[ANN][DASH] Dash (dash.org) | First Self-Funding Self-Governing Crypto Currency

[stan.distortion]

No, they're matched. Emission doesn't change, instead mining power reduces as profits reduce. The only market stability offered stems from miners reserves, accumulated coins and unwillingness to just cut their losses on hardware.

[toknormal]

No, they're matched. Emission doesn't change

Just to clarify:

Mining sales (in the secondary market) are matched by mining buys (in the primary). Ergo mining profits are zero unless they can mine at a lower cost than exchange prices. It follows that the rest of the mining cost manifests as the primary "price" of the coin. (What the miner had to pay to acquire it).

Masternode sales are unmatched. They acquire the coins at zero cost.

DAO allocations (that get liquidated on exchanges) are unmatched. Again, the contractor receives the coin at zero cost, however if the contractor adds an equivalent value to the coin then it could be argued that the sale is "matched".

If we want to quantify this numerically then all we have to do is measure the profit each stakeholder makes on a sale at the exchange. Unmatched sales yield 100% profit and matched sales yield zero profit. That tells you all you need to know.

[stan.distortion]

You're not anchored to anything. Price dictates mining costs, there's no "unless they can mine at a lower cost", if the market isn't offering them above cost they switch to mining something else. MN operating costs are close to 10% of rewards at the mo (ignoring depreciation on collateral) so not entirely free but it wouldn't really matter. If Dash was entirely PoW the price would be just the same, what's being soaked up by the markets determines the price (in a perfect world ofc, here in the real world it's mostly determined by manipulative trading and selective reporting).

[toknormal]

You're not anchored to anything.

Let us do some simple accounting. A miner mines 1 Dash. They expend $50 of direct cost doing so. They sell that 1 Dash on an exchange for $55. So the accounts for that "stock" go as follows:

Revenue
============

Sale of 1 Dash: $55

Direct Costs of Sale
============

Electric bills: $50

Gross profit (Loss): $5

So when you account for any mining activity, you are indeed "anchored to something" at least in the sense that you can't take the cost of mining a Peercoin and use that to calculate the profit you made on a Dash. I'll restate what I said above maybe in a more specific way: the miner makes zero profit on any given mined stock "unless they mined that stock at a lower cost than the revenue they made from its sale".

Following from that we see that:

Mining sales are matched to a buy (plus or minus their gross profit)
Masternode sales are unmatched (because they incur near 100% profit on the sale)
DAO allocations could be considered matched to their contract costs (plus or minus the gross profit)

Conclusion:

The only source that exerts exclusively sell pressure on the market as a whole (at nodecount equilibrium) is...... masternode rewards.

Corollaries:

Increase the proportion of blockchain emission that goes to masternode rewards and you put more chronic downward pressure on price and therefore marketcap relative to fully mined competitors.
Decrease the proportion of blockchain emission that goes to masternode rewards and you'll relieve that downward pressure on price and allow marketcap to grow more competitively.

(And I always emphasise - at nodecount equilibrium because that's the long-run economic condition).

[stan.distortion]

It makes fx all difference. Miner and MN emission is constant, it wouldn't matter a damn if it was all going to miners or all going to MN's, if it's getting to markets then the market (supposedly) matches that to cash flow in, matches supply to demand.

If anything's the opposite would apply, MNs only send enough to the markets to meet their running costs and hoard the rest, supply to markets reduces.

[toknormal]

It makes fx all difference. Miner and MN emission is constant, it wouldn't matter a damn if it was all going to miners or all going to MN's, if it's getting to markets then the market (supposedly) matches that to cash flow in, matches supply to demand.

Go back and look this diagram.

You're making the same mistake as Ryan did - pretending the primary market doesn't exist. That's why we're in this mess in the first place. The point is that the supply is NOT finding its way into markets. Masternode rewards BYPASS the primary market and go straight into holder pockets without them ever having to fork out a dime (remember I'm talking about the nodecount equilibrium case so you can't argue that masternodes are somehow more "deserving" of the reward having purchased their collateral. It's exactly the same thing in accounting terms as giving the reward away to any 3rd party, masternode holder or not. This remains the case as long as next to none of that reward gets invested in the network somehow).

So you're wrong. It does make a difference - a whole lot of a difference.

[stan.distortion]

Were you sober when you came up with that? You've got it back to front, the amount of fiat coming into markets dictates how much fiat miners have available to pay their running costs, mining adjusts its overheads to match it. 40% or 100% makes no difference to how much fiat is coming into markets, it only effects what percentage of that fiat is spent on mining running costs.

Mining costs are only invested into the network in the sense that they use electricity to provide security, plug in a toaster and you get toast, plug in a miner and you get security. You could argue that expenditure of energy is what gives crypto value but it's a pretty piss-poor argument (that also happens to be back to front).

[toknormal]

Were you sober when you came up with that? You've got it back to front, the amount of fiat coming into markets dictates how much fiat miners have available to pay their running costs, mining adjusts its overheads to match it. 40% or 100% makes no difference to how much fiat is coming into markets, it only effects what percentage of that fiat is spent on mining running costs.

Doesn't matter. You're not understanding a simple accounting equation and focusing instead on a lot of hand waving nonsense about running costs and mining dynamics that have no relevance to this in accounting terms. They're common to all mined coins.

To see this, ditch all your mining metaphors (because that's all they are). Get them right out of your head and consider the blockchain as a decentralised market where bidders bid for the new supply. That is the more informative and accurate economic metaphor because anyone who wants a coin straight off the blockchain has to pay for t. If you issue some of that supply with a zero price into the market, it's not going to do anything but corrode the viability of the rest of the market - obviously.

In that context, masternodes are no different from non-dash holders: they are part of the market for the new supply. You might as well give the reward to a non-masternode holder for all the good it's doing the network because the fact that it's issued at 100% profit for the node holder is disastrous for Dash as an investment asset because that profit HAS to come out of marketcap. There is no other source for it.

Remember I'm talking about the nodecount equilibrium condition. I realise that masternode rewards provide an incentive initially for people to invest in a node, but once the nodecount as a whole reaches a stable level and there's no net nodecount growth, we're no different from Bitcoin where most of the supply is also held in wallets.

The only difference is that half our supply is being released off the blockchain with a price tag of zero on it. The fact that we're actually even still in the top 100 is a testament to Dash's resilience given that we're paddling against such a huge self-inflicted tide.

[stan.distortion]

Where are you getting the idea that the amount people have to spend to receive block rewards effects how much money comes into markets? The only reality in which that works is one where the electricity companies use the money they've got from miners to buy Dash.

[toknormal]

Where are you getting the idea that the amount people have to spend to receive block rewards effects how much money comes into markets? The only reality in which that works is one where the electricity companies use the money they've got from miners to buy Dash.

That's such a hypocritical argument.

You don't dismiss market demand when it manifests at exchanges do you ? Yet ALL of that money is just going into 3rd party pockets. It's just going from one person's savings account into another's. The only benefit to the network is that if there's more demand than supply, the price rises.

The primary market is just the same except the electric companies are simply mediating the bidding. How else would you do it and make it trustless ?

Not only that, unlike in the exchange markets they're not even receiving ALL of the money that enters the market because as the blockchain price rises the electric company also has more costs because they have to supply more product to us, ALL of which goes into raising the marginal price of the coin in the primary market. (Price of extracting the next coin off the chain). So once again that argument that Ryan made was 180 degrees wrongly reasoned.

[stan.distortion]

You might want to consider backing off on whatever you're drinking/smoking/whatever. You've had a lot of extremely rational arguments in the past but you're going full Camosoul on this one. The electricity companies aren't mediating the bidding, they're charging a fixed price per unit and miners are using more or less electricity as value goes up or down.

You could argue that mining has a constant disincentive, "fx you, why should I be doing all this work when you're getting it for free?". That would definitely have legitimacy and reaches equilibrium when MN running costs equal rewards, somewhere around 4$ at the mo but that would adjust in the same way as mining, the number of MNs would reduce.

[toknormal]

You might want to consider backing off on whatever you're drinking/smoking/whatever. You've had a lot of extremely rational arguments in the past but you're going full Camosoul on this one. The electricity companies aren't mediating the bidding, they're charging a fixed price per unit and miners are using more or less electricity as value goes up or down.

Mining is a market. Plain and simple. You know fine well there's no drills and spades involved - it's a metaphor. So give up on the metaphorical dynamics for a moment and see it for what it is in accounting and economic terms.

To obtain a coin in that "market" you need a currency. The market currency is energy (the mechanism that makes that market trustless, but it's still a market). That is the respect in which electricity companies are "mediating the bidding". I don't think this really needs explaining to anyone who understands accounting, it's obvious and it's also obvious (numerically) that if you release coin into that market without exposing it to competitive bidding, it will simply chronically erode the price, so that needs to be done extremely sparingly. Not like dumping half the supply into the ecosystem with a zero price tag like we're doing.

[stan.distortion]

The only place it's exposed to competitive bidding is the exchanges. Crypto 101, mining difficulty adjusts, the cost to create the next coin constantly changes.

"...and he went on to explain how black is white and got killed at the next zebra crossing"

[toknormal]

The only place it's exposed to competitive bidding is the exchanges. Crypto 101, mining difficulty adjusts, the cost to create the next coin constantly changes.

The more demand there is for primary supply, the more the price rises.

So no. Exchanges are not the only place it's exposed to competitive bidding. The primary market (obtaining coin straight off the blockchain for a price based on how many other people are trying to do the same) is the first.

[stan.distortion]

That supply is fixed, the cost to create it is what changes. It doesn't matter if 40% or 100% of that supply has a creation cost, all the market sees is the average.

[toknormal]

That supply is fixed, the cost to create it is what changes. It doesn't matter if 40% or 100% of that supply has a creation cost, all the market sees is the average.

Except it's not a "creation cost", it's a capitalisation volume. So only 40% of the supply is being "capitalised". The other 60% is capitalised in secondary (exchange) markets but that capital never reaches the chain. It goes to individuals instead (to pay for MN profits which are at near 100%).

You don't make the coin more valuable by reducing the "creation cost", you make it less valuable. The "averaging out" you refer to it is the marketcap depletion that I'm refering to.

This goes back to the second of Ryan's flawed appraisals - characterising POW as a "manufacturing process" where hashrate is an "overhead" instead of a capitalisation process where hashrate is the mediator of capital entering the coin. It's not difficult to see why the former characterisation is wrong and you'll always come to that conclusion as long as you swallow the mining metaphor in a literal sense - a picks and shovels operation - instead of what it really is: a trustless market.

Primary Market Dynamics

To see that, lets consider ONLY the primary market for the moment (because the secondary market is common to all coins so cancels out in the comparison). In this case we just imagine there's no secondary exchange of coins, the first holders of the coin keep it and never sell. In Dash, masternode holders are primary holders of the new coin just the same as miners.

In this case case the marketcap is defined exclusively by the marginal cost of mining. In other words the next block to emerge has a cost of production and that cost defines the coin price. (Note the only difference between "cost" and "price" is that price is just the unit cost. If I buy 10 toothbrushes and the "cost" was $20 then the "price" was $2 per brush).

It follows therefore that the marketcap in this case (and consequently the store of value performance) is DEFINED by the cost of mining the next block.

We know that difficulty rises with more miners, so the cost of mining the next block also will. That therefore represents (by definition of "marketcap") the mechanism by which the block is "capitalised". Seeing it as a "cost of production" or overhead would be like sticking cash in the bank and seeing that deposit operation as a "cost" or "overhead" to be minimised. It isn't a cost, you're just moving capital from one parking place to another.

Secondary Market Dynamics

Now lets re-introduce the secondary market into our appraisal. For analysis purposes, lets assume secondary market price equals primary market price (cost of mining) for a moment so we can observe the effect of asymmetric primary "price". We now have a bunch of sellers who's holdings are at heterogeneous unrealised gains. The mined supply is neutral - it's not at any realised gain or loss and there's no profit to be made by selling. There is also a disincentive (in the long run) to sell below cost because that incurs a loss for the miner.

On the other hand, the masternode holder doesn't care. They are at a profit at any price because they never had to capitalise their "coin" in the first place. The secondary buyer is going to do that for them. (Whereas the miner, is simply transferring a pre-capitalised coin to the secondary buyer). This leads to another source of downward pressure on marketcap - excessive profit realisation from uncapitalised holdings.

Even if you take the view that miners are "forced to sell" to cover electricity costs, it doesn't matter because those "electricity costs" went towards capitalising the coin. You can also argue that masternodes are "forced to sell" because the whole point of running a node is to operate an income stream and that income stream is only useable if it's constantly realised. Except that "income stream" does not go to capitalising the coin as with the miner. It leaves the network. So that argument cancels out on both sides.

Conclusion:

Using the discipline of Primary / Secondary market analysis and not falling into the trap of interpreting the mining metaphor literally, we see that excessive use of the protocol to distribute coins "for free" is corrosive in BOTH primary and secondary markets. (If you make 100% profit on the sale of a stock then you got it "for free", so nor is this term debatable in my opinion).

To get the marketcap buoyant again and retro-rocket reverse our descent towards page 2, we need to TIGHTEN monetary policy on masternodes and get those reward ratios wound RIGHT IN to 10% or 20% or something otherwise we're screwed. Masternodes will be pleased because while they like their rewards, they also like them to be worth something.

Otherwise it's just a massive leaky faucet that's all.

Caviat:

Remember once again, this is the "nodecount equilibrium" analysis. MN rewards provide an incentive which manifests itself at an aggregate level while the nodecount is growing. Thereafter the dynamics above take over in characterising the market.

[stan.distortion]

So yeah, you're a believer in "the energy needed to create it is what gives it value" dumbass argument. That's no different to saying a TV goes up in value as it gets older because it's used more electricity. It works for the creation of energy, trying to justify it for the usage of energy is ass backwards (but no surprise to hear coming from an accountant).

[toknormal]

So yeah, you're a believer in "the energy needed to create it is what gives it value" dumbass argument. That's no different to saying a TV goes up in value as it gets older because it's used more electricity.

I don't know if you've realised this but you're not on winning territory here. If mining really was a "cost of production" like your ridiculous TV analogy we'd be at the top of the page 1 POW marketcap rankings and not the bottom.

I just explained why it isn't and my explanation is supported by what we see in the market so I suggest you rethink and go and read what I wrote above again. Then come back and try to argue why producing a blockchain token more "cheaply" with "less electricity" makes it more valuable.

See how many investors you get for that idea.

Dash is the live experiment that's already giving us the answer and if you want to sit on your hands while that experiment reaches its logical conclusion then prepare for page 2 status and probably rapidly page 3 once the reality sets in for investors.

[stan.distortion]

What you're saying holds true for a strong market, strong demand but it's still ass backwards, the cost of production dictates prices because it's a competitive market, the cost of production has been driven down close to its limits. That doesn't exist in PoW crypto, the cost of production adjusts to meet demand while the volume of production remains unchanged regardless of demand.

It's a very weird set of market dynamics but those dynamics never get genuinely tested because it's a very weak market, genuine need is practically non existent and you can see that just by looking at what leads those markets, there's practically zero interest in more optimized and cost effective products.

If you want to criticise the excessive difference between MN rewards and their running costs then go right ahead, I'm in full agreement but please don't do it with some twisted "we lost money this year therefor we all got richer" accountancy logic. Those excessive profits shouldn't exist in a healthy and competitive environment and even if that environment existed the collateral requirement would prevent it from reaching any kind of equilibrium. Hell, even the name "Masternode" gets my goat because it implies every other node is a servant/slave and why would anyone want to use a network that clearly only serves to make a few thousand already wealthy and privileged individuals richer? (they do it every day with products they buy from big business but that's a whole 'nother story).

[toknormal]

What you're saying holds true for a strong market, strong demand but it's still ass backwards, the cost of production dictates prices because it's a competitive market, the cost of production has been driven down close to its limits. That doesn't exist in PoW crypto, the cost of production adjusts to meet demand while the volume of production remains unchanged regardless of demand.

It's not "ass backwards".

"Cost of production" is a total mis-characterisation of what's going on here. We are not "producing" anything. That's a manufacturing model where a producer profits according to the difference between cost of production and price at market. That model bears no relevance to the POW economics which is about storing value. The "cost" is not an expense, it's a transfer of capital into the chain.

If you use that flawed "manufacturing" model to design a blockchain protocol then you end up with priorities that generate a block as cheaply as possible. i.e, the block has a LOW PRICE. Ergo stores NO VALUE. Thats what's happening to Dash - we are tanking in marketcap. We are tanking in network participation (nodecount). We are tanking in competitively (ranking). We are tanking in dollar ROI. In other words in every single metric that your side of the debate, and in particular Ryan, claimed to be targeting with this flawed high masternode reward ratio strategy.

And all this with the LOWEST PORTION OF MINED SUPPLY of any POW coin on page 1 of CMC.

Your case is lost. The "production" model doesn't even apply. There is no "company" to benefit from that low production cost. The 100% profit on masternode rewards simply leaves the network forever upon realisation, in a chronic haemorrhaging of marketcap.