I didn't understand that. If he's defining "circulating supply" as "coins not collateralizing masternodes" and 4.7 Million are collateralizing while the total supply is 10 M, how does he end up with a figure of 11% Even growth rate. Nodecount in 2019/20 was near 5k, now it's 4.7k. If nodecount is reducing, how can it be "trending in the right direction" ?

Where is there any addressing of how store of value works at the "equilibrium" level ? When nodecount is static ? Every time someone sells a node, the collateral fragments into hundreds of tiny pieces (just watch one getting dumped on any orderbook). That moves the nodecount equilibrium level down as the coin supply becomes increasingly fragmented and smaller amounts are held by more people.

Also, the "store of value performance" isn't defined by circulating supply anyway, it's defined by the price that the remaining supply is exchanged for. You can have 1000 coins in "circulating supply" out of 10 million but if they're exchanged for $1 each then the marketcap collapses to 10 Million. That's what's happening now in Satoshi prices as the market prices in our non-performing (in terms of investment capital gain) masternode margins. Add to that, coins collateralising masternodes "at equilibrium" ARE circulating. You can buy and sell a masternode just as you can buy and sell any other part of the supply.

This whole approach is flawed (well illustrated by the fact that dropping out of the top 50 is being hailed as a "success"). The way to maximise store-of-value is deploy the full emission budget and not throw half of it away in "givaways".

Because mining efficiency is a ratio: (hashrate contributed) over (hashrate cost). A blockchain protocol is the rule base governing the issue of blocks. The two are unrelated.

I understood this perfectly. It's a mining efficiency feature, not a protocol behaviour. The Doge blockchain does not give up a block without you competing for it so it's not remotely comparable to what Dash protocol is doing.

I'm afraid this doesn't mean what you seem to think it means.

The Doge protocol doesn't self-adjust to detect "merge-mining" clients and issue the coin for free. It has no clue who's merge-mining and who isn't. Note that in your quote “for free” is in inverted commas. That's in acknowledgement of what I've just stated. It's in quotes because the gain comes from an efficiency saving on the miner. It's nothing to do with the protocol and is exactly the same thing as a miner simply finding a cheaper source of electricity. (Being able to mine more efficiently). It still has to supply the hashrate to the Doge pool.

The Doge protocol doesn't care about the electricity price as long as it gets its a competitive enough bid (mediated by hashrate) for the block it's releasing.

Dash, however DOES release coins at zero difficulty, bypassing the primary market bidding mechanism. This IS set by the protocol and merge-mining isn't remotely comparable. It has nothing to do with this principle.

It's not possible to take seriously an argument that's present as "So one way to look at it" when that way of looking at it doesn't represent reality.

You do not get Doge for "free" when you mine LTC (even if you want to "look" at it that way). The reward from merge mining is awarded on exactly the same basis as that for solo mining - according to prevailing competition for the supply. You would not get any Doge for mining LTC without contributing hashrate to the Doge pool.

What you're doing in that post is conflating how mining protocols award coin with how you might account for it in your own books.

It's only "not very consistent" because you've misrepresented what merge-mining is and framed it as something it's not (a "buy one get one free" transaction at the protocol level). At best it just makes more efficient use of a mining rig.

In all other respects it's no different from running 2 mining rigs at once on 2 different pools. You are still competing for the supply on each chain. If there are more Doge miners - even if they are also merge-mining - the difficulty (and therefore the primary market price) will increase with mining demand. See this article on merge-mining and note the following paragraph: https://captainaltcoin.com/what-is-merged-mining/



There's no "free with LTC" on offer. Your Doge reward is proportional your Doge hashrate directed into the Doge pool.

ASIDE:

It just happens that prior to last week's Doge skyrocket into the top 20, I snapshotted Doge and Dash primary market parameters as reported on coinwarz.com. They were next to each other in marketcap and were also next to each other in profitability listings on coinwarz. (I've no idea if that's coincidence or not but it's irrelevant to the point I'm making here).

This is their relative primary market states today. We can see that transmission has occurred - of secondary market price through to demand for the primary supply.



================================================================================
Here are the Doge and Dash difficulty charts respectively. Now, they LOOK the same but they AREN'T the same. Why ?




Because the real Dash difficulty chart looks like this. Only half the supply is subject to that difficulty level.

In cryptocurrency primary markets, difficulty represents price (adjusted according to how much competition prevails for that supply). But in Dash, half of the supply has its price RIGGED = set to zero by the protocol and that supply is issued to a subset of existing holders instead of being competed for and "bought".

This is reflected in the profitability of those coins when it comes to dumping them in the secondary (exchange) markets. They are profitable at any price above zero and any fiat drawn is not re-invested in Dash's primary market (as it is with mining).

That also happens in POS chains such as Tezos but the difference is there is an on-chain sink for that new supply in the form of on-chain Dapps which consum token. Real economic work is done to balance the supply growth. Mining is also real economic work of a different kind because it serves as a sink for fiat by raising the price of the primary market supply in proportion to the amount of fiat drawn from markets by miners - who simply act as brokers for that transaction.

The problem with excessive MN profits is that they fall into NEITHER of these two categories. They are pure profit and therefore end up getting paid for effectively straight out of marketcap. The masternode sector of the block reward are always net dumpers because they never had to bid up the price of the primary supply in order to obtain their reward so any non-zero portion of the masternode reward at all that gets dumped has a net negative impact on price.

What isn't a smarter approach is to overpay for it to the extent of half the coin supply such that the service can only be maintained by depleting the marketcap.


Wrong. They receive a reward of BOTH LTC and Doge according to the highest bids placed for the primary supply. So the price of both is bid up by hashrate contributed.
They don't receive anything "for free".

It sure is lot easier to get ranking by simply adding mining rather than features.

I thought about this as well. I didn't post my idea because I thought it was just too big a leap for people's imagination and might blow fuses so I just proposed the 2-yearly (as an example) hard coded protocol revision as a starting point.

However, since you brought it up, I'll now complete the picture I had. This is a definite problem (the fact that masternode operating costs are fixed but their non-performing profitability rises with price). It's part of our "baggage" and we need to solve it but I also think that Dash is uniquely placed to solve it beautifully with the masternode network.

For example, the masternode network is capable of generating realtime consensus over observed metrics using quorums etc. It can have an awareness of Dash price (and even mining profitability although this would not be necessary if a nominally competitive value for profitability was arbitrated on such as, say 10%). This could be used very occasionally (say every 3 to 6 months or if there is a very big revaluation that persists) to dynamically revise the reward ratio to keep masternode margins competitive and not have this capital "leakage" in transmission from secondary to primary markets if price rises. The algos are probably easier to implement than the mining difficulty ones. You just take the price and have a straight mapping from price to reward ratio using some moving average so we don't get instability and over-correction. We have 5 years of volatile history to use as test data so it can be made very reliable.

Again, masternodes would not lose out from this. They would GAIN from it because the objective is to maximise capitalisation of their collateral WHILE allowing them to profit from running a node. So their dollar-value profits would not be affected and would still grow as price grows (just as happens with miners). We would just be ensuring that we are more competitive than everyone else. High mining quota AND far more versatile in use.

The ultimate result is to keep Dash investible by "preserving" investor's capital.

Here's my best take on it.

We can either decide it's not important or decide to do nothing, but we can't pretend it's not there. We're talking about more than half the emission (after Spork 21) so it seems more than a side-issue to me.

(IMO what we should do is target a medium term reference price for mining/masternode profitability parity - say $800 as described in these tables. That would signal to markets a reference point for valuation and give us an investible margin either side for a speculative range.

It would also serve as a kind of rolling peg since Dash has positioned itself as a payments medium so some form of valuation "anchor" would be consistent with that role.

We've already seen that the reward ratio is semi-dynamic at long term periods. It just needs a vote. If the valuation becomes stable again at the higher level and transaction count warants a higher liquidity then the reward ratio set by the protocol could then be reset to a higher value - i.e. target mining/MN profitability parity at a new higher price. It wouldn't prevent speculative investment, it just gives the market a much stronger signal as to investment viability than it has at the moment.

This would turn a weakness....into a strength IMO).

(By this measure, our "parity peg" is currently set at something like sub $50).

Lets be generous and remove "De-Fi" then:

Like I say. We already have the scenario. (They also didn't sign up for an asset that they thought would be uncompetitive). If masternodes are profitable at any price then there will be takers at any price because none of the other POW coins in our league are even rewarded yet they all have fairly healthy networks.


First of all, the most specific question here is, is Dash's primary (new) supply better spent on:

 • attracting competition for that supply or
 • giveaways to masternodes

The concept of "hashrate" is deceptive because it makes people think it's about wasting energy, but they're missing the economic role it plays which is to mediate competition for the supply. By spending less on "hashrate" we're not saving money, we're just reducing the size of our primary market. I re-emphasis, we MUST see this in terms of primary and secondary markets. If we don't take this into account we'll miss the big picture and sink to the bottom of the rankings just because we were so blind that we didn't realise mining was a market.

Moving now to the broader aspect of your question...


...as I explained in an earlier post, there are generally only 3 approaches at the moment to store value in a crypto:

1. mining (= a trustless market for the primary supply)
2. on-chain services (the "De-Fi" model which consumes tokens and burns them to pay for on-chain computing services)
3. monetary velocity (your coin has such a high circulation for making payments that that alone sustains demand+price)

The "new chains" can get away with POS because that supply growth is needed to fuel all the on-chain Dapps that are growing on their platforms. They also support securitisation models (tokens on top of tokens) which in themselves can consume tokens or create monetary velocity. But Dash is not going the De-Fi route. It's going to have OFF-CHAIN Daps. We don't even have high fees like bitcoin does to sustain demand - our fees are specifically promoted as being LOW, so we can't rely on bitcoin's model of moving from mining to a fee-only model as emission dwindles.

Monetary velocity is also a dead-end because we are not a stable coin. Stable coins are going to be where all the day to day transacting gets done in terms of paying for coffees etc.

So Dash's natural market is still where it always was - a more versatile version of bitcoin. A highly mined store-of-value that's easy to move around and cheap to transact in where it's possible (unlike bitcoin) to earn a trustless dividend by running a masternode. There is nobody else in that space.

But the whole point of decoupling the mining and service protocols in Dash was so that we didn't have to compromise mining (or even a slow blocktime) to support a high level of services. We could have our cake (mining) and eat it (services). But if the protocol doesn't offer a very high mining contingent then that advantage is lost. I mean  - what do we have to lose ? The budget is just being thrown away at the moment. It's ok for attracting masternode growth but once they reach equilibrium nodecount then it's simply wasted. It has the opposite effect.

None of them would if they had any sense. Clearly that's the whole point of making this argument - that it's in their interests to support this. You're over-focused on the reward. Masternodes are far more exposed to capital losses (or opportunity costs through diminishing competitivity) than they are to small changes in reward because they have 1000 Dash at stake.

What would be the difference ? We'd be going from 1.3 Dash per week (45% reward share) to around 8% (0.23 Dash per week). So you'd be making 1 Dash per month for running a node.

Now that is far more realistic at high valuations. It's also far more realistic given the operating costs that nodes incur. It also highly incentivises the investment in nodes because the operating profit margin of a masternode (unlike with BTC/LTC or even Dash miners) increases with increasing Dash price, but the real objective is not increased reward anyway. It's capital gain of the holding (and therefore EVERY Dash holding, not just masternodes).

At the moment, everybody is paying for masternode rewards. Not only masternodes themselves (through relative capital loss compared to fully mined coins) but also other holders who don't receive any reward. If you really think all this is worth it just to sustain the illusion of a numerically consistent but otherwise diminishing reward, then I don't think you understand your own investment well enough.

Individual decisions may be.

But the aggregate performance of the marketcap in relation to other mined coins is characterised by the dynamics described above. Overpaying for a masternode network that costs peanuts to run.

Lol !   What do you think they've been doing for the last 3 years ?

Masternode reward has ranged from $2000 per week to $50 over the last 3 years - a range of 6000% from lowest to highest - and you're quaking in your boots at making a 30% protocol share revision that would radically address our bleeding marketcap ? Your logic defies understanding. Stop being obsessed with masternodes - this coin can go to zero with a full compliment of 5000 nodes no problem at all.

Think of miners and masternodes as 2 market stalls selling coins to the public. If one stall can afford to continuously undercut the other all the way to zero and still be at a profit what do you think is going to happen ? They'll simply erode the price chronically. Swilling around the bottom of the barrel with Sushiswap.
How difficult can this be to understand ?

On the other hand (OTOH) what will be the INSTANTANEOUS effect of increasing the mining share back to 80% as described in this post ? A doubling of our mining competitively for a start attracting "primary buyers" away from other coins and towards us. We know this because even if it isn't promoted, much mining is simply algo-driven and we'd be doubling the reward for hashrate instead of giving it away for free to nodes. Remember that mining is a market.

 • What effect would that have ?
 • Increase competition for the Dash primary supply

 • What effect would that have ?
 • Invoke a speculative pricing in of the future value of the new supply

 • What effect would that have ?
 • Increase the dollar value of masternode rewards

 • What effect would that have ?
 • Increase demand for masternodes

 • What effect would that have ?
 • Start to make us competitive again

 • What effect would that have ?
 • Throw the chornic marketcap erosion we've experienced over the last 3 years into reverse and stabilise our store-of-value offering

We need to break the viscous circle that non-performing masternode rewards are having. People are obsessed with the protocol share and this 45%. Forget it. It's meaningless. The market decides what the reward is. We need to give the market what it wants, not the masternodes what they think they want.

I think I must have missed those because I certainly wasn't ignoring any "counter arguments". The only counter arguments I've ever seen is what qwizzie posted months ago which was that throttling traffic to order books from miners was a viable basis to boost Dash's store of value competitively and that our early position on the emission curve will be compensated for by increased masternode take-up driven by increased reward.

But these two assertions have been shown to be flawed because, in the case of the former:

 • it's too myopic. It's shown above that mining reward is a zero-sum game. Throttling supply to miners will NOT raise price, in fact it has the opposite impact because the aggregate effect is to lower competition for the primary supply and

and in the case of the latter...

 • the analysis was done in Dash whereas it should have been done in dollars to take into account the impact the market can have on repricing the masternode rewards

What you presented wasn't "counter arguments" but "#pumpIsComing" mantras which we all know. It doesn't affect Dash's competivity at all since "alt-season" applies to all alts, not just Dash so your "counter arguments" are irrelevant. This discussion is about what makes Dash MORE competitive than other coins, not what surf-waves are coming for the crypto market as a whole.

That's not very convincing. If I were to sum up your argument it's "stop being emotional, Dash will pump when pump season comes".

That's it.

You've been presented with reasoned argument, quantified models (which take no small amount of work to produce), citations of economic theory that endorse the observations were seeing and ON TOP of all that, you've seen Dash's competitive performance be consistent with these arguments.

Yet you can't address once single aspect of these analyses with anything other than "it's just your opinion" or ""we're not at pump season yet". May I remind you that when if/altcoin season comes, Dash is not alone in the race. There are plenty of other candidates with upside on offer - in fact more than ever before - and if it's judged that fully mined coins are more investable than those where half the supply is "donated" to large holders (as it seems to have been up til now) then we might get very little to nothing out of "alt season".

I don't think you or anyone else in the community is in any position to dismiss this prospect with hopium-based trend theory.

It's just the same as in macro vs micro economics. The "trader" perspective is fine as far as it goes. But it has to reconcile at some point with the macro perspective which basically involves reconciling aggregate capital flows. You can't ONLY see things from a trading perspective because you will never see the big picture. The big picture has to make sense and in looking at the big picture we need to invoke known, tried and tested economic theories that are known to be instructive in analysing these capital flows.

Two in particular apply to Dash:

1: the theory of perfect competition

This is just common sense, but tells us that if a network operator is making a gazillion times more profit than another network operator (known as "Supernormal Profit"), the market will act to reconcile profitability by devaluing the supernormal profits until they become competitive again. From this theory alone we can see that Dash masternode profits are unsustainable, both within the Dash ecosystem itself and in the broader crypto ecosystem because they are totally uncompetitive at higher valuations of Dash. They therefore make the marketcap unscalable. They absorb far too much blockchain supply for them to maintain a high dollar valuation. So we can see that the market has responded to our uncompetitiveness in this regard by devaluing us in ranking.

This is why I proposed that we should set net reward share at parity in this post ("sweet spot") as being the optimal competitive protocol configuration for Dash.

2. the use of "Primary" and "Secondary" markets as an analytical tool to study monetary commodity markets

Mined crypto is EXACTLY like the fine art market in this regard. (or even the gold market). One MUST take into account the cost of mining a coin from the blockchain when looking at market flows because that is a legitimate market source just as an exchange is. Anyone wanting to "buy" Dash always has the choice of mining it or buying from an exchange. These are both markets and the price that they pay for their Dash in extracting it from the blockchain is just as legitimate a "price" as that paid by a secondary buyer on an exchange.

What you're "missing" is that masternodes are not some kind of insiders as far as the sums go. They are simply part of the primary market which is receiving the coin for free. So imagine I am a fishing boat offloading a catch at a market. I have 100 customers. I charge 50 of them $10 per fish and I give another 50 the fish for free. What will happen ? Two markets will form because the 50 customers that received their "free fish" can re-sell theirs for $5 and make $5 profit, thereby tanking the secondary market value.

Saying that "ah but masternodes don't sell their rewards" is no counter argument to this. It doesn't matter if they sell or not at a macro level. What matters is that the coins are worthless to the holders in terms of cost base. They have value by association with the REAL mined supply and nothing more. This can only be rectified by addressing our mining deficit and restoring it to an optimal level since we are way past the point of diminishing returns with the current protocol split.

FINAL NOTE:
Masternode rewards are a carrot in terms of attracting buyers, but this only has an effect while the masternode count is growing. I'm talking about the equilibrium situation, when the nodecount is static. We must be able to sustain a valuation at that point. That's what we need to analyse properly and make work in terms of store of value. Amanda's video shows how Proof of Stake coins do it and why that is not going to work for Dash. Until monetary velocity is sufficient to sustain us (think 10 years time if we're lucky) we need mining. There is no other sustaining store of value mechanism available.

No, because whether they sell or not doesn't affect the capital flow equations in terms of value. The value is transferred as soon as the masternode receives the reward, not when they sell it. At that point it manifests in the books of the first holder as profit. So if you were to compare the books of a miner with those of a masternode holder you'd see the difference. The miner's "book" would register a cost. It's that cost which was spent on raising the price of Dash in the primary market (i.e. the 'market' where coins are obtained directly from the blockchain as opposed to from another holder). But the masternode's book would register almost 99% profit. Masternode revenue is not passed on to Dash's primary market.

It's that "profit margin" that the market is marking down in value compared to other mined coins. Nothing to do with "early fast mining".

We're simply p*ssing valuable blockchain revenue up a wall where Bitcoin & Doge are not and markets are valuing us accordingly. That's all.





By the way, when I started arguing that Ryan had got his analysis the "wrong way around" about a year ago, people ridiculed that view and pointed to proof of stake coins as evidence that I was wrong. But I responded that those POS chains had a completely different economic model and archetype to support their price which was that scarcity was achieved through token consumption by on-chain Daps or contractural securitisation as a replacement for mining.

Luckily Amanda B Johnson has now come along with a very nicely presented explanation which illustrates exactly that point in her new video "Why are fees on Bitcoin and Ethereum often so high? | How Dash Fixed It"

Enjoy !
https://www.youtube.com/watch?v=f_Uux9RUtw0

In a mined blockchain, there are two ways to acquire a coin:

 • mine it (the "primary" way, straight out of the chain which is constantly issuing new supply)
 • find someone who already mined on and buy it from them (the "secondary" source)

It's conventional to treat these as two "markets" since they have distinct dynamics, methods of acquisition, and sometimes even pricing. We give the name "mining" to the primary market in crypto but effectivelly, all you're doing is "purchasing" the coin straight out of the chain and paying a price that's commensurate with competing bids. The hashrate is there to mediate those competing bids, so it has the same commercial function as an orderbook on an exchange. You add more hashrate = you move your buy order up the ladder.

When a miner "places" hashrate, they're effectively placing a buy order in the primary market. When they sell on an exchange they're placing a "sell order" in the secondary market. But (most of) the fiat they draw from that sell order just goes straight back into the chain in the form of placing more bids for the new supply (that's by definition what "mining" is). So there's no NET sell pressure. The miner is serving as a broker for secondary buyers and making sure that their demand ends up being transmitted from the secondary market to the primary market, making a small profit as they go.

Contrast that with masternode rewards. Here the "transmission" is broken because while masternodes are "brokers" just as miners are, the secondary market demand does not get transmitted back into the chain. Masternodes do not have to "buy" their coin in the Dash primary market, they get it for free. The fiat that masternode reward sales draw from the secondary market therefore leaves the Dash ecosystem entirely. That's why I say above that sell pressure from masternode rewards is "unmitigated".

That's the source of our "leaky marketcap" and we need to plug it.

Qwizzie's point about "hashrate is doing just fine" is irrelevant. Whatever our hashrate is, it's only applied to half the supply. The other half is "shielded" from that competitive demand. We could have more hashrate than bitcoin for that matter but as long as half the supply keeps emerging at zero difficulty it will still have the same effect on marketcap.