Collateralized mining, revisited...

camosoul

Grizzled Member
Sep 19, 2014
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https://blog.dash.org/mitigating-51-attacks-with-llmq-based-chainlocks-7266aa648ec9
smart people said:
As of now, Dash is as vulnerable as any other Proof of Work coin and many community members have asked how we can solve this. There was an older proposal called “Collateralized Mining” which would solve the 51% mining attack to some degree, but it would have required massive changes in mining economics (which would have been an issue on its own).
I've been observing a clash with reality approaching, and I think collateralized mining may be the answer to this problem, rather than the problem for which it was originally put forth, and turned down.

DASH is no different from BTC in the block reward reduction mechanism. As the years wear on, the block reward gets smaller. Until the block reward produces nothing new, and the only funding comes from the TX fees.

But, DASH is working against itself here... DASH want's to be super cheap and huge blocks. Great. but, how will it pay the MNs to continue doing all this?

DASH's dreams of the future require DASH to be worth about $10,000 per unit of 1 to run the powerful servers and have the dedicated bandwidth to support the features and blocksize of the future. This only works, maybe, with the current block payment model. A model which is going to become extinct by design. So, even if we're blindly optimistic and #believe that DASH will be worth $10,000 in the not too distant future, it won't be long before that model of sustenance is gone anyway... Much like the budget, it won't be able to keep itself alive. In the case of the budget, the numbers will be too small. In the case of sustaining MNs, even if the valuation is high, it won't matter because the MNs won't be getting paid any DASH regardless of how much it may or may not be worth...

Since processing these features and functions will likely require ASIC-type hardware, could that hardware not also include privileged mining? Only MNs can mine? (Think, RISC-V w/ some pretty exotic custom extensions; the MN server hardware of the not too distant future).

Or maybe, privileged mining is the "savings account" for those who can prove a stake?

Or a combination of both... Essentially, cloud mining off of the MN's dedicated hardware by proving a stake?

Or, mining itself is simply extinct because we have other metrics, as ChainLocks proves. Chainlocks + user staking is the "savings account" previously mentioned? What other information could be used as proof of stake instead of the currency itself? Prove you're doing/storing for the network. MNs are in a position to do as this requires low latency, while the end users are in a position to store higher-latency, less urgently needed data. What would that be and how could the roles be fulfilled? MN DashDrive and end user DashDrive for different purposes? The different use models would create a deterministic metric dochotomy that is naturally and mutually opposed, so the result would be very useful for validation... Not sure how to say it...

The bottom line issue is that DASH's "be cheap and offer tons of services" direction will become a mirror of the impossible-to-sustain welfare state. All these fancy services provided, but how will you pay for it when block rewards are reduced to nothing but TX fees? Fees which are kept deliberately low. Well below sustainable levels...

Not only does the future require a different way of thinking for availability alone, it has to be able to pay for itself. MNs are currently incentivized. By current design, that will no longer be true. It's tough enough for BTC to get volunteers to merely host the full blockchain.

How will DASH incentivize the future of MasterNodes when block rewards don't come anywhere close to paying the bills, much less being a good investment? Currently, MNs are a huge risk and a lot of work, for what is roughly a 6% ROI. It's already a terrible deal. There are plenty of options outside the cryptsphere that people can invest their money into that pay much higher interest at much lower risk, with next to no hands-on involvement for the investor... That disparity looks to get worse, not better...

I'm concerned that the idiotic communist mindset so prevalent in tech/crypto is leading to no thought being put into this... MasterNodes are currently incentivized. More and more is being expected of them. Pay is already below the level that it makes any sense to run a MasterNode. What happens when the incentive is zero because block rewards are reduced to the point that MNs operate for free or in the red after expenses?
 
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qwizzie

Well-known Member
Aug 6, 2014
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Maybe Dash can fund research which focus on researching and developing additional reward streams for masternode owners ?
Maybe future Dapp services that run through Dash Evolution can provide such additional reward streams for masternode owners ?
Maybe Dash Ventures is the first step into that direction ? (Although i'm not sure how Dash Ventures can directly benefit masternode owners)
Maybe Dash Core Group should setup a sub-group after Dash Evolution 1.0 got released with a specific focus on developing additional reward streams for masternode owners ?

I'm just brainstorming a bit here...
 

TroyDASH

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Jul 31, 2015
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Currently, MNs are a huge risk and a lot of work, for what is roughly a 6% ROI. It's already a terrible deal.
What people need to realize about this is that if the "ROI" was 30% or 200% or 900% it doesn't actually make a difference. It's paid for with inflation.
 

TroyDASH

Well-known Member
Jul 31, 2015
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Do explain.
I'm challenging the idea that a 12% "ROI" or a 50% or 5000% ROI would be any better than our current 6%. It doesn't help to be rewarded with more coins if the coins are going to be worth less. In my opinion the cumulative value of the network (the market cap) is independent of the block reward schedule; hence a higher block reward/inflation rate would necessarily equate to lower price per coin. The ROI for running a masternode is basically a way to have your share of the network go down less quickly than it otherwise would. I think investors would be seriously misguided if they made their investment decisions based on which coin's masternode "ROI" (aka subset of the inflation rate) is higher.
 

camosoul

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Sep 19, 2014
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I'm challenging the idea that a 12% "ROI" or a 50% or 5000% ROI would be any better than our current 6%. It doesn't help to be rewarded with more coins if the coins are going to be worth less. In my opinion the cumulative value of the network (the market cap) is independent of the block reward schedule; hence a higher block reward/inflation rate would necessarily equate to lower price per coin. The ROI for running a masternode is basically a way to have your share of the network go down less quickly than it otherwise would. I think investors would be seriously misguided if they made their investment decisions based on which coin's masternode "ROI" (aka subset of the inflation rate) is higher.
So, we're all doing this for free either way? I'm not following your argument at all. It seems conflated.

If I get X% of Y, and Y is worth Ns of Z, then I'm getting X% of Z by proxy of Y.

X = 6
Y = DASH
Z = EUR/USD/BTC/Au

If something else, Q, (Q is low risk and zero effort) will pay me 8% of my Zs why should I go to the trouble and risk of the proxy Y when Q pays more Zs and is lower risk?

I choose Q instead of Y.

I genuinely don't follow your logic at all. Screw your network. I want more Zs, and I'll take the best way I can to get them. Y isn't it.

This is the same reason coin-hopping multi-pools exist for mining.

Is it merely a complicated circular reference that comes back to "HODL for moonshot?" If so, then where's the value after you land on the moon? You can't go to the moon when you're already there...

How will you pay/incentivize the MasternNodes to perform all these services when the block reward is zero? It's the converse of the same argument.

If the incentive is an illusion, then why do MasterNodes exist? Every incentive payment inflates itself to zero upon receipt? I don't get it...

I can't eat a blockchain...
 
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TroyDASH

Well-known Member
Jul 31, 2015
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So, we're all doing this for free either way? I'm not following your argument at all. It seems conflated.

If I get X% of Y, and Y is worth Ns of Z, then I'm getting X% of Z by proxy of Y.

X = 6
Y = DASH
Z = EUR/USD/BTC/Au

If something else, Q, (Q is low risk and zero effort) will pay me 8% of my Zs why should I go to the trouble and risk of the proxy Y when Q pays more Zs and is lower risk?

I choose Q instead of Y.

I genuinely don't follow your logic at all. Screw your network. I want more Zs, and I'll take the best way I can to get them. Y isn't it.

This is the same reason coin-hopping multi-pools exist for mining.

Is it merely a complicated circular reference that comes back to "HODL for moonshot?" If so, then where's the value after you land on the moon? You can't go to the moon when you're already there...

How will you pay/incentivize the MasternNodes to perform all these services when the block reward is zero? It's the converse of the same argument.

If the incentive is an illusion, then why do MasterNodes exist? Every incentive payment inflates itself to zero upon receipt? I don't get it...

I can't eat a blockchain...
I do think the incentive to buy 1000 dash because of the masternode ROI is an illusion. Why buy a mn for 6% when the market cap of dash would need to go up by more than 6% in the same time period in order to come out ahead (if it doesn't then your collateral will be worth less than it was when you bought), and when the volatility of the value of the collateral is likely to make the 6% look like peanuts either way?

I think the incentive to create MNs for people who already have 1000 dash for other reasons is real though
 

jarroyo

New Member
Oct 15, 2015
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I would say this is a topic certainly worth bringing awareness to. However it always boils down to a resource allocation thing. How far down the line do you believe we can we go before the reality of this concern manifests? Because im assuming the necessary R and D to make it happen would be pretty high, so the problem needs to be more urgent to make it happen(not to say it isn’t urgent in the long run).
 

lynx

Active Member
Dec 11, 2015
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I'm challenging the idea that a 12% "ROI" or a 50% or 5000% ROI would be any better than our current 6%. It doesn't help to be rewarded with more coins if the coins are going to be worth less. In my opinion the cumulative value of the network (the market cap) is independent of the block reward schedule; hence a higher block reward/inflation rate would necessarily equate to lower price per coin. The ROI for running a masternode is basically a way to have your share of the network go down less quickly than it otherwise would. I think investors would be seriously misguided if they made their investment decisions based on which coin's masternode "ROI" (aka subset of the inflation rate) is higher.
While it is true that the long term effect of inflation will eventually dilute the value of the coin, the fact that miners/masternodes receive the newly created coins first gives them a substantial advantage. It's sometimes referred to as The Cantillon Effect or the Non-neutrality of Money.

Therefore, the newly created Dash miners and masternodes receive as the result of the inflation of the money supply (block reward) are not an illusion.

Ludwig von Mises said:
"To simplify and to shorten our analysis let us look at the case of inflation only. The additional quantity of money does not find its way at first into the pockets of all individuals; not every individual of those benefited first gets the same amount and not every individual reacts to the same additional quantity in the same way. Those first benefited—in the case of gold, the owners of the mines, in the case of government paper money, the treasury—now have greater cash holdings and they are now in a position to offer more money on the market for goods and services they wish to buy. The additional amount of money offered by them on the market makes prices and wages go up. But not all the prices and wages rise, and those which do rise do not rise to the same degree. If the additional money is spent for military purposes, the prices of some commodities only and the wages of only some kinds of labor rise, others remain unchanged or may even temporarily fall. They may fall because there are now on the market some groups of men whose incomes have not risen but who nevertheless are obliged to pay more for some commodities, namely for those asked by the men first benefited by the inflation. Thus, price changes which are the result of the inflation start with some commodities and services only, and are diffused more or less slowly from one group to the others. It takes time till the additional quantity of money has exhausted all its price changing possibilities. But even in the end the different commodities are not affected to the same extent."

https://mises.org/library/money-method-and-market-process/html/p/377