reflect on.....

Why do miners only make a minority profit ? (Say, 10% if they're lucky)

 • Because they incur costs

Now ask yourself another question. What are those costs ?

 • they are the costs of acquisition of their coin

Now reflect on that last answer for a second. Cost of acquisition is otherwise known as "purchase cost". i.e. miners are buyers.

That one fact invalidates all the logic behind the current protocol configuration because it was based on limiting supply to markets on the assumption that miners are the biggest sellers. But that assumption is wrong. They do execute sales as part of their overall trade but they are not NET sellers (they are only serving as brokers for exchange market buyers). It wasn't fully thought through since only the exchange markets were considered which is only one half of their trade. The other half is the purchase of the original supply emission.

What we've done is cut off the supply to the PAYING market and instead increased the supply to the NON-PAYING market. The aggregate mathematical effect of this is simply to put a lot of unnecessary pressure on the price. Like selling half your supply at full price and the other half at zero price. This brings us full circle and squares with the fact that masternodes operate at almost 100% profit (since they incur no cost of acquisition). That profit margin is subsidised by the Dash budget (the very same "budget" that is deployed by the treasury). That's budget which Dash's competitors use to attract competition for their supply and expand the size (and thereby value) of their primary market.

Even if you argue that the loss of mining market competitivity is offset by gain in masternode demand, that only applies up to a point which is defined by the equilibrium nodecount at which there's no net masternode growth. Even at that there's also a point of diminishing returns in the reward ratio beyond which it does more damage than good (to masternode interests as well). A suggested approach to determining that optimal point in the reward ratio analytically is discussed here.

This needs to get sorted for Dash to even be able to compete with fully mined counterparts but before it can get sorted, the problem (and mistake/oversight whatever yawanna call it) needs to at least be acknowledged and properly discussed.

Why don't you post some relevant reasoned argument if you have something to say about it ?

You find my posts "exhausting" but you're happy with the market performance continuously doing exactly the opposite of the intended outcome of the reward split ? Since you're in the majority surely there must be plenty to promote ?

Be my guest.

What relevance has this to Dash's problem ? That list is simply the "Mineable" subset in CMC, so it's what anyone would see if they clicked the "mineable" filter. ADA is a smart contract platform so even though it's not POW it does have a basis for valuation which is that it hosts on-chain dapps that serve as a token sink.

Dash is a clone of bitcoin. It does not support an on-chain sink for emerging coin supply as POS chains do.

That means its store of value basis is in mining (a scarcity value set by the level of competition for its primary supply). The theory that crippling the mining market and giving the supply away to masternodes instead has now been tested. It didn't work. (And is not even being priced in). All our fully-mined counterparts rose to the top and we sunk to the bottom. This is consistent with the reasoning given in this post (not to mention common sense).

What exactly did you consider "misinformation" ?

It seems you need to lower the bar evermore to make your point. It's taken a monumental capital influx into the crypto space including Hedgefund/Tezla hype and gaxillion coin buys just to eek out a 4 year old Dash price piggy backing the coat-tails of bitcoin.

You've also seen clearly demonstrated that the theory on which our "store of value" protocol revision is based is bogus. You need to understand calculus even to appreciate the "improvement" cited at the last quarterly call. The circulating supply is clearly stated on coinmarketcap.com. That's what investors look at, not some arbitrary subset of it cooked up as an excuse for maintaining a crippled mining market.

I'm sure there will be a pump, at which point some major hodlers will be exiting this coin. It's what happens after that that concerns the long term future and we've far less of a cushion in terms of competitivity than we had the last time.

Each time the price rises, so does disparity in profitability of one half of the coin supply over the other. That's the half that will get preferentially dumped to pull the roof down on everything else. Our 100% mined competitors do not have this asymmetry handicap which is why they are more buoyant in marketcap than Dash, even with zero features.

Until we acknowledge that and do something about it, the entire project effort is drained in paying for excessive, uneconomic masternode margins instead of competitive capital gain performance. (<-- otherwise known as "store of value" )

Unfortunately that doesn't matter much since the wider market does appear to share my "belief". (Or at least its relative valuations reflect it).

And it is that wider market, not "the forum" that assigns a valuation to Dash, its protocol and its uncompetitive masternode margins.

#doTheSums

---

Descending smoothly out of the top-10 mineables.

Every one of them that demands hashrate to extract all the coins from its supply (as opposed to only half the coins) gets above us. This is not proving the theory of "we don't need all this hashrate". Here's why.



[moderator's note: consecutive posts merged]

Manoeuvring.

(Think how much more manoeuvrable we'd be if we could reflate the price of the next block by swapping a component of masternode reward for capital gain).

With our current crippled block-price, getting past Doge would now be a cause for celebration.

arielbit is posting.

Does that mean Dash is about to take off ? Despite its crippled mining market ?

That is the question 

You let him trigger you. That was a missed opportunity to promote Dash's new store-of-value properties
11% growth-rate reduction in non-collateral supply.

It's not the "thread" trolling you which you should be worried about, it's the markets trolling you.

This here is not a temporary trend, it's permanent and there are good technical reasons for it. If you want to argue for sitting on your hands and doing sweet f.a. about it then that is of course your prerogative but this coin does not work by sending begging letters to devs. The devs do what the community tells them to and if the community wants to live in dismissive ignorance of the priorities that drive its market performance as you seem to be advocating then don't expect any future other than continuing along the same trajectory.