Sure, you can look at it that way. i.e. The block has value..."because"...rather than the block has value "because the prevailing level of competition to mine it represents the starting value for the block".

However, taking that approach has consequences - namely that half the supply ends up being held at a zero cost base and free markets do like to massacre high margins where they have the option. So you end up with chronic profit-takes from masternode rewards competing with miners for limited fiat liquidity and undermining them (because they can afford to right down to a price of zero).

It doesn't matter which way you model it IMO, the long-run behaviour (in the absence of massive added service value to justify the MN rewards) tends towards chronic loss of marketcap share.

That's not what I'm arguing here. (Though philosophically I do subscribe to that idea).

I'm pointing out that investors in the primary (mined) supply who pay 100% of the mining costs receive only half the proportional supply they do with other coins (100% mining reward ones). We therefore lose marketcap share to them.

Masternodes do not "bring coins into existence" as quizzie asserts in the sense of bearing the cost of their production. Miners do. But miners aren't the problem because they just pass the cost on to the market and difficulty adjustments can keep them viable. The overhead (of the "free masternode coins") is felt in terms of loss of marketcap share as the phenomenon acts like an "anti-magnet" to new capital. See this post.

You can describe it this way - it's an anecdotal way of looking at it. But it's not remotely instructive in modelling the aggregate impact of reward ratio on the competitiveness of Dash in the market (i.e. how little investment we need for maximum price support).

I'd say you have 2 choices - go back and read this post again or wait for a certain well known "joke coin" to acquire our ranking which it's now only 25 Sats away from doing. (The "For Dummies" version)

Indeed. That's the point I'm making. The proportion of the block reward received is the ONLY difference.

The proportion of the block mining cost PAID (all blocks & rewards) is the same.

Also, miners are irrelevant in this - it's investors that pay that mining cost. They pay the mining cost of BOTH mining and masternode rewards but only receive the mining reward. The miners-only model is therefore more competitive in this respect.

I'm not doing that.

I'm pointing out that the masternode rewards have to be SOLD to the investors (who pay their mining costs) at the point of mining, even though those investors never receive them and that leaving this issue unaddressed will continue to lose us marketcap share & ranking. (Despite the fact we may accrue some value with the rest of the market).

@bigrcanada - Here's another way of looking at it that may help you to see the point.

Try ditching the obsession with trying to limit the amount of Dash that finds its way to market. We have no control over it regardless of reward ratio. Instead focus on maximising the value for money that the coins that DO get sold provide to that market.

When I talk about the "primary supply" I'm referring to the "mined" supply - i.e. the very first time a block is bought. (It's also what Ryan's proposal is concerned with because it ring-fences mining rewards as the target for limiting supply to markets).

Where I differ from Ryan is that he sees only the mining reward portion of the block as the problem. i.e. his thesis is that the need to cover mining cost drives that reward to market, so if there's less reward less Dash will go to market (and we don't have to worry about masternodes because they apparently hodler for the most part).

All I've done differently is ditch the suppositions and look at it from an accounting perspective. The starting constraints are slightly different but just as relevant. (They are also "known" as opposed to speculated). Those are:

1. a block has a mining cost. The cost covers the mining of the WHOLE block, not part of it

2. that ENTIRE mining cost is borne by the miner (if they hodl) or the investor (if the miner continuously sells)

Analytically therefore miners that hodl can be considered as the "market". (The miner in that case has dual roles - a mining role and an investor role. They buy their own rewards).

3. the mining cost doesn't just cover the cost of the mining rewards, but the masternode rewards also (because there's a cost of mining through the chain to invoke the block rewards that are sent to masternodes)

CONCLUSIONS

Some significant conclusions emerge from these observations:

A. the entire primary supply is always bought. Either by the hodling miner (in investor role) or the exchange markets (in investor role). (Conversely, this means that the entire primary supply is always sold)

B. Point "A" remains true independently of the mining/masternode reward ratio

C. the entire primary supply is not returned to the investors covering the costs at point 1 above

The implications of points "2" and "C" are that investors in the primary supply only receive half the coin they pay for relative to other chains. This sets up a marketcap pressure gradient away from us. (Or put another way, Dash has to recover twice the amount of fiat from a finite market liquidity than our competitors do to cover mining costs).

This is what makes us different from the other clones. We've given ourselves a huge overhead to deal with that acts as an insurmountable headwind to all the technical innovations that are delivered.

The original basis for the split reward was that the utility value added by the masternode network would more than offset the diminished returns made to investors covering the mining costs. That can still be the case but not with such a ridiculously high margin as we have at the moment. Perhaps with a 10% or 20% masternode reward ratio. Even that is a challenge - to convince the market to take 20% less Dash in exchange for the added features and utility. The market wants coin for its buck, not jam tomorrow features which get instantly priced out on a "sell the news" basis.

It becomes more of a challenge every time we lose a ranking place because Dash is seen as less of a "premium" coin.

IMHO the situation's recoverable by following the steps I outlined at the end of this post.

My "agenda" is to point out that the reasoning behind the lowering of the mining block reward is faulty because it targets the wrong priority - i.e. tries to limit the amount of "Dash" that miners send to market rather than trying to limit the amount of dollar-denominated fiat we draw from the market as a whole.

They aren't the same thing because while Dash protocol can control the former, the market has control of the latter.


The marketcap ranking is just evidence that a lowered mining reward hasn't done anything for our ranking in 5 years compared to our mined competitors so there's no reason to expect that lowering it even further will do so.

As for my "theory", there's no "proof" needed other than a calculator and half a brain. Masternode revenues have to be included in the overall accounting equation. Anecdotal testimony such as "I never sell my rewards and neither does quizzie" aren't a substitute for this if that's what you mean by "debunking".


Well it shouldn't be if you're so confident the market will take your view and not mine. It doesn't exactly look like brimming with enthusiasm to me. In December when this proposal was first presented value got priced out, not in. Since then we've lost about 4 ranking places and today are on the verge of losing another.

Masternodes convincing themselves of their own case is one thing - the words "turkey" and "christmas" spring to mind. But dangling carrots that you value in front of the market hoping it'll re-float your bag may not work as well as simply giving it value for its money on its own terms.

True and the worst of it is that prospective investors don't even need to consciously think about this stuff for us to feel the negative effect.

The Dash ecosystem does it for them simply by needing to draw far more fiat liquidity from markets than our competitors do. We require to draw both the block mining cost PLUS the masternode revenues on top which our competitors don't. Reducing the mining reward doesn't reduce that mining cost. Only a reduction in mining competitiveness can do that which is something we do *not* want since it would indicate a decline in demand for the primary supply in general.

You keep finding excuses and ways to avoid the elephant in the room.

One of the highest emission coins of any over the last 5 years gets well above us in ranking during that same period despite having nothing like our functional versatility nor promotional activity, yet you manage to turn that into "it's our emission rate that's the problem".

Bitcoin forks not once but twice (3 times if we include Litecoin) thereby increasing its effective circulating supply by multiples, yet you manage to characterise this as an "advantage" over Dash just because no single one of them exceeds our emission rate.

Nothing to do with the fact that the ONLY consistent distinguishing economic factor between all of these coins and Dash is that they return 100% of mined supply to the people that paid for it and we do not.

Congratulations !

I sure hope the wider non Dash-holding market is more convinced by your logic than I am

That doesn't quite explain our ranking problems IMO.



Try:

"If your protocol requires you to under-supply the market that pays the mining cost by 40% then you may find yourself losing marketcap share - even to "dumb" coins that don't do half the development you do".

We can certainly agree on this point :-)


Then why are DCG focusing so heavily on it ?

The entire premis of the proposal (to lower mining reward) is based on what they claim happens to the so called "primary supply" and that if the protocol gives less to miners then they'll sell less compared to masternodes. But I agree with you - that this hypothesis is based on assumptions of behaviour that is in fact "irrational and unpredictable".

What isn't "irrational and unpredictable" however is the relationship between a given mining cost, the fiat value required from markets to support it and the marginal overhead of masternode revenue. These are entirely "rational and predictable" because the protocol makes them so. We can also measure (in relative terms) what we demand from the market to keep "ticking' compared with other similar coins.

The problem with this debate is that we're marketing the coin to ourselves. The market does not value chainlocks...we do. It's a technical concept that's redundant in a coin where mining competitivity is high. We can easily have lots of great utility features and still drop to Nº 300 in ranking because technological innovation is cheap and just needs a few programmers for a year or two to produce. This is what will happen if we don't value the core business model that makes any mined coin work - competitive mining. It's throwing the baby out with the bathwater.

We can have both because the beauty of the Dash protocol is that it only needs a tiny staking element to add huge amounts of value to the mining model. The service layer can multiply this value, but not if it kills the engine that drives it. The phrase "we don't need all this hashrate" is equivalent to an airline becoming so focused on the in-flight service that they forget they need to make the plane go somewhere. Then they wonder why they lose customers.

Thanks aleix, nice to hear from you !


It wasn't a peice of junk at the time. Peercoin was a highly valued asset designed to carry "trunk" payments, i.e. large payments and had a well thought out monetary strategy. It also boasted EXACTLY the type of monetary protocol that Dash is trying to argue will improve its store of value today.

Its split reward ratio was one of the main differences with bitcoin/litecoin et al. Nor was it more of a "peice of junk" than bitcoin or litecoin in any other respect.


True. And that's why I qualified my comparison as being with pure monetary coins. i.e. blockchains which are invested in as a monetary reserve rather than as a business. To justify large margins over cost (as MN returns do) your investment needs to be doing some useful work for somebody at least to within a reasonable margin of the return. "Service oriented" assets need to feature somewhere on this list for example.

Dash is invested in for very different reasons from the likes of ETH, XTZ et al. It's as different as investing in silver on the one hand and airline on shares on the other.

The more poignant question is....if a split reward that's so inconsistent with the value delivered back to the investor is so great, why have we lost so much market share ? People don't want to face this important question.

We already have this protocol adopted and it's not working as advertised. Why ? Because of simple arithmetic as I've outlined above. I like to trust numbers and the numbers say that the only way masternode margins are sustainable in Dash terms is to accept that the market will devalue them in dollar terms over the long run. (Relative to our competitors, which is why I say it ends up as loss of marketcap share).

Ok, I'll make the point less "salady" for you.

The proposed theory is that by reducing the mining reward, less Dash goes to market and therefore price will not be so suppressed. The reason I say this theory is flawed is twofold:

1. the problem is wrongly framed. It should be framed as how much $USD value does Dash have to draw from markets to support mining. Changing the mining reward does not affect this *. Mining costs whatever it costs in USD and that's what gets passed on to markets. If you return ever less coins to that market in return (proportionally, relative to other chains), market will just move its capital elsewhere

2. we've already tested this theory and found it to fail. With our mining ratio ALREADY depleted by over 50% we've dropped out of sight while our 5-year BTC clone competitors have not. All other pure monetary offerings which tried it met a similar fate

Relying solely on "Ah but it'll be different this time" logic may seem comforting to you but it doesn't to me.

==========
* Mining cost doesn't reduce with a reduced reward ratio. It only reduces if mining is less competitive and that can only happen if Dash is in less demand. Mining cost covers the cost of the ENTIRE primary supply.

I won't have the choice. My exposure in "dollar terms" will automatically be reduced for me by the free market which will understand that 60% of its investment isn't an investment at all but an expense.

Anyone who understands double entry bookeeping will see that. Whatever "income" masternodes draw is pure margin that has to be passed on to the market - "disguised" as an investment when it's actually an expense. That component of Dash's price does not go towards making competitive mining more "competitive" in Dash's case. With Litecoin it does. With Bitcoin it does and even with Monero it does. For us to compete in that regard we'd need a much higher mining reward ratio.

It's like paying a miner $1000 to mine you some gold and then paying a cleaner another $1200 to polish it for you. Ok if the polished gold increased its value by 110% over the dirty gold, but if not.....the investor's gonna buy Litecoin and use a hand cloth of their own to shine it up.

Evan's original plan was that the "polisher" (Dash's service layer in this case) would add value to at least an extent that justified the premium charged to the market over the mining element and that should still be the idea long term. But meantime, while we're waiting for service demand to emerge and service provision to support it, lets give the investors what they want:

1. - more dash for the buck they pay to miners and get ourselves competitive again with the other BTC clones
2. - the prospect of "cherry on top" service layer that boosts the value of their investment

It only needs a tiny bit of sacrifice in priority 1 to fulfill priority 2 because if we reverse the current situation, the market will do the work of revaluing the coin upwards and that will give masternodes greater dollar valued rewards anyway. What we're doing right now is trying to stuff more gasoline in the engine when all it needs is more air to burn the fuel supply it already has. There was never a problem with demand for masternodes. Nor do we have a (competitive) problem on plain wallet ROI. Our competitors don't have it and still blow us out of the park on rankings.

We DO need to compete with them on mining reward however because that's the primary supply that's delivered to investors. Miners are just a proxy (if DCG's demographic claims are anything to go by). If we give those investors less of the supply (proportionaly) than other coins, we'll simply lose market share to other coins. If we make them pay for all the mining cost (by purchasing the miner reward) and then pay again to acquire the balance of the primary supply from masternodes - we'll lose market share again.

We need to restore competitivity for our miners instead of bleeding them dry to the extent that they can't even command a decent price anymore being so undermined by masternodes who can afford to give it away and still break even. Difficulty adjustments can save miners long term but they don't save investors because the capital losses end up on our doorsteps. That masternode income does nothing to boost the value of the coin at the moment (in relation to other mined coins) other than letting users download the blockchain a bit quicker. It's almost all margin and will therefore get eroded by the market - unfortunately at the expense of ALL investors, not just node holders.


Indeed !

Has it never occurred to people that @babygiraffe might not actually mind if the community takes its own course ? Just because he presented a proposal doesn't mean people need to follow it. He has a job to do which is to present a RECOMMENDATION for the community to debate around. His job isn't to direct the community, it's to direct DCG and serve the community which he's done admirably IMO. It's our job to direct ourselves and make sure that whatever we do works and receives proper cross examination.

The DCG proposal will not be successful unless it's presented with challenges, alternatives and stimulated wider debate. Even if it gets rejected, it will still have served its purpose and DCG will have done its job professionally. It's a grain of sand around which to grow a pearl.

Pictorially presented, the question is who to market to ? To whom should we appear more competitive ?

 • the people that bring capital into the Dash ecosystem or
 • the people that draw down that capital without replenishing it ?



By increasing the mining reward ratio, we're not giving more to miners, we're giving more to investors and thereby attracting marketcap share back from the competitors to whom we lost it. That will stabilise price, restart growth and deliver far higher dollar-valued rewards to masternodes.

The loss of marketshare/ranking isn't due to any shortage of industrial growth, product development, exciting roadmap, masternode margin, commercial integrations or uniqueness or pedigree. Those are in plentiful supply. The reason is purely arithmetical (IMHO):

 • In BTC, (a notional) $100k of market demand liquidity has to cover the mining cost of the ENTIRE supply
 • In DASH, (a notional) $100k of market demand liquidity also has to cover the mining cost of the ENTIRE supply (regardless of reward ratio)

...and additionally the dumping of masternode rewards which its competitor's market liquidity does not. This "deadweight" overhead gets bigger the more the mining reward ratio is lowered.

Therefore: much less of Dash's market demand liquidity is available to support the price/cost of mining which remains unchanged from a lowered reward ratio alone. Ergo it loses market share since buyers continuously get more of the primary supply for their "buck" with 100% mining reward competitor coins.

Nothing fancy. Just



Also, the priorities expressed in this kind of perspective present a problem for Dash:


...because the case is being constructed, argued and addressed to masternode holders when it should be being addressed to the wider market from its point of view. It's non dash-holding, potential investors that will determine the future of this coin, not a tiny bunch of masternode holders (who will probably destroy it anyway if track record is anything to go by. They can afford to).

With that in mind, window-shopping Dash no-coiners are interested in one thing from a long-run economics point of view: paying the absolute minimum premium over mining cost for the privilege of acquisition. If we slap a whopping great 60% acquisition tax on their purchase, lets not expect to be rewarded with improved rankings.

Only in a philosophical sense. Such as saying that a "vibrant economy is a distraction from gold as a store of value".

True in a particular philosophical perspective, but less than useful when it comes to allocating capital.

...other than to note that sh*coins are the "lungs" of bitcoin and one of the reasons that bitcoin has managed to grow sustainably over the last few years of its existence

This is why we see a continuous long term decline in dominance coupled with a sustained long term growth in price, because the octupus head needs tentacles that have the technical, monetary and commercial versatility to reach into the corners that the head doesn't, albeit that those tentacles may themselves not outlive the head, interchangeability being one of their strengths.

A "pandemic" of testing. (...for saline saliva).

Those are all valid points quizzie. Also, XKCD has made valid points in his comments. But they're insufficient to address the issues at hand which are chronic and fundamental in terms of loss of market share. Doing "more of the same" isn't going to fix it IMO. Compared to bitcoin or litecoin we've already got massive reward ratios for nodes which are ridiculous compared to the cost of running them. We've also got far more versatility in the chain functionality, yet w've sunk out of trace on rankings and they are buoyant, including the forks. This isn't a problem of "too much mining reward". All the top coins have nearly twice that of Dash.

It's helpful to see the "economics" of the coin in at least 2 layers of context. At the protocol level there only a few variables which makes it much easier to analyse than the morass of nebulous complexity of the broader market and holder demographics.

We need to "engineer" that inner protocol model so that all the variables are perfectly tuned with each other, work in harmony and it's bullet proof. I've already demonstrated how easy it is in the last 2 posts - it's almost back of the envelope stuff and is only basic due diligence apart from anything else.



IMO, the reason I've been at cross purposes with others in these discussions is because I'm addressing flaws in the core protocol economics and they're countering with anecdotal solutions from the broader market context. Ok - some of those may be valid, but it's again like leaving the brakes on and just fitting a bigger engine instead.

If something is flawed or unstable in that inner protocol economics model then it's going to be felt all the way to the outer layers but it'll be impossible to detect where the problem originates cos it'll be buried in clouds of opinionated ambiguity that's unresolvable.

So returning to your question: , the answer is that the above analysis of core protocol model (whether we take my "500 Dash supply" market perspective or your "1000 Dash supply") requires Dash to lose market share or miners to mine at a 50% loss either of which destabilises the core protocol model.

The only way that model comes back into stability IMO is:

1. ramp the mining reward back up significantly. This would restore the lost competitively described in Example 1 previously. It will also solve the conflict of priorities between that and mining viability described in Example 2

2. continue to evolve the service provision layer to "mop up" the asymmetric margin over cost in the part of the primary supply that's "gifted" to masternodes. (Because if we don't, the market will do it for us by devaluing the coin further)

3. between 1 and 2 we will then have a more "measurable" value added provision by masternodes and this will feed positively back to both the supply deficit challenge (Example 1) and the mining sustainability challenge (Example 2) to mitigate them

We will then have a sustainable, competitive protocol economics model that isn't in conflict with itself, can market the primary supply competitively and sustains mining. With all that in place the price can rise and masternodes will start to benefit as well with dollar-valued rewards that are more in line with original expectations.

OK, lets look at it your way then. (Example 2).

We'll do the exercise again with different priorities. We'll make the supply to market a constant and allow the mining revenue to vary instead (which was constant and competitive in the last example). This time all 1000 Dash are delivered to the market as you say, from primary holders(Miners and Masternodes).

So now, for its $3000 investment, the market gets:

1. all 1000 new Bitcoins (=50% of the closing supply)
2. all 1000 new Litecoin (=50% of the closing supply)
3. all 1000 new Dash (=50% of the closing supply)

But lets look at the mining revenue:

1. the 1000 new Bitcoins cost $1000 to mine and revenue was $1000
2. the 1000 new Litecoins cost $1000 to mine and revenue was $1000
3. the 1000 new Dash cost $1000 to mine but revenue was only $500

So we now have uncompetitive mining rewards and the model's unstable. Something else would have to give to restore equilibrium.

The "uncompetitive overhead" is still there - it just pops out in a different place.