Lots of chaff, hand waving and clownery do deflect from the core principle expressed here.

Which is asymmetric profitability of miners and masternodes resulting in outsized exposure of half the coin supply to statutory selling pressure all year round.

This is yet another adverse effect of not targeting broad parity between mining and masternode profitability resulting in a glass ceiling on price that snaps us back down when the difference between the two gets unsustainable. And now here comes Spork 21 to make this disparity even more acute.

In our mined competitors, all that red zone is invested straight back into the chain as wealth preservation capital in the form of upwards difficulty adjustments. The white zone is effectively given away with a zero cost base. This keeps masternodes in holiday cruises but drives the price down chronically over time.

You can see it. You can feel it. Best to address it rather than deny it.

It doesn't matter, go back and read your own country's rules. It's an effective income tax because your masternode reward will simply be filed as a capital gain from the start of the tax year (Jan-Dec) with a zero cost base. Same difference and same asymmetrically applied sell pressure compared to mining. The only advantage of that system is that you don't incur a liability if your overall holdings incur a capital loss which offsets the annual reward earned by the node. So you'll have incurred no liability the last few years.

But you need for Dash to be a poor store of value and decrease in price for that to work. (Well it's worked for you the last few years )

Go back and read this post.

The principle being described is one of asymmetric profitability amongst reward categories in the Dash protocol. The aspect of taxation only comes into it because it's a general principle - anywhere - that it's the net profit element of a business that exposes it to taxation. So it follows that masternode rewards incur a massively disproportionate selling pressure from statutory sources compared to miners. An asymmetry which only grows as price rises. Also, it's a general principle in good business practice that paying excessive tax is a waste which indicates you've got something wrong with the gearing of your operation (such as not investing enough back into it).

Contrary to your assertions, the Netherlands is no different from anywhere else in observing this principle. Masternodes ARE businesses and if your idea of growth is that they remain as a server in some teenage kids basement rather than the kind of institutionalised operations that we started to get a hint of during the last bull run then you've set your sights lower than me.

Incorrect. It's exactly the same in the Netherlands as everywhere else.



The Dash protocol is also the same in the Netherlands as everywhere else because operating costs are fixed whereas mining operating costs are variable. Therefore almost all of the masternode reward is exposed to taxation whereas only a small portion of mining rewards are and this asymmetry only becomes ever more staarlas price rises.

The difference is the same in any country. Re-read me previous remark from 2 posts back.

Ask yourself why successful store of value beats utility, even when it comes to merchant payments.

It's because it needs to be money first and a fancy messaging service second and in crypto money is mined value. (Dash mentioned - as an "also ran").

No, I'm not doing that. You've never understood this argument and I don't expect you to understand it now. Just more "it has value if people say it has" and "it depends if they sell or not" hand waving.


Yes, I'm sure. Masternodes have fixed operating costs and miners have variable ones that scale (due to difficulty increase with price & competition). Masternode costs do not scale, so as Dash price increases, almost all of masternode income is taxable whereas the same is not true for mining income. Nothing to do with tax jurisdiction, it's the Dash protocol split into fixed and variable operating cost.

First of all, in the early years this wasn't a problem. Mining and masternode operating profitability were far closer to parity. (Remember that price has an asymmetrical effect on them respectively since mining costs are variable and MN costs are fixed). Then two things happened leading up to 2017:

 • price skyrocketed, sending redundant masternode revenue (holder "profit") into orbit
 • the masternode network became fully populated

Since then we've experienced a 3 year continuous bear market and collapsed out of the rankings almost to doge coin level.

The second thing was that I was forced to review the way I looked at and accounted for my own holdings. This was because, up until 2018 I had always casually regarded MN returns as a growth in capital (and took accounting advice to that effect also). So a growth in holdings would represent a capital gain if the overall value of the holding had increased and a capital loss if it had decreased.

But at the end of 2018, the UK tax agency released a fairly detailed document on how crypto holdings and earnings should be accounted for which specifically required the likes of masternode rewards to be reported as income (in line with how other countries do it). As professional background, I've spent around 30 years developing custom business software and doing systems analysis for corporate clients, much of which is based around double-entry bookeeping concepts. Given that background, when you think "revenue" you immediately think "cost". i.e. where's the other side of the entry, at least conceptually.

This lead me to think the whole crypto-mining business model through much more fully than I had done before and consider how it actually works in terms of capital flows and where value gets stored etc. It also brought to the forefront that the masternode revenue was "idle" in the sense that it wasn't retained in the network the way mining revenue is.

Later, Ryan released his famous "tokenomics" presentation. That was what finally woke me up out of my stupour. If he had gone in the other direction (increasing the proportion of the chain that's mined) then at least our thinking would have been congruent in principle. But that was the time when I realised that his thinking was 180 degrees out of whack with mine.

The way I reconciled it was that he's looking at it from an optimal resource usage perspective. In other words he sees the economic objective as being to create coins and transfer them as cheaply as possible and now that we have chainlocks, hashrate isn't needed for that. If that was indeed our objective then he would be right. But it isn't. We're not just building a monetary messaging network but a synthetic store of value which is based on real world monetary archetypes. In this case, a completely different set of criteria applies in which Ryan's perspective is positively toxic IMO because it destroys the store of value dimension. To realise this you have to appreciate the mining model's capital dynamics and how it preserves value by putting a "price" on the extraction of a block from the blockchain. (Seems obvious but it got lost in our obsession over utility IMO).

Think of it this way. If you invest in Visa you're not actually buying units of a monetary asset. You're buying equity in a company. Where does Visa's value lie ? In its merchant subscriber base. Visa sells access to markets. The 3% fee the merchant pays is a marketing cost not a transaction cost so it's a brokering system, nothing to do with money really. Meanwhile gold sits in a vault and does nothing all day long. They are very different and we do not want to model Dash on Visa because it's not designed for that. It's a bitcoin clone who's core mission is to store value like gold. What it has over bitcoin is the decoupling of the service layer so we can have on-chain services VERY CHEAPLY without much loss of mined capital. But if we overpay for that service layer we'll just kill the store of value role.

See ? We've come to exactly the opposite conclusions but not because of different or flawed thinking, rather different starting points as to what we're actually building here.


Right now, any adjustment that exposes more blocks to mining competition would help turn things around IMO. The lowest reward setting is what would cover:

1. the treasury requirements and
2. masternode operating costs

...as a minimum. The highest setting would be what we have at the moment (45% ?). So lets say 20%. That still gives masternodes 10 x over cost and guarantees profitability. This profit margin will only increase with Dash price. Ideally I'd make masternode rewards an inverse function of network difficulty but that's dreamland. Such a relationship would IMO lock in a virtuous cycle whereby all of the new supply was put to maximum use in one of the three dimensions of Dash's economic "engine":

 • wealth preservation (mining)
 • service provision (masternodes)
 • forward investment (treasury)

Anything else is just waste, most of all what I have come to call "non-performing masternode margins". They are also corrosive from a statutory perspective because they generate a large tax liability which creates constant selling pressure. Again that tells you something's way sub-optimal. At $1000 per Dash the masternode network would get paid $300 MILLION per year. Can you fathom that ? Since most of it's pure profit there's a theoretical, say $100 million worth of Dash that needs to get sold just to pay tax authorities and hitting the highest tax rate bands. To me this is bonkers. This doesn't happen with mining.

Capital gain is the game. ROI cannot be measured in Dash, it must be measured in dollars and take the capital gain/loss of the collateral into account otherwise we're simply deluding ourselves (To be precise, the way that the reward is generally accounted for on a statutory basis is through 2 transactions, not 1. You received USD, then you bought Dash with that USD. From that point on the capital gain or loss is calculated and the market price at reward time is your cost base).


Because there's a job of persuasion to do first. There's no point is floating a proposal that doesn't already have well rooted support and a chance of succeeding. In my opinion the community has barely scratched the surface of this debate. It simply hasn't thought much about these aspects because most people's minds are stuck back in the 2014 "anything goes" world where if you create enough hype and fireworks pumps will come. Also I think that quite a lot of people just want out and would like to stfu till the pump comes. I am not in that category as I genuinely see a future for this project, but only as a "highly mobile bitcoin", not as "Visa with store-of-value".


Any systems of governance worth their salt have a permanent opposition. One of the reasons we're in this mess (IMO) is because there was no formal alternative presented when DCG floated their "tokenomics" proposal. It was a "follow the leader" exercise. (That's not DCG's fault, it's the community's). Hopefully that will change but we have the choice of either permanent constructive challenges from within the community or permanent trolling from outside of it IMO.

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I've never actually changed my view on this. If you look back my posts from years ago you'll see I've always promoted Dash for its advantages as a versatile mined asset. The subject only became an issue when DCG diverged from this path by signalling their dismissal of mining as a priority factor in store of value. Then the masternode vote endorsed this. So it's the path of Dash that's changed. My line of reasoning has remained the same.

If Dash is at $1000, you think it's viable to pay $320 million per year straight out of the blockchain to operate a network of nodes when the service delivery value of those nodes (measured at cost) amounts to barely $1.5 million ?

How does that translate into a "store of value" for a new investor ?

I would argue they impoverish the project in the current protocol configuration.

These "services" cost nothing to provide over and above hosting cost. Yet we're charged $32M a year for them and this is paid directly out of the capital value of the chain, just like treasury budgets. Miners at least have to invest hashrate in the chain to get any coin out of it at all. That hashrate adds to the store of capital rather than draining it.

If a treasury contractor wrote a service-provision proposal who's budget accounted for 99% profit margin they'd be likely to get thrown out the door. Saying that the 1% worth of service provision "benefitted the network" would be unlikely to save them.

In the formal (accounting) analysis this is simply not true. Masternodes are being paid. The revenue is real, therefore the cost is real. The currency doesn't change anything. We must therefore investigate WHERE that cost is being taken and by whom. When I did this I discovered it was being drawn from the capital value of the chain because it represents a mining deficiency and mining is what creates real scarcity (i.e. if you define scarcity as commercially competitive effort prevailing to obtain a scarce resource rather than simply a small number of something which I'd label as faux scarcity).

The idea that restricting traffic to order books represents a more valuable form of "scarcity" than mining is even more faux still. I can create my own crypto of 5 coins, never sell them and they won't necessarily be worth anything. But if I can somehow attract competition to extract them from the blockchain at great expense then cost of their extraction puts a commercial value on that scarcity and will set their opening price in the secondary market. (If we define the blockchain itself as the primary market).


Why does anything need to change ?

 • masternodes would still be profitable
 • the treasury would still exist
 • we'd still have all our features
 • we'd still have the same development budget

We'd only be stripping away much of the redundant element of the masternode reward. It isn't paying for anything at the moment so nothing would change in terms of budgets. Nodes would continue to be profitable and in fact be MORE profitable as the marketcap increased. This is what people seem to forget - the reward ratio is irrelevant to masternode profitability because their costs are fixed. So what if they get 10% or 60% ? It all depends on the price, not the reward ratio. (The same is not true for mining). Masternodes could be making $1000 per week at a 20% reward share or $200 per week at a 60% reward share.

On the other hand, reducing mining reward DOES come with a measurable cost. Arguing against this is hypocricy because the basis for the current policy is ostensibly limiting traffic to order books - thereby creating a form of "scarcity", but not one that has any measurable value. It's a notional concept that I personally think is ludicrous because high volume, deep liquidity markets can represent high value assets as well as low value ones. What matters is what's being DONE with the revenue from selling. Spending it on raising mining difficulty is a far more wealth-preserving proposal than giving it away for nothing in this respect and IMO.


Again, I find this argument slightly hypocritical. Masternodes are simply an extension of the treasury in economic terms. They're no different from any other commercial contractor and their "delivery" should be evaluated in exactly the same way. If you don't see it that way then you need to see them simply as zero-difficulty miners which is an equally concerning proposition.

So what does Dash get for its $32 million per year from this extended treasury budget ? Hosting costs and an incentive to keep coins in wallets ? But other networks get this for free. Even if those networks do send more of their new supply to markets proportionally (even that's debatable), more of their blockchain goes towards raising fiat to pay for scarcity (REAL scarcity that preserves capital, not faux orderbook traffic management scarcity).

So the $32 million budget per year is a far bigger waste than anything the treasury can throw away IMO. Treasury is only 10% of the supply. Nodes are going to get 60.

Dash transaction fees are paid straight out of the blockchain.

Just because they're not charged to network users doesn't mean they don't exist. (Or that they're not the most expensive in the "business").

Market getting pumped.

The most expensive network to run on the planet, now being made even more expensive. (Coz holiday cruises don't come cheap and shuffling those 22k transactions per day around is high value-added material). $90k per day in rewards to transfer how much transaction value ?

That is something people will want to invest in.

It just means that if you do a withdrawal from an institutional regulated exchange like Coinbase, you would first have to provide them with KYC details for the destination address. (So if it's your own address I don't really see the problem - you already had to give them your KYC to get an account in the first place).

I think Brian Armstrong's cr*pping himself because he realises this will just drive trade use of crypto (as in using it to buy stuff) off exchanges and into offline wallets. It's quite handy to be able to send satoshis here there & everywhere from your exchange account but if you needed to get KYC info for every single address.....f* that.

That's cos Ryan did a tok in South America where he sed Dash woz gonna be the new moneh.

Ah, so October 2020 is the new December 2017 ? That's when we dump everything to Kingdom Come and run for the hills ? (Only for the $USD to then crash & burn as that's also when hyper-inflation might be getting started). Things might get complicated.


As I remember, most of the alts reached their peaks inside the BTC/USD bubble. OMG, PPT, BAY, even NxT. But they were spiking through out the year also - BTS went berserk around October I think. Dash was months before.