We don't have any choice IMO. We need to get our mining deficit restored ASAP otherwise we'll keep plummeting down the rankings.

When Ryan presented his theory that throttling supply to miners would mean less sell pressure, he missed out a vital dimension which is what miners DO with the fiat they draw from markets. They use it "buy" coins from the new supply thereby creating competition for that supply. Nothing to do with securing the chain, it's implementing scarcity that costs the money. They're selling into the secondary market to be able to buy into the primary market. Ergo very little NET selling pressure. The whole operation makes a small profit if they're lucky.

Masternodes on the other hand create unmittigated selling pressure, because if any MN reward is dumped on markets, the fiat coming the other way does not get re-invested in the chain. We are therefore "spending" pure marketcap on masternode revenues because there's no economic activity associated with it. No synthetic scarcity is created, no blockchain costs covered, no work is done and no monetary velocity is gained in proportion to increasing MN profits.

Why do you think we're struggling to even keep up with Doge in ranking Because we have a mining deficit compared to ALL these coins above us  - Dogue, Monero, the bitcoin forks, Litecoin - all of them. If this doesn't light up people's radars that something is seriously wrong with our protocol reward allocation then they need a shot of adrenalin IMO.

The "locked up in masternodes" idea is good, but the bulk of the coin should be mined first, pass through markets with a cost base that reflects its scarcity and THEN find its way into node collateral. Then a profit element can be fed to the masternode population from a residual component of the supply that corresponds to the optimal profitability balance for maximising capital gain (as determined along the lines of the analyses above).

You can see why by looking at the NET reward ratio rather than the gross which is what I think we should have been focusing on all along. Protocol reward ratio is meaningless on its own because the relative value that miners and masternodes extract from the chain is determined by the price, not the protocol.

It's also meaningless to compare them in terms of "traffic to order books" because the two sectors are totally asymmetric in terms of what the protocol requires them to invest back in the chain. So you're only looking at one side of the equation.

If we look at net reward ratio, all sorts of things emerge that show us the way forward, not least where the "sweet spot" is to avoid asymmetric profitability in network operating margins because the price will just be throttled by the part of the coin supply with the largest available gain. So to get scaleable growth in a heterogeneous supply we need to set (net) margins at parity for all prices as far as possible, otherwise we just hit the same glass ceiling as we did before and never escape it since masternodes go to ridiculously unsustainable profit margins at high prices while not investing anything back in the network (as miners have to).

These monthly-based models are based on a notional 10% mining profitability, current emission schedule, $30 per month masternode hosting costs and assumes all treasury budget awarded. The current 45/45 reward ratio one shows straight away the problem in asymmetric profitability:

(Sidenote: The "Net Reward Ratio" columns below should strictly speaking read "Net Reward Share")




This is made even more acute when we move to a 60/40 one (which corresponds to a 54%/36% respective share of the total reward):




The sweet spot with these constraints turns out to be at exactly 82/08 mining/masternode reward ratio (expressed as respective proportions of the total block reward). People will probably find that alarming, but it's scaleable in a way that the above two just aren't and at $900 per Dash, not only is the masternode reward greater in value than it is at the moment, the collateral is 9 times the value. That is what matters - not the reward ratio but getting to high valuations and MAINTAINING them

Look at the reward per month for the 82/08 ratio. Does it not make sense to make 1 Dash per month at high valuations rather than 5 for a measly $30 operating cost ? Can you seriously see bitcoin giving away 5 BTC per month for peanuts ? We need to reconsider our priorities here if Dash is to ever get above $200 per coin again IMO. Even at the 82/08 ratio, masternodes are still massively profitable with operating margins back above 90% at $400 per Dash.



Note: Y-Axis rescaled.



Constraints: 60/40


Constraints: 82/08

Does anybody know what this means from Dashcore GUI launching ?

Is the copy of the blockchain shot ? It was about 99% downloaded. Do I need to download it again from scratch or can I do something fancy like delete "chainstate" or something to stop it choking ?



Ah. Here we go....need to use command line....https://www.reddit.com/r/dashpay/comments/aw3eof/please_help_with_dash_core_wallet/

Because none of their blockchains issue coins to holders at an instant gain. Dash is the only one.


That's only true in a speculative sense. But speculative value requires there to be a fundamental basis for future cashflows (even if it's only investment flows). That's what xkcdd ignores. He thinks that Dash can have value just..."because"....and that that will feed through to hashrate.

No. It doesn't. Speculative value is simply the pricing in of future REAL value so it's that REAL value basis that has to be analysed properly, otherwise it's just a hype-based pump& dump that might last long enough to get out with a gain but no more. In that context, only two aspects of REAL value that can underpin the pricing of masternode operating margins are:

 • service provision (measured by how much of the reward is invested in it) and
 • monetary velocity

The reward therefore needs to be balanced between masternodes and miners to maximise its benefit to the capital value of the chain. You can't seriously dismiss the role of hashrate in this regard because it's what attracts competition for the primary supply (not the secondary supply, I accept that, but even the value of that trade can only feed through to the primary supply via hashrate as  xkcdd himself points out with the phrase "hashrate chases price")

You've perfectly illustrated the whole fallacy of this reward ratio circus.

It's measured in Dash - which is meaningless. What is meaningful is the value of that Dash. i.e. the purchasing power. In all your responses to my posts you've never once addressed the issue of capital gain. Sure I can cut the same piece of cake into smaller pieces and say I have more cake if I only measure the quantity in "pieces" rather than grams. But that doesn't mean you can charge more for it.

The issue is that the market can adjust the reward ratio between masternodes and miners in DOLLARS as it sees fit. Dash protocol has no control over this. So the reward ratio should be adjusted to optimise the gain in DOLLARS, not Dash and the only way to do that effectively is to set mining and masternode margins as close to parity as possible (for a given optimal target price or masternode operating cost).

Now we're seeing a price rise. What are the implications of that ? They will be to aggravate the innate heterogeneity of the Dash new supply in terms of inherent profit margin. In other words, as price rises it becomes ever harder to overcome the headwind of profit-taking from the half of the supply that is at ever greater gain over the other half. Effectively issued for "free", especially in the absence of any other fundamental driver such as monetary velocity (which is almost non-existent).



This isn't some "vague theory". It's both common sense and observed fact. When market prices rise, the profit takes are driven by the holders at the biggest gain. So building a profit-taking incentive into your protocol by generating half the supply at no cost to its holder just puts an elastic restraint on the asset that snaps its price back down after a revaluation, bringing the margins back into parity over time.

I think I might have got that bit  

I wouldn't disagree with any of that.

I'm just pointing out that Dash has an unbalanced capital flow equation which results in an unsustainable level of operating profit on its network. Because of that we end up unable to compete for marketcap with our peers which don't have this handicap.

That's a new one. Please expand on this "other perspective". Are you talking about "users" ? People who don't buy Dash to hold but rather just buy it to immediately spend at Church's Chicken ?


Nobody's trying to have it "both ways". The whole point of my argument as that masternodes are NOT filfthy rich. They are NOT benefiting from the reward because the more the reward ratio slider moves away from miners and towards masternodes, these things happen:

 • value drains from our marketcap compared with our 100% mined competitors
 • that therefore depletes its attractiveness as a monetary medium
 • which impacts on USE (see our blockchain traffic compared with competitors who have none of our technical "features")
 • and adversely impacts masternode incentives by wiping out their reward via capital loss and huge opportunity costs when measured against our 100% mined peers

So nobody wins. You seem to be arguing that sustaining the marketcap isn't important.

What exactly IS important then in your opinion ?

That's a philosophical point at best and irrelevant to markets because the masternode revenue is almost all profit. It's that "unearned profit" (from the market's perspective) that's being priced in rather than the value of the coin itself. The primary market can get a far higher mining quotient from the 9 mined coins above us in marketcap ranking because almost all of its investment goes towards upwards difficulty adjustments rather than straight into the pockets of existing holders as with Dash. (It does not get spent on mitigating Sybil attacks or delivering services).

If there are 1000 coins circulating as total supply, 999 "hodled" in wallets and only 1 sold, then that 1 coin sale establishes the marketcap for the entire supply. It follows therefore that if the coin supply cost base is heterogeneous (as it is with Dash) then the lowest value segment will drag the rest down.

That's a service feature, not a store of value. Bitcoin also has those service features and bitcoin investors don't have to lose their capital to overpaid nodes to receive those services.

It would be nice if Dash could deploy its very significant firepower where it matters - store of value - so investors could feel like they wanted to invest in it again.

In a mined coin, store of value = mining budget. That's all there is to it.

If you've got extra features over another coin with a similar mining budget then you'll get more ranking. But if you overpay for them out of your mining budget then you end up like this:



Why is dash Nº 38 in ranking now ?

Because it's the only mined coin that has to fund its nodes (which cost nothing) from the blockchain. Every other mined coin gets its node network for free. So why is it so perplexing to Dash people that investors don't want to invest in Dash ?

Why does Dash not deploy its (extremely potent) firepower where it matters ?

 • put maximum blockchain budget towards attracting competition for our primary supply (mining)
 • allow that to grow capital gain which funds the Dash TREASURY
 • make Dash nodes competitive against Bitcoin nodes by allowing them to be PROFITABLE (rather than a leech to the entire Dash ecosystem)

Bitcoin does not have profitable nodes. 10% profitability on running a node would give us all the competititivity we need against bitcoin. We don't need all this mad consumption of the blockchain supply by masternodes.

Why do we have to live with the demented Spork 21 protocol when the Dash supply could be deployed much more aggressively against other mined coins ?



Who is actually defending Spork 21 ? That is the question.

The answer is nobody because it's Spork 21 that is destroying Dash. It has to be reversed.

A coin can go to effectively zero and still have its fanbase intact posting great things about it. That's the difference between investors and mascots. Investors make critical appraisals based on investment criteria who's priority is capital gain. Mascots are only interested in shielding their religion from criticism.

https://talk.peercoin.net/t/listing-peercoin-on-coinbase/10333/2

Remember that Dash can go to zero and still have 5000 masternodes. Those folks are all still "minting" away with their stash locked up in wallets. But the whole marketcap is only worth as much as the last traded value.

As I think you know, that wasn't my "reasoned argument". These are....

...on why "Hacking" Security ("chainlocks") isn't a substitute for "Monetary" Security
https://bitcointalk.org/index.php?topic=421615.msg55974559#msg55974559

...on "driving with the brakes on" how Dash protocol encourages miners to recover lost reward through running masternodes, thereby negating any effect of throttling supply to miners
https://bitcointalk.org/index.php?topic=421615.msg55573119#msg55573119

...on Why comparisons with Previous Trading "bottoms" are not Valid
https://bitcointalk.org/index.php?topic=421615.msg56048260#msg56048260

...on why capital gain on collateral must be taken into account when measuring "ROI"
https://bitcointalk.org/index.php?topic=421615.msg55857801#msg55857801

...on what investors are investing in and which aspects of the blockchain delivers them
https://bitcointalk.org/index.php?topic=421615.msg55813271#msg55813271

...on the statutory dimension to overpaying masternodes: they are tax inefficient and attract selling pressure
https://bitcointalk.org/index.php?topic=421615.msg55732188#msg55732188

...then there's always this for measuring how the market likes to price in our relative mining deficit which forms the basis of Dash's new "Store-of-Value" remedy

No they didn't. It's just that you're apparently not able to turn what they taught you into a well reasoned argument, let alone a quantified one, that promotes your case which is why you need to resort to dismissive troll-like soundbites such as "Apparently, when I studied accounting, they taught it different to you".

Sure. Go and study accounting before you go any further with your delusions.

If they were mined then they were mined at zero mining cost.

I presume you're referring to these candles at the end of 2015.

At that time we didn't have 5000 hungry masternodes drawing their reward straight out of the capital value of the chain while giving nothing back in the way of upwards difficulty adjustments as miners are required to do.

The masternode count was also growing, not static as is now. That was what anaesthetised us to the adverse side of having such a huge relative masternode reward and ever growing uneconomic masternode operating profitability compared to mining as price rose many multiples past the operating cost of a node.

It's the GROWTH of the masternode count that sucks the supply out of orderbooks, but it doesn't address the case where the count reaches equilibrium between nodes bought and nodes sold. At that point we're no different from bitcoin where supply is "locked up in wallets" instead of "locked up in masternodes". Spork 21 simply assumes that the additional 10% incentive will create an additional 10% demand which will therefore set the growth going again.

But it doesn't work that way, does it because:

1. the market isn't interested in how much extra Dash it gets from the reward, it's far more interested in the capital gain on the 1000 Dash collateral

2. every time a masternode is sold, it fragments into hundreds of pieces which draws the "equilibrium" nodecount level ever closer and lower instead of pushing it further away

3. the reward itself has to be paid out of the capital value of the chain. There's no economic activity that nodes do which compensates for the "free gifted" Dash that's given to them

The only way to address this problem of nodecount equilibrium IMO is to set the protocol reward ratio such that masternode and mining operating profitability are at least far closer to parity than they are now, for an initial target price of, say $500 per Dash. That would put the supply back to work again in a way that prioritises scarcity and capital gain over ever more worthless masternode rewards paid in Dash but not manifesting in Dollars.

 • we would retain the advantage over mined competitors of having incentivised nodes who's profitability grew as price rose (since they have fixed costs). So no need to "fiddle" with the reward ratio to improve their incentives

 • we would retain the advantage over mined competitors of having a governance system and treasury - the effectiveness of which also depends on capital gain, not masternode reward share

 • we would retain the advantage over mined competitors of all our utility features since the whole POINT of a dual-layer protocol is that you don't have to throw the mining budget under a bus (as we are doing now) to implement on-chain services



The charts are also totally different for the comparisons you make. Look at the On Balance Volume for your 2015 example. It's flat, going against the trend of price which tells you that there was accumulation going on back then well below the first green candle that "took flight 0.0065 to 0.016". Compare with now: the OBV is diverging to the downside ever more. The weekly price candle is hammering off support looking like it wants to go to the next support level which will probably take us to the 0.001 range, specially if bitcoin continues its rise.

Indeed. What sector of primary holders is it that's paying for the primary supply ?

Miners. (Masternodes get it for free). So it would seem appropriate economic sense to attract the former at the expense of the latter, yet we do it the other way around.

We spend ever less of our budget on attracting demand from the sector that pays for our new supply and ever more of it on free giveaways to the sector that doesn't. That is why capital does not find this asset attractive as an investment.

So that's the primary market. What about the secondary market ? What are buyers there purchasing in a mined coin ? They're basically buying hashrate by proxy.

What do they get for their capital investment with BTC, ETH, LTC, XMR, DOGE etc ? The knowledge that every single coin that gets bought was mined at great expense and that by buying the coins they're simultaneously buying their full compliment of "effort" that protects their investment. (Since somebody else would have had to spend an equivalent amount of "effort" to obtain another similar coin).



What do they get with Dash ? The knowledge that half the coins were mined at NO expense. So no "effort" is being purchased. Rather a "free gift" is being purchased. How much value is in that ?



What is the result ?

The risk I see is of continuing down the futile path of trying to be "less like bitcoin" and overvaluing the economic role of the masternode when we in fact inherited BTC's protocol and store-of-value model. Now we have declining transaction count to add to dwindling marketcap and competitiveness as we appear to be slowly heading out of the top 40.

We can always live in hope.

This is what it looks like to me. Dash had its pumps exactly when Ether got them. It just didn't make anything of them.

Feel the weight of that masternode network absorbing $30 million per year of capital out of the blockchain which our competitors spend directly on upwards difficulty adjustments across their whole chain to support their price.

Monero don't have half a million dollars worth of freely given away coins to dump on markets each week. Every coin mined of theirs attracts fiat that gets spent on upwards difficulty adjustments applied across the whole chain, not just half of it.

That's something the store-of-value-seeking market values.

Well you didn't succeed then. You made it worse by encrypting the entire transacting platform instead of targeting fungibility specifically.

Baby. Bathwater.

The problem is not that. The problem is that by voting to pay themselves even more of the mining reward than they already had (it was already near 50%) masternodes have all but destroyed this currency's competitiveness based on ill advised, short sighted and warped economic logic.

No other stakeholder had a vote in the matter - not regular holders, exchanges, prospective investors or merchants. However the market has the ultimate vote with the result that we're now 16 places below a joke coin in ranking at just over half its marketcap.