Up until now, I've been talking about the "
primary supply" (new mined supply) and people have responded with the #
pumpIsComing theory of capital flows, saying that while I may have the odd valid point, when the "pump comes" it will blow these cobwebs away.
So I thought I'd have a look at the secondary market (exchanges, not mining) and see how absorbent Dash protocol is to rises in price there. But here I see a problem also.
As the coin supply gets absorbed into masternode collateral, it becomes ever less contiguous. What we saw in 2016 & 2017 was the low hanging fruit get put into masternodes, but we will reach a point where it gets exponentially more difficult to find any continuous block of 1000 Dash with the same ownership (or co-operative owners) at which point we've reached "equilibrium: As many masternodes get sold as bought and the nodecount remains constant.
So we MUST consider the protocol in the context of this equilibrium state. It isn't enough to depend on a growing masternode count because at some point (like
now) it will hit the limit and at that point we want the capital value in the chain to maintain buoyancy. (Which it can do by directing any mining revenue that isn't absorbed by service provision towards keeping the block scarcity high for the majority of blocks).
Considering a rise in price in the secondary market then (i.e. nothing to do with mining, just new demand at exchanges) we know that that feeds through to mining difficulty to raise the cost of mining a block, and therefore keeps the "opening price" of each new block catching up with the secondary market. For a 100% mined coin, ALL of the money going to primary market is directed at this priority. (i.e. all revenue generated by newly minted coins goes towards raising the difficulty and therefore opening price across all of the chain. No blocks emerge with a zero cost base).
But in Dash it does not. What's supposed to happen is that some of that revenue was to go to finance the service layer, but instead it just goes straight into private hands, not funding either mining difficulty OR services because the masternode reward coins continue to be generated with a cost base of zero.
So we have a TRANSMISSION PROBLEM even in the
#pumpIsComing scenario. Exchange demand does not fully feed through to scarcity. Instead it goes to MN profits directly. The way to sort this would be to set the two margins at parity - mining and masternode. That would allow the protocol to:
A. retain capital in the chain without it hemorrgaging out to uneconomic masternode margins
B. absorb far more of the secondary market demand (if and when it comes) as capital gain instead of it being derailed into masternode revenue (and from there, out of the network)
#nodesAreNotACharity
#setMarginsAtParity
