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Conflict of interest accusations and defenses

Discussion in 'General Discussion' started by xjones, Mar 20, 2017.

  1. xjones

    xjones New Member

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    In a number of different places on the Internet, I have seen accusations of conflict of interest directed at the DASH system. These accusations amount to saying that, because of the alleged instamine, a small number of people own a large fraction of circulating DASH, and that nobody can be sure who these people are, and they may be able to vote for many budget proposals in favor of their own projects.

    It's not clear just how valid these accusations are.

    In the business world, small closely-held companies are often subject to this type of conflict of interest. For example, suppose five people invest equal amounts of money to start a company. Any three of these people can form a coalition and vote together, and thus invest all funds in their preferred direction, denying the two-person minority any say in how their 40% investment is spent. What usually saves the situation is that this type of problem is obvious, because everybody knows who is voting for what.

    In the DASH system, on the other hand, nobody knows who owns which masternode. So if a coalition of 51% of masternode owners is always voting in favor of its own budget proposals, there's no way to tell.

    I searched these fora for the string "conflict of interest" and found lots of hits, but no clear discussion of this issue and no rebuttal of the type that I think we do need.

    I think we need a good rebuttal to this type of accusation of conflict of interest. Otherwise the accusations will never die down. The more successful DASH becomes the more these accusations will occur, and at some point, will begin to undermine the credibility of the entire system.

    Right now the growing value of DASH may simply indicate a greater demand to buy dash to run a masternode. In the long run we need greater demand from non-masternode owners who just want a reliable and private currency. That's when credibility will become critical.

    One possible solution will be for all involved in budget proposals to disclose their DASH holdings. This may be very unpopular. Also, the truthfulness of any disclosure may be impossible to prove. Perhaps there are other solutions not requiring such disclosure.
     
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  2. tungfa

    tungfa Administrator
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  3. xjones

    xjones New Member

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    There's a lot of text at that link, and yet nothing there mentions the budget or the masternodes.
     
  4. tungfa

    tungfa Administrator
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    because it explains that this premine thing was, what it was and that it is done by now
    there is no issue with MN count or budgets !
    not sure what you are referring to
     
  5. xjones

    xjones New Member

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    Quoting from my original posting, the key conflict of interest accusation is: "In the DASH system ... nobody knows who owns which masternode. So if a coalition of 51% of masternode owners is always voting in favor of its own budget proposals, there's no way to tell."

    I would expect a rebuttal to mention both masternodes and budget.
     
  6. GrandMasterDash

    GrandMasterDash Active Member
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    Actually, it's me that has probably been the most vocal about this issue. I'm sure the pre-mine does not adequately address your concerns. Unfortunately, there are very few MNOs willing to address this issue and I suspect the wake up call will be when Core members (or MNOs directly) are hit with legal action, at which point expect all hell to break loose because dash will plummet in value and there will be insufficient funds to defend itself properly. Imo a substantial legal defence fund needs to be setup.

    The problem is not so much collusion but proof-of-distribution.. that there are a sufficient number of widely distributed and unique MNOs. There is a possible solution to this that I have recently suggested and it can be done on a voluntary basis. MNOs can voluntarily access AML / KYC services (such as Shrem's recently proposed debit card) without mixing. When virgin dash hits these services, miners and MNOs will be identified and thus those companies can independently publish their findings without giving out personal information.

    (btw, it's not even 51% of votes, it just needs 10% net votes to pass)
     
  7. xjones

    xjones New Member

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    Thank-you, I appreciate your reply. And thank-you for clarifying the issue re 10% net votes, even more scary than needing 51%. So just two or three persons could easily control the budget.

    I'm not sure why more stakeholders in Dash are not concerned about this issue. Maybe because Dash had a relatively low value until recently, and the budget was small, and the budget proposals were relatively innocent.

    But now, with Dash hitting US $100+, the annual budget will soon be quite significant. There will be strong motivation for those in control of 10% masternode votes to make budget proposals involving self-dealing.
     
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  8. GrandMasterDash

    GrandMasterDash Active Member
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    It's not 10% of MNs, it's 10% net yes votes... in other words, if 500 MNs vote no then there needs to be 500 x 1.1 yes votes (550).
     
  9. GrandMasterDash

    GrandMasterDash Active Member
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    I don't think anyone here wants compulsory voting (I can kind of understand why), but it leads to many proposals going through when only 20% of all MNs participated, therefore making the 10% net votes more achievable by a handful of people.
     
  10. GrandMasterDash

    GrandMasterDash Active Member
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    Some people have a hundred or more MNs. And I suspect the recent price rise is partly down to whales snapping up whole MNs. Without proof-of-uniqueness, we can't possibly say how corrupt or fair the voting is.

    If you started a company and hired one person per server just to keep uptime, you'd probably say it's inefficient. Well dash supposedly does that bottom up.. and I can't imagine human nature allowing that to continue, so it seems inevitable that eventually there will be MN centralisation, it's just a question of how much USD you can wave in their face until they capitulate.
     
  11. camosoul

    camosoul Well-known Member

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    Such a "coalition" of MNOs does exist, and they hold WAAYYY more than 51% of the MNs.

    But it doesn't matter because the development doesn't answer to the MNs. The governance is impotent to affect development even if they had the brains and the balls to vote for appropriate action.

    But therein lies the second issue. The MNOs don't have the brains or the balls to make effective decisions. They never weight the results.

    Just like little kids play house, MNOs are silly brats playing corporation. It's a damn good thing they don't actually have an swing over things that matter.

    The trajectory of DASH's development may be autstic, but even a retarded pickup artists gets a few... Mixed in with the pork and hype are key points that actually need to be done. A laser-like focus would be much better, but they are slowly failing upwards, floundering through tons if silly bullshit that is a huge waste of time, money, work, and resources... But they are moving. I'd like to cut the fluff and get straight to what matters, but at least something is getting done... After seeing how the MNOs grossly mismanage their responsibilities, The Usual Suspects are actually an improvement...

    giraffe, minotaur, tungfa, kot, etc may be a hilarious self-beclowning shitshow to those of us with experience in grown-up business operations, but mixed in with the mountains of confusing nonsense pork that they seem to honestly believe needs done, are the few tidbits that actually need doing. They get to look busy and feel important, and the clueless MNOs look on in amazemenet as all this wasteful busywork mesmerizes them. Wasteful busywork that would get them fired from any real business, but the MNOs are clueless and caught up in playing corporation and feeling important as they grossly mismanage a budget of free-money-for-nothing that has no consequence for gross mismanagement and will only be refilled again next month, to be wasted on dumb shit all over again... The MNOs have no experience in real, grown-up business. They're snowflake idiots. If the MNOs were actually in charge, DASH would have failed spectacularly 2 months after the DGBB was launched. The Usual Suspects would be fired on the spot and thrown out by security if they had a real job, so they created a board of obnoxiously clueless directors out of the dumbest snowflakes on Earth...

    Be glad the votes don't actually guide this project. If they did, there would be no project. This forum would not exist. We would not be having this conversation.

    The unfortunate reality is that this demonstrates that the governance isn't really governance. Thats why we see so many weird proposals that are only peripheral to DASH, or just trying to get money out of DASH for some totally unrelated thing, like charities and lotteries "It would be good optics for DASH if we gave a bnch of money to X." That's all it's really good for. The DGBB isn't really any good for actual G. Just like the problem of bitclones lacking appropriate feature set to make good on their promises, so they get used for mindless ponzi. It falls back to what it is good for, because it's not able to fulfill it's advertised purpose.

    In this particular case, that failure is actually a good thing.

    But, the optics for real grown-ups is that DASH is no different from any other crypto; DASH is Cancer. Even with the right features to effect adoption, they're going to need a layer or two of isolation from these idiots if DASH ever expects to be used in the real world. But that leads us to the issue of IX being broken, and nobody seems to care. It seems as if they presume adoption could never happen anyway because they know DASH is Cancer, so why bother...
     
    #11 camosoul, Mar 20, 2017
    Last edited: Mar 20, 2017
  12. xjones

    xjones New Member

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    Maybe we could require every person submitting a budget proposal to simply declare any conflicts of interest. It would be hard to verify this, but it might be a good beginning.
     
  13. DashEcon101

    DashEcon101 New Member

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    Is it wrong that Bill Gates has the majority vote of Microsoft or Michael Dell of Dell computers?? Even if three or four people "founders" have the majority of masternodes they have obviously, up to this point, voted for the good of Dash.
     
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  14. xjones

    xjones New Member

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    I am glad you asked, because this question deserves an answer.

    Here's the difference.

    In a corporate situation, we know who owns how much and who is voting for what. If Bill Gates votes to appoint his own wife to a high position, the shareholders are well aware that there might be a conflict of interest, and they can be suspicious and ask the right questions to make sure that it's being done for the good of the company, not for the good of just Bill Gates and his wife.

    Do a Google search for "self-dealing" and you'll see some discussion of this type of situation.

    With masternodes and the budget, we have no idea. If a significant number of masternodes vote in favor of a budget proposal that pays money to some person X, we don't know if most of those masternodes are controlled by Y who is married to X, or maybe Y is actually X.
     
  15. demo

    demo Active Member

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    The statistics are correct once again. Listen to me, my beloved #13. Bill gates produces software. Michael Dell produces Hardware. Those are products, those are commodities. Dash is not a product, it is not a commodity, it is (supposed to be) money. It is a medium of exchange and has value just because there is a community that agree with it and trust to it.

    Do you get the difference? Money is a social thing, it belongs to a community and it does not belong to someone the way a commodity does. If someone thinks that money should belong to a small group of persons, then you know what the answer from the rest community will be? It is the F word.
     
    #15 demo, Mar 20, 2017
    Last edited: Mar 20, 2017
  16. jimbursch

    jimbursch Member

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    If you parse out the personal insults, @camosoul makes some very valid points.

    The MN network needs a comptroller:

    https://en.wikipedia.org/wiki/Comptroller
    "A comptroller is a management level position responsible for supervising the quality of accounting and financial reporting of an organization. A financial comptroller is a senior-level executive who acts as the head of accounting, and oversees the preparation of financial reports, such as balance sheets and income statements."

    This would be a person/organization whose sole responsibility is to investigate and report on the fulfillment of budget proposals.
     
  17. DashEcon101

    DashEcon101 New Member

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    touche
     
  18. DashEcon101

    DashEcon101 New Member

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    I agree with xjones statement regarding transparency, but I believe the root of the argument is being confused.

    The original statement made when the thread started was the following...

    "These accusations amount to saying that, because of the alleged instamine, a small number of people own a large fraction of circulating DASH, and that nobody can be sure who these people are, and they may be able to vote for many budget proposals in favor of their own projects"

    This statement is implying that a small group of people shouldn't own the masternodes. My response was in regard to this statement and I essentially said that I don't see it as an issue. However, i agree it's not ideal.

    xJones introduced a caveat of "transparency" as to say...if transparency existed then it's ok for a small group of people to own the majority of masternodes, which is excellent I agree with transparency.

    demo you have introduced a statement that is a correct statement, but it's not applicable to the original argument. You made the statement "if someone thinks that money should belong to small group of persons then". This statement is implying that a small group of people shouldn't own all the money, which I happen to agree with, but there are subtle differences in this statement and the original argument...

    Remember we are talking about owning masternodes not owning the money. You are saying that money shouldn't belong to a small group of people, but what does this statement really mean?

    1. Owning the creation of money or producing more Dash (owning masternodes doesn't allow this)
    2. Owning the ability to transfer Dash from one Address to another (owning masternodes only allows this for the treasury)
    3. The treasury is used to develop the infrastructure that sits on the blockchain, marketing and education, which is very different then owning the creation of Dash (like the federal reserve).

    If the "originals" owned all the masternodes and the treasury amounted to 1% of total circulation yearly then it basically means the "originals" get to take 1% of money in circulation and do whatever they want to with it. Keep in mind they aren't creating more Dash so they can't impact inflation by doing this. If the "originals" vote for poor infrastructure or things that aren't beneficial for Dash then people will not use dash and they will no longer get their 1%. What I have described here is not happening, but it's the most extreme thing that could possibly occur and this situation is far better than the situation we have with central banking. Everybody sees what is happening with the treasury and it's not being transferred to someones personal account. Also, as more and more Dash are mined the treasury will shrink and shrink.
     
  19. ericsammons

    ericsammons Active Member
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    If MN owners vote in a proposal that helps Dash, it helps all Dash holders. If they vote in a proposal that hurts Dash, it hurts all Dash holders (themselves included) and people can abandon the project. It doesn't matter if it takes 3 voters or 1,000 voters to pass the proposal.
     
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  20. jimbursch

    jimbursch Member

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    The problem is if a small group of MN owners are able to pass proposals that benefit themselves but not Dash -- skimming the cream off the top without spilling the milk. It's the way insiders and parasites have always operated.

    The MN voting system is a terrific innovation, but the MNOs have to be vigilant, active and smart not to allow the system to be abused.

    I believe that's the crux of @camosoul 's critique -- that chunks of the Dash budget are being wasted and frittered away because MNOs aren't paying attention.
     
    #20 jimbursch, Mar 20, 2017
    Last edited: Mar 20, 2017
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  21. ericsammons

    ericsammons Active Member
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    I still don't think there is a problem. If some small cabal of MN owners votes for proposals that benefit themselves but not Dash, that is out in the open for all to see. It's not like the proposals are secret - we know where the block rewards go. We might not know exactly who is in the cabal, but we'd see block rewards going out with nothing to show for it. People would lose confidence in Dash and eventually it would die. Problem solved.

    Masternode owners -whether they own 1 MN or 1,000 - are incentivized to vote for proposals that improve the network and raise the value of Dash. A small cabal might be able to get away with a few small insider proposals, but eventually it would catch up to them.
     
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  22. jimbursch

    jimbursch Member

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    True dat.
     
  23. David

    David Well-known Member
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    Jim & OP: I answered a similar question awhile ago over on BCT. I'll repost here, updated for current prices and MN count. RE: "How can we be sure that MN owners won't collude and skim budget funds if they have enough MN votes to do so."

    This potential problem assumes that the vast majority of masternode owners just sit around and do nothing. Let's think about it:

    a) Proposals have to be submitted about 96 hours before superblocks are created. It takes 72 hours for a proposal to "mature" and become valid, and then budget finalization happens around 24 hours before superblocks. Votes after budget finalization don't count. Consequently, we can say that masternode owners have a minimum of 72 hours to vote on any proposal.

    b) An "abuser" would need to attract 10% net votes, which at the present time is about 410. Now, we're reasonably confident that nobody owns more than a couple hundred masternodes (assuming everybody is honest about how many they own). Even Otoh is down to 76 masternodes (again, according to him). So right off the bat, we're assuming that at least two people have to collude, and that's with ZERO masternode owners noticing the "attack" and voting against it.

    c) An abuser (individual or, more likely, a group) would need to possess at least 410 masternodes, which is 410,000 DASH ($43 million at today's price). The maximum reward they could get from attacking the budget system is the entire budget amount, which is 6,920 DASH ($726,600 at today's price).

    d) A successful abuse of the budget system would likely crash the price of DASH, at least temporarily. Let's say that such an attack reduces the value of DASH by just 10% (in reality, it would probably be far worse than that). The attackers gain AT MOST $726,600 but lose $4.3 million (10% of the value of their $43 million holdings).

    e) In reality, there are generally many proposals that reach greater than 10% support. In fact, we often see the majority of the budget consist of proposals with greater than 18% support. That means the abusers would have to control even more masternodes to be able to seize the entire budget. In reality, only a small percentage of the budget is usually available to a "barely passing" proposal...usually less than 1,000 DASH. The most that an attacking consortium with $43 million worth of DASH could hope to seize is...about $105,000 (1,000 DASH * $105 USD per DASH).

    Therefore, an attack on the budget system by a rogue group of masternodes is a) unlikely, and b) not economically feasible.

    tl;dr Somebody who owns enough MNs to successfully abuse the budget system would lose far more money than he/she would gain.
     
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  24. Acedian

    Acedian New Member
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    If someone owns 51% of masternodes then that is more than 2000 masternodes. The value is about 2 million dash with an income of over 16000 dash per month. Why would you waste time voting for projects that line your pockets with a few hundred dash per month. They would already be getting 22.5% of the block reward an extra 1 or 2% from dodgy proposals seems almost pointless, a waste of your clearly valuable time. If you vote for proposals that hurt dash you are still burning your money. I don't really see a conflict of interest unless the person with the 51% is just building to a massive troll.
     
  25. GrandMasterDash

    GrandMasterDash Active Member
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    No no, sorry but this is utterly untrue. There is absolutely nothing anywhere to show who owns what, it's all conjecture. But while we're guessing, I'd say the recent mega rise in price is largely because of deep pockets snapping up whole masternodes. How is anyone going to prove me wrong? - clearly they can't. But we do know there are scripts that stagger voting times in order to obfuscate statistical analysis.

    I think if we allow miners and MNOs a chance to be voluntarily accounted for in a decentralised manner, then the public at large could draw some confidence that the MN network isn't in fact centralised. There are plenty of merchants with AML / KYC processes and it would be relatively easy to detect the virgin coins coming from miners and MNOs... and so those independent merchants could publish broad statistics about it's miner / MNO customers without having to reveal their identity.
     
  26. xjones

    xjones New Member

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    The kind of analysis you have done falls under the field of study called "game theory", I believe. This type of analysis has been done by many computer scientists and mathematicians for the bitcoin blockchain, and they have all generally concluded (with a few exceptions) that that blockchain is resistant to attack.

    But that type of analysis has not been done for the case of masternodes owned by unknown parties that might collude to vote in favor of their own budget proposals. In your analysis you assumed certain specific numbers. It might be that for the specific numbers and scenarios you assume, that collusion and self-dealing won't occur. But there are simply too many possibilities for us to analyze them all. Until the experts who have analyzed the bitcoin blockchain do the same type of analysis of masternodes, and publish their research papers, and allow time for other experts to read those research paper and confirm their conclusions, I don't think it's safe for us to assume that dishonest self-dealing won't occur.

    Rather than do a comprehensive game-theoretic analysis, it's so much simpler to just avoid the problem altogether, by prohibiting self-dealing without full disclosure of all conflicts of interest.
     
  27. xjones

    xjones New Member

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    They're not going to make it so obvious.

    More likely, they will vote for budget proposals that are of the greatest benefit to them personally, and also of some benefit to Dash. Were the masternodes truly neutral, they would likely have voted for other budget proposals that would have been of greater benefit to Dash.
     
  28. David

    David Well-known Member
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    Other than a general statement of "we promise to be ethical" I don't know what you're wanting, exactly. Do you want Core Team to reveal the number of masternodes they own? Even if everybody is willing, how will you know they are telling the truth?
     
  29. xjones

    xjones New Member

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    To begin with, to raise awareness of possible conflicts of interest. The awareness will be raised by the public anyway, once Dash hits the mainstream. Better we do it now and think about solutions.
     

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