This post is meant to address concerns about Dash Core Group’s viability at these market prices, especially in the wake of projects associated with other cryptocurrencies announcing major reductions in staff.
Throughout 2018, the crypto markets have experienced an unprecedented collapse and altcoins have been particularly affected. This bear market has been notable in several regards, including the persistence, duration, and both absolute and relative magnitude of the declines. Few could have predicted the severity of the market downturn. There are many causes for the dramatic erosion of the markets, including the overextensions of 2017, failure to live up to the adoption expectations, and rampant scams permeating the market.
Most recently, I believe we are witnessing a severe breakdown of market confidence across the industry. In my personal view, the recent fork between Bitcoin Cash and Bitcoin SV seems to have triggered a new wave of skepticism, especially given the ensuing hash war that cast legitimate FUD over the very concept of blockchain security. The resulting loss of confidence is market-wide and severe.
There is little doubt, the severity of financial losses will accelerate the demise of many poorly conceived projects — ones with weak business models, questionable market value, illegal origins, eroding treasury funds, or nefarious intentions. We have already heard from ETCDEV and Steem. For each of the ones we hear about, there are probably many that are shutting down quietly, running on fumes, or burning through distressed ICO funds. Naturally, I’ve heard concerns about Dash Core Group’s ability to continue supporting Dash.
In short, DCG is not at risk of shutting down anytime soon, or of any significant cuts in staffing levels in the near term. We have a significant buffer in place to withstand the impact of the market bottom, whenever that comes. I’ll explain how we are dealing with the budget constraints so far and our plan to avoid the worst of the impact.
With Dash’s unique proposal system, funding trickles out in a monthly budget provided by the network. This limits the monthly run-rate we can replenish and therefore caps our long-term spending. Dash Core Group has expressed our intention to draw no more than 60% of the available budget, except in extreme circumstances.
When Dash peaked in December of 2017, DCG did not expand the team in line with the market exuberance. Instead we restrained ourselves to incremental growth of our fixed expenses. Without this restrained approach, we could not have withstood a 94% drop this year without substantial impact. The vast majority of proposal funding a year ago was directed to non-DCG proposals. Many were one-time expenses. There was undoubtedly waste from this period, in which the network funded many proposals of questionable value. However, DCG never attempted a large scale grab for the available funding.
In recent months, DCG has built up a significant buffer against currency risk. This is feasible now that the Dash DAO Irrevocable Trust is established and DCG is owned by the trust. In essence, DCG is now a safe entity in which the network can entrust significant funds for future use. DCG converts nearly all funds to USD upon receipt, so subsequent price declines do not affect our balance sheet. In addition to the buffer, many of our employees and contractors care deeply about the project and have agreed to reduce or eliminate compensation while continuing their work on the project. While not everyone on the team is in a position to offer, many have proactively requested a reduction or elimination of their compensation to protect the project. Combined, these actions will allow DCG to operate at nearly full capacity for an extended period even at depressed prices.
Of course, we are not immune to economic realities. We have cut stipends for ad hoc contributors, cut back on translations for less prominent languages, cut benefits, and eliminated support for some projects like the Copay wallet. There will come a time when we will need to scale back more meaningful operations if the current price holds, even though volunteers have stepped forward to extend that date. We continue ongoing planning to enable an orderly reduction in line with available funding should that become necessary. We would communicate these changes through our quarterly calls or monthly budget proposals.
We have a budget buffer in place for a reason… to sustain DCG through a market correction in an orderly fashion. With the buffer in place, we should not overreact to whatever price ends up marking the market bottom. If we were to scale the team size to exactly match the available budget at the market bottom, we will have impacted the team and project to an extent beyond what was necessary. Instead, we will balance the need to preserve our buffer with the need to retain talent on the project.
What is most frustrating about the current market is that by most other measures the Dash network is succeeding. November metrics were solid. Wallet downloads reached a level not seen since the second quarter. PrivateSend usage reached a new record. Trading volume is above the average for the last 12-months. Merchant acceptance is at an all-time high.
We also have many exciting developments. Two of the largest exchanges added InstantSend this week. We’ve continued signing up merchants in Venezuela, and have started to move upmarket from mom-and-pop retailers to corporate operations. Venezuela now represents our largest market for wallet downloads. ePaymints integrated Dash to serve the needs of high-chargeback merchants. Canntrade has launched on Alt36’s platform, with live B2B users. Much more is in the works to drive transactions and use.
Despite the frustration of the disconnect between price and adoption trends, the team remains focused on delivery. They are a group of passionate, energetic, skilled, and committed individuals. They care deeply about Dash, its mission, and its success. And they care about the team, with many reducing their compensation to enable us to keep the team operating at full capacity. DCG is simply not staffed with mercenaries available to the highest bidder. Our team members are actually coming together to support each other rather than disbanding like many other projects.
We know that the path forward involves some pain, but we will pull through by focusing on delivery and supporting one another. We will be transparent with the community if we feel a significantly smaller team is prudent. My hope is that in the future we can reward the individuals sacrificing today to enable the next phase of products and growth under these constrained market conditions.
I hope this post provides some insight into how the team is doing and how much confidence we have in Dash to pull through this period. Things are not chaotic. We are not obsessing over price changes. We are not panicked. Instead, we are focused on the work at hand and delivering value to the network. This focus on goals and not price is deeply ingrained in the culture of DCG.
Looking forward, I’m excited about the release of 0.13, which introduces huge improvements to the user experience. InstantSend transactions will be the default going forward for most transactions, which will improve the experience of sending Dash, even from services that don’t currently support InstantSend. This is the first protocol-level automatic instant transaction upgrades. We’re also introducing deterministic masternode lists, which will be leveraged for future services like ChainLocks to protect the Dash network from the very attacks that precipitated the most recent bear market trend.
Folks, we will eventually hit a market bottom. Hopefully, we already have. At that point, Dash Core Group will still have a team working hard to improve the product and delivering market-first innovations. I’m not going anywhere, and neither are many of my colleagues, no matter what happens. Dash will still have a robust community of users and partners. There will still be other teams, too, working on wallets, merchant solutions, and end-user services. And Dash will still retain the competitive advantage that it has today through the proposal system — able to self-fund an array of projects to further its ecosystem — long after other projects have depleted their ICO windfall.
As usual, we will provide more information on the quarterly call about the actions we’ve taken to date and the dramatic cost cutting we’ve managed without impacting productivity in a significant way. In the meantime, we’re all headed back to work. Thank you for your support and trust!