this assumes that all MNOs sell their rewards all the time. That makes the cost real. Otherwise this is all just a virtual number
In the formal (accounting) analysis this is simply not true. Masternodes are being paid. The revenue is real, therefore the cost is real. ...
I understand you want Dash to switch to a pure PoW coin (as much as possible) and reduce both the MN reward drastically, as well as the share for DCG, but your statement stops there. What comes next? You don't answer that. Do you want Dash to become like Litecoin? You can't be serious about that
Why does anything need to change ?
masternodes would still be profitable
the treasury would still exist
we'd still have all our features
we'd still have the same development budget
We'd only be stripping away much of the redundant element of the masternode reward. ...
On the other hand, reducing mining reward DOES come with a measurable cost. Arguing against this is hypocricy because the basis for the current policy is ostensibly limiting traffic to order books - thereby creating a form of "scarcity", but not one that has any measurable value. It's a notional concept that I personally think is ludicrous because high volume, deep liquidity markets can represent high value assets as well as low value ones. What matters is what's being DONE with the revenue from selling. Spending it on raising mining difficulty is a far more wealth-preserving proposal than giving it away for nothing in this respect and IMO.
In my opinion the treasury is a bigger elephant in the room. That's where I've consistently seen waste.
Again, I find this argument slightly hypocritical. Masternodes are simply an extension of the treasury in economic terms. ...
So what does Dash get for its $32 million per year from this extended treasury budget ? Hosting costs and an incentive to keep coins in wallets ? But other networks get this for free. Even if those networks do send more of their new supply to markets proportionally (even that's debatable), more of their blockchain goes towards raising fiat to pay for scarcity (REAL scarcity that preserves capital, not faux orderbook traffic management scarcity).
So the $32 million budget per year is a far bigger waste than anything the treasury can throw away IMO. Treasury is only 10% of the supply. Nodes are going to get 60.
They not only offer hosting costs and coins in wallets ... they also offer services that this network of nodes manages and that enrich the project.
I would argue they impoverish the project in the current protocol configuration.
These "services" cost nothing to provide over and above hosting cost. Yet we're charged $32M a year for them and this is paid directly out of the capital value of the chain, just like treasury budgets. Miners at least have to invest hashrate in the chain to get any coin out of it at all. That hashrate adds to the store of capital rather than draining it.
If a treasury contractor wrote a service-provision proposal who's budget accounted for 99% profit margin they'd be likely to get thrown out the door. Saying that the 1% worth of service provision "benefitted the network" would be unlikely to save them.
But I see it as a question of proportionality, because its contribution of value, in value-added services that are those that DASH has achieved on the original basis of BTC and even shaping its POTENTIAL personality, is undeniable. And furthermore, they are not just economic costs, but governance costs and to the highest degree, ...
If Dash is at $1000, you think it's viable to pay $320 million per year straight out of the blockchain to operate a network of nodes when the service delivery value of those nodes (measured at cost) amounts to barely $1.5 million ?
How does that translate into a "store of value" for a new investor ?
Incentivizing full nodes creates an undeniable benefit and prevents us from going in the direction Bitcoin has. Bitcoin decided to limit the block size at 1 MB, because it would become cost prohibitive to run a full node with large blocks and lead to centralization. As if that centralization doesn't happen anyhow, or wasn't already present. Still, it was one of the main arguments and in my opinion ridiculous, as layer 1 can scale far beyond 1 MB without any significant orphan rate. Something to keep in mind. Incentivizing is certainly a good strategy to achieve an objective, but it's possible that we are over incentivizing the Dash MN network.
Anyhow, I hear you and I'm not against the idea of lowering the return for masternode owners. I don't need the return, nor do I do anything with it. I don't run MNs, because of the return. There were no masternodes when I joined Dash. MNs only started end of 2014. I would still run masternodes even if we were to decide to reduce the return to zero. Just like Bitcoiners are running full nodes without any return, simply because they believe strongly in the project. Similarly, I just think it's awesome to be part of the Dash network and run masternodes. Dash masternodes are so awesome and it's going to become so much more than what it is today.
However, I am sure this is not the feeling for everyone. There are probably many people for whom running a MN is all about getting that return, not primarily about supporting the project. This is a consequence of constantly showing the ROI for running a MN. I don't support this, as MNs are not investment vehicles. They really aren't, but some people tried to present it as such or at least made it into a carrot luring in new people. It worked obviously, but over subsidizing the MNs has led to a very large network, but isn't actually required at all, when we look at the actual usage we have. It's like saying we built a super high way with 32 lanes, but don't mention that only 10 cars are driving on it.
It all comes down to this arbitrary setting of the block reward split. Ideally it's the result of a dynamic algorithm, but that's a complex matter. If only we could have someone with a PhD in economics and deep knowledge about money ánd cryptocurrencies take a look at Dash and share his/her opinion on it. Maybe Dash should pay for an independent study on its economics. They could work out which block reward scheme is more likely to lead to a better price per coin (increased perceived store of value) and therefore providing larger returns to all investors due to price appreciation (capital gains).
I would definitely prefer to see Dash at $500 with a 5% MN return than Dash at $100 with a 60% return, but I'm not convinced that your intended block reward split would actually lead to a significant increase in price. I agree though that in your model the overal network cost (in the strict accounting sense ;-) ) would drastically go down obviously.
As I tried to point out in my previous reply, a booming price appreciation depends on so many factors that are non-technical, where Dash needs to improve a lot. There are several non-technical elements that would have a much higher impact on price I suspect. We need much better promotion, which can be done at no cost, simply due to higher involvement and effort from community members to increase excitement and so on. We need to show the world that we are a movement with the ideals of Satoshi in mind, but with massive improvements which benefit end users. Those non-technical factors matter a lot in the crypto wars and much smaller projects than ours are doing better in that regard. Everyone involved should be active on social media spreading the word, but the community is still recovering from a terrible bear market and the "nevorlution" crap, so sentiment is a bit low. It's a bit sad cause we are effectively really close now with Dashpay already running on testnet in preparation for the upcoming public statement. Sentiment will hopefully turn around soon. To be honest, lots of alt projects are deep down in the dumps and suffering too, it's really not just Dash. Bitcoin is kicking everyone's ass. We're perhaps just feeling it more because we used to be a Top10 coin.
So to wrap it up, I have some questions for you:
1/ Why did you never raise your concern about the block reward in 2014, 2015, 2016, 2017, 2018 or 2019? Don't tell me you suddenly had an epiphany in 2020, because anything you say was already true in 2014/2015.
2/ Suppose you are right, what is your ideal proposal in terms of block reward? I remember asking you and you told me something like 90% miners 5% masternodes 5% dcg ? Just state it here for the record. Maybe some day we can all look back at it and agree that we were all fools and that you were right.
3/ Also, if you feel so strongly about it, why not use your bloated ;-) masternode return to enter a proposal with your analysis and desired block reward split? At least you could say afterwards that you really tried.
I'll leave it at that, because I'm well aware that this discussion will lead to nothing and detracts all attention away from our upcoming testnet release. I'm really excited about Dashpay. Aren't you?
Anyhow, kudos to you for going against the majority and stating your analysis. I really don't mind, but let's not drag it out endlessly. I don't want it overshadow what is coming.
