By offering a return on investment we are incentivising DASH ownership...By paying holders of DASH for holding we are creating a positive feedback loop there which creates an underlying demand on the coin. Currently a 1000 DASH earns roughly 6.5% more DASH
This only works if you measure your wealth in Dash. Nobody does that. They measure their return against whatever currency they invested to acquire the holding and against other assets that they "might" have invested in (opportunity cost).
Dash therefore cannot "pay ROI". Only the market can do that (by revaluing the masternode collateral which has far more to do with "ROI" than masternode rewards do). Lets say an investor buys a masternode for $200. Then the price drops to $170. It would take more than 2 FULL YEARS of masternode rewards just to recover that loss and break even again assuming the price didn't correct any further.
So the protocol should be optimising ROI from capital gain, not from masternode reward *. Then the rewards will take care of themselves. The two are completely distinct concepts to the extent that increasing masternode reward
beyond the optimal point, DECREASES ROI by having an adverse impact on the exchange rate (which in turn devalues the collateral). This is what we always see once the nodecount reaches equilibrium.
* There are a whole host of other advantages from this, not least that ROI from capital gain does not attract tax whereas masternode rewards do, so we'd be ditching a whole lot of statutory compliance selling pressure which we have nowTo this point:
Think of it like a bank, if the interest rate is high, you put your money in it to earn interest
Ok, lets "think of it like a bank". Here you can see exactly the problem. You don't earn interest just by having a balance. The bank has to re-invest your balance in some economic activity that generates NEW WEALTH. That activity has to be profitable to the extent that there is a surplus to pay your interest. So that could be road building, oil extraction, commercial services whatever.
Masternode collateral is only "invested' to the extent that the role of the node generates economic activity that revalues that collateral. In Dash's case there is no such
onchain token-burning activity (like De-FI tokens have) so it has to be monetary velocity. But you can see from
the above trends that that that has dropped to near nothing. So we're back to Dash original inheritance from bitcoin -
store of value. We are offering scarcity and we should just admit that. Scarcity is optimised through mining (because competitive mining maximises the cost of acquisition from the primary supply). To compete against bitcoin we then add back in services but not by compromising scarcity the way we are at the moment, rather by selecting the reward ratio that optimises capital gain (described a couple of posts back).
