You seem to personify aspects of the protocol. I don't know why people do that. It's also one of the reasons we got into this mess I think.

I get that it's common for an individual to be associated with a masternode but a "miner" is not a person as in a coal miner who actually goes down a mine with a pick axe. Nor is a masternode. These are functional properties of the protocol that issue coins to addresses under distinct constraints. Thats how they should be appraised.

So in the general case, the "difficulty" must be aggregated across the chain which means that any economic entity that operates a hybrid business model will have a lower aggregate difficulty level than one in a pure mining operation. The former therefore has the advantage which means it's likely not only exist but grow in prevalence.

There's therefore no basis for dismissing thunderjet's assertions about hybrid mining groups because it's likely to become the only viable way to mine Dash.

Well lets look it another way. What advantage do Dash miners who run masternodes have over Dash miners who don't ?

Their net mining difficulty is far lower for the same network difficulty.

I'm one of the foot-draggers.

I'm protesting. I'll let my node go off the network before upgrading.

Hunger strike.

If that's how you interpret my view then I'm think you've misunderstood it.

The energy required to produce the coin is irrelevant other than serving as a proxy for scarcity in the implementation of a monetary archetype. Remember that these are synthetic monetary assets. They're not like precious metals or rare minerals who's monetary use is incidental to their existence.

Any synthesised archetype has to be faithfully implemented in terms of the properties its trying to inherit from its real world counterpart, otherwise it simply becomes useless and is cast aside.

In that respect there are essentially 2 on offer:

1. contractural money (that's backed by a counterparty bond)
2. commodity money (that is backed by a scarcity value representing the amount of financial effort needed to acquire it from nature)

That's it !

There is no "make these tokens and somebody will buy them" money. Or worse even "the cheaper this money is to produce the more valuable it will be". So I think you've missed the point about mining. The "energy" isn't there to secure the network or even to generate the coins. It's role is to mediate competition for the supply without recourse to counterparties or intermediaries. As such it is able to faithfully inherit the monetary properties of commodity money. This is what leads to its ability to store capital because the scarcity can be measured in financial units independently of the market traded price - again another important inheritance of commodity money such as metals or minerals.

So if you throw out mining and ALSO don't capitalise the tokens in some other way such as through bonds or massive utility, what have you got left ? Nothing. An emperor's clothes scenario where the market simply devalues you on a chronic basis. The "rewards" in that case more closely represent a cake that gets sliced ever more thinly without gaining any size or weight.

A greeting

With "all due respect", this is arrant nonsense in the case of cryptos who's store-of-value proposition is based around a commodity archetype and the last 5 years of trading have shown it to be such.

You're basically arguing that bitcoin would be more valuable if it could be created without all that hashrate.

Be my guest in demonstrating this theory because Dash is already trying it and plummeting out of competitive range of its contemporaries. All these theories are trying to do is justify how "free money" can have value. It's emperor's clothes logic, nothing more and is exposed when you simply present an authentic formula for ROI for masternodes and mining as done above.

It sure is. Because there are 2 significant omissions/flaws in the reasoning behind Spork 21 IMO:

   1. expressing and targeting ROI in Dash instead of USD (irrelevant to an investor)

   2. modelling miners and masternodes as demographic groups instead of compoundable factors in the reward function (makes the analysis almost sociological in nature instead of economic)

So, to correct for these two errors we see that a completely different picture emerges as to the optimal approach.

Masternode ROI now becomes: (Reward + Capital Gain or Loss) / Collateral
Mining ROI now becomes: (Reward[at mining difficulty] + Reward[at zero difficulty])/Mining Cost

This is the more complete and correct description of the Dash protocol economic model which is the one that should have been used to determine an optimal "store of value" configuration IMO since roughly half of Dash's supply is effectively mined at zero difficulty. Any "miner" can therefore avail themselves of primary supply:

 • exclusively at mining difficulty
 • exclusively at zero difficulty or
 • a combination of both

Note that there are two significant implications of this which turn the reasoning behind Spork 21 on its head:

   1. while the Dash protocol can set the reward ratio in Dash, the market sets the reward ratio in Dollars.

   2. following from 1, the Dash-determined reward ratio is IRRELEVANT unless its "tuned" to a market-competitive level. If we set it wrong the market will simply work against us to "set it right"

   3. the argument that "restricting supply to miners" is somehow effective in gaming order book liquidity is moot because in the holistic model the entire supply is mined, just at distinct difficulty levels. It is also rendered moot because of the false assumption that demographics are coupled to reward categories which they clearly don't have to be

   4. the argument over whether or not miners run masternodes to subsidise mining is also moot because the Dash protocol ENCOURAGES IT, since the more masternodes a mining cartel runs, then lower their average mining difficulty level is. Masternodes are also a capital asset that can be cashed in at the end of use (unlike mining rigs) so the incentive for hybrid mining is substantial

***************** HOW TO FIX *****************

The problem is that mining profitability is set DIRECTLY by the free market (through difficulty adjustments) whereas masternode profitability is set INDIRECTLY by the free market with recourse to the coin price. We need to eliminate the tension between the market-optimal reward ratio and the protocol-configured reward ratio to get rid of the drag.

Since masternodes are effectively miners in the sense that they receive the primary supply, the mining profitability margin therefore serves as a reference for this (since it's already responsive to the free market). We can even guess it just by looking at a few coins - getting it anywhere near the right level will be infinitely more optimal for growth than what we have at the moment.

He already pointed out to you that that's irrelevant because distributed wallets don't mean distributed owners.

It's particularly poignant with Dash because large holders HAVE TO split their holdings into distinct addresses if they want to run masternodes.

Mining profitability is here: https://www.coinwarz.com/mining/dash/calculator

1. Borrow $67,000 at zero percent interest
2. Buy 1 masternode
3. Mine for 6 months at zero difficulty
4. Dump your masternode
5. You now have $2264 worth of Dash at zero cost and no investment capital

The problem is, that with bitcoin at $100,000, current Dash/BTC ratio and current mining/masternode reward ratio MN "profits" would be at near $6000 every 7 days for 1 node. That amounts to $2 Billion per year network-wide in pure profit for doing no economic work. Mining at zero difficulty in exchange for $2 Billion worth of value.

If you think that's a "theory" that works then you went to the school of Alice in Wonderland economics because no activity survives with that kind of deluded model. The profits simply get repriced in dollars. So we'd be looking at Dash/BTC ratios of around 1/10th of where they are now if we're lucky.

The job of the "competitive mining theory" is to preserve capital in the chain by making the coin as expensive to mine as it is to buy. End of story. It's very successful at that and if you don't use it then the capital simply disappears out of the chain in proportion to the number of blocks that get mined at zero difficulty in comparison with those at full difficulty. (A bit like what would happen to bitcoin if it were to give away half its new supply to large holders at zero cost instead of putting a price on it.What's the difference between that and what Dash does ? - none. Ok so they have to run a node. Big deal, it costs $15 a month. It's no more than a symbolic gesture compared with the devaluation incurred through loss of mining effort).

In mined coins, utility arises from being an effective store of value, not the other way around. (As we have found to our cost).

Although it's nice backstop to have if the hashrate drops away (or if the protocol intentionally mitigates it) I think some of this community doesn't quite get the idea behind mined crypto-assets.

The whole POINT is that it gets hacked.

That's its protection against "hacking" - the current protocol is simply the last biggest "hack" that succeeded. It's a "bring it on" type of logic. That gives miners a strong incentive to apply hashrate to the chain and aligns the interests of the holder with those of the hackers (because by "attacking" the chain they are also "defending" it). It creates a virtuous cycle that resolves the conflict between monetary security and network security.

Contrast this with the approach that tries to mitigate hashrate because it doesn't value it:

In that case, we see hashrate as a potential threat and so we devise ways (like chainlocks) that de-incentivise competitive mining. That in turn reduces competition for the next block which feeds back to the price in the secondary market and a viscous cycle is set up instead of a virtuous one. Monetary security is now in conflict with network security because the former has to be compromised to pay for the latter.

This type of approach would be more appropriate if we were trying to create a payments network that was very cheap to maintain. i.e. where the "hashrate" was a cost to the network rather than an investment IN the network. It would be the type of network that Mastercard would create if they wanted to decentralise their messaging system.

But the problem with that type of network is that it can't store value. By making it cost less you're simultaneously pushing away investment in it (because investment is seen as a "cost" in the protocol's view).

This is the flaw in thinking we have currently informing our protocol. It's been thought out according to the priorities of creating a cheap-to-run decentralised secure messaging system instead of a high-investment store-of-value token. This is what needs to be addressed and revised IMO.

We need one of these pronto:

I sure would vote for that.

While this is interesting, it doesn't really address the main problem. DIF could buy all the gold it likes but there's no way for a regular investor to access that value. Dash "tokens" are not gold-backed bonds, they're still mined.

As an example of the problem we have at the moment, imagine someone put in a proposal to Dash DAO to receive HALF the entire new coin supply. You'd want something for it wouldn't you ? You'd want to know how it was worth directing that supply to a proposer instead of having it mined. If the proposer simply took the money and "ran" we'd be not very highly regarded by the market, nor well valued.

Yet that's exactly the situation we're in with masternodes. Masternodes are not delivering any kind of return for that allocation, they're simply holding coins - which happens to be what every other holder in every other coin is doing except they need to have obtained theirs through competitive mining (or have bought them from someone who did) which (ironically !) does actually serve the network in a way that masternode rewards don't.

This is what's drilling a huge hole in the valuation on a chronic basis. Buying gold with a slither of allocation that doesn't come from this haemorrhaging capital doesn't do anything to shore it up IMO.

Reject it all you like but the fact is it works because it preserves capital in the chain (both theoretically and demonstrably) rather than eating it away and it explains a lot of things that anecdotal observations of market cycles just don't. There's nothing wrong with inflation as long as the new supply is adequately capitalised. One the other hand, if you allow that supply to be mined at zero difficulty, the market is simply going to value it at zero difficulty.

With Dash, it isn't "a few coins a month" it's more than half of all the new supply. We have the inflation anyway whether we mine it or give it away, so why not subject it to competitive mining and give it a robust opening price ? How on earth does making that supply a free gift mitigate the effect of inflation more than having it mined ? It's effectively counterfeit as far as the mining archetype goes.

This is known economics not rocket science. The fine art market is very similar - if an artist starts giving away their work for nothing it simply collapses the value of all their works in the secondary market as well.

Dash has now given up ALL the satoshi gains it ever made. It's the only one of the mineable top 30 coins to have breached all historical support levels and is now on a more or less permanent downward path with a steepening gradient. We're back at the satoshi price that existed 4 months after its birth and Dash and Dogue are now decoupling from our mined former top 20 contemporaries in that respect. It isn't a "bear cycle" it's a death spiral and there are clear reasons for it which is that supporting the revenue of 5000 nodes at a near 100% profit margin is a COST believe it or not. That cost has to be paid from somewhere and right now its being paid straight out of the blockchain which is why it's continually losing value.

Your argument amounts to what I call the "washed up by the tide" theory of growth. The problem I have with that is that you're basically advocating for no more than an exit pump. Secondly, it doesn't matter what coin you're invested in - "washed up by the tide" isn't exclusive to Dash, you could pick any coin to be invested in.

I don't see it.

I'm simply accounting for the value that goes into the market and what happens to it. None of what you write addresses this, yet we're forced to do it for bookkeeping purposes. We have revenue, therefore there's a cost. The question therefore arises of who bears that cost and where ? It doesn't matter whether the coins get sold or not, it's still the same bookkeeping cost impact because debits must equal credits.

So you're basically saying that 2+2 can equal 8. That Dash can take pure revenue from the chain at zero difficulty week after week and still expect its capital value to grow while all the other mined chains have to hash out every block. Do you realise how ludicrous that sounds to any serious new investor who sits down to do some due diligence appraisal of Dash as a long term investment ? Even our utility doesn't grow - not because we lack features but (ironically) because we're such a poor store of value.

At a price of $3500, masternodes are at a pure profit of $4500 per week - for performing no economic work. Margins like that simply get repriced into oblivion in no time which is what happened at the last ATH which lasted only a matter of days. Good luck in getting out inside that window the next time it comes around.

There's got to be some fundamentals of the coin economics that square for the thing to be investible. It isn't enough just to talk about market cycles because there's far more Peercoins and Bitshares out there then Litecoins and Moneros. If BCH blows up the natural successor is Litecoin, not Dash because we're talking about store of value not utility. The chain doesn't have to be useful to be a good store of value but it does have to be a good store of value to be investible. The only thing you have in that regard in the absence of mass adoption, is mining.

P.S.

You say Litecoin has completed a bear market cycle and Dash has yet to complete its. Well Litcoin is at 1/10th of its ATH against Bitcoin and never went below it. Dash is ALREADY at 1/27th. So we're getting kind of late in pulling out of the nosedive. We'd need to dig ourselves out of the ground first.

This was the build up to the 2017 "pump" form the year before - steadily rising bottoms. (Even the earliest of which is above where we are now !).

Compare with the "build up" we have now (chart above).

There ain't no "saviour" pump headed our way.

I think you maybe just trying to convince yourself that something that isn't viable somehow is.

The costs you cite are not even scaled with price. At $500 Dash, weekly margin over cost for a node is about 99% given a hosting cost of 30$ per month (which is already about 2 times what I pay).

That isn't sustainable. The conditions now are nothing like the conditions in 2017. We received a massive pump from hedging the impending bitcoin fork at that time. Bitcoin had never been forked before - there was no BCash or BSV. There were almost no stablecoins which are now prolific and efficient to be used as payment mediums. There were far fewer competing investable assets.

Additionally, the 2017 pump (in Satoshis at least) preceded bitcoin's big rise by around 10 months. So if you're looking for an echo of that one then this was it - we already had it and profits are now being taken:

Ok, you may be right. I was trying to illustrate a point.

Being that:

 • hosting cost does not increase with Dash price
 • mining costs do

Therefore as price rises, those two profit margins get out of sync.

The more they get out of sync, the less capital value Dash is able to absorb into the chain (because, proportionately, more of it is going towards holder profits).

Therefore it has a glass ceiling that fully mined coins don't have and when it reaches that glass ceiling (where the disparity between the two margins is stretched beyond the point that the market wants to start taking profits from one of them) it crashes back down to an equilibrium level.

That "glass ceiling" gets ever harder the more masternodes we have because the nodecount reaches a point where the coin supply ownership is exponentially more fragmented. At that point nodecount growth stops. You can't manipulate it via protocol incentives.

So we need to be competitive at the equilibrium level of masternodes. MN growth or shrinkage cannot be a factor in Dash's store-of-value proposition other than temporarily because MNs must be tradeable just as the rest of the supply is.

We are now at 5000 - back in 2014/15 it wasn't anywhere near that so the low hanging fruit was still being picked. The price was rising from populating the MN collateral, not because of core store-of-value properties.

The way to remove the glass ceiling and allow the price to rise sustainably is to set the two margins at reasonable parity with each other over cost. Obviously that is not an exact science because the mining profitability is always kept competitive by the free market - they have variable costs. Meanwhile masternodes have fixed costs so their profit margin is effectively set by the protocol and rises with price without MN's having to do anything for it. But we have such a massive room for manoeuvre on this that we could instantly increase the mined proportion of the supply by about 30% and still cover masternode hosting costs by multiples.

That seems to me to be the way to respond most robustly to our market devaluation.

Excellent post ! (+very interesting perspective re. MN subsidised mining = (zero difficulty mining + commercial difficulty mining) = reasons for cartels to accumulate = corruption).

This is the kind of numerically informed debate we need to restore Dash back to top-10 marketcap rather than roll over and die "cos MN's took a vote and that's sacred". It isn't sacred. It's a vote, that's all, and it was the wrong vote.

The beauty of Dash protocol is that the utility layer is extremely cheap to support but massively competitive against other mined coins. However the store-of-value function is in the mining, not the utility. Therefore the obvious advantage that we have is that we can support almost as much mining (store-of-value) as bitcoin, but only have to sacrifice a tiny bit of it to gain a disproportionate advantage in utility.

That was always Dash's advantage - so why no avail ourselves of it and go on the attack ? Why be defensive and pretend that we need to play some silly games with supply & emission optimisation to be competitive ?

Did anyone that invested in this coin do so on that basis ? Did y'all look into emission, traffic to order books from miners vs masternodes and that type of stuff when you invested ? Of course you didn't. You just saw a "better bitcoin". Implicit in that appraisal was the idea that Dash would have bitcoin's store-of-value properties as a given but additionally great usability. Why else inherit its codebase ? But according to Spork 21 that isn't what you invested in. You invested in a coin who's major governance achievement as far as store-of-value is concerned is to optimise traffic-to-market between miners & masternodes.

For me that is unacceptable. In the words of a tennis player "you cannot be serious".

We need to re-appraise this. As always, the thing that will save us is...thinking.

Of course not because Dash protocol allows you to put the mined supply revenue straight into your pocket at zero difficulty instead of investing it in mining which you would be required to do with bitcoin/litecoin which is why they attract far more investment capital than Dash does.

Monetary security vs Network security:

 • chainlocks implement network security
 • hashrate implements monetary security