Welcome to the Dash Forum!

Please sign up to discuss the most innovative cryptocurrency!

Do Masternodes really help to stabilize the price?

Discussion in 'Economy' started by moxx aka joe, Sep 4, 2017.

  1. moxx aka joe

    moxx aka joe New Member

    Joined:
    Aug 31, 2017
    Messages:
    7
    Likes Received:
    8
    Trophy Points:
    3
    I mean, the money in circulation isn't really affected by the DASH held back. So why should they stabilize the price?
     
  2. tungfa

    tungfa Administrator
    Dash Core Team Foundation Member Masternode Owner/Operator Moderator

    Joined:
    Apr 9, 2014
    Messages:
    8,072
    Likes Received:
    6,292
    Trophy Points:
    1,283
    it is all psychological
    u can sell your MN collateral anytime obviously - but when u have a MN up and running u will not sell only because of a rise / fall in price (and go through the whole "hustle" of setting MN up after again)
    if u have one up and running u will let it be and up and running
    and that obviously stabilises the price ;)
     
    • Like Like x 2
    • Agree Agree x 2
  3. Crypto Eric

    Crypto Eric New Member

    Joined:
    Nov 13, 2017
    Messages:
    10
    Likes Received:
    5
    Trophy Points:
    3
    I think so yes. Now I am relatively new to how Dash functions as a DAO, but from what I understand from a simple economic perspective is that a Masternode costs 1,000 Dash (correct me if I'm wrong).

    There are roughly 4,000 Masternodes. So 1000 x 4000 = 4,000,000, what this means is that there is 4 million Dash locked up in the Masternodes. This acts similarly to proof of stake from what I can tell. If there is roughly 7.6M Dash in existence right now, and 4 million of that 7.6 million is locked up in Masternodes, that would DEFINITELY stabilize the price. Which is what I've seen in Dash's history, a slower healthier rise.

    Please correct any inconsistencies, I am still somewhat newish to Dash, I am here to learn!
     
    #3 Crypto Eric, Nov 14, 2017
    Last edited: Nov 30, 2017
  4. kelvin

    kelvin New Member

    Joined:
    Nov 14, 2017
    Messages:
    15
    Likes Received:
    4
    Trophy Points:
    1
    The problem here is the logic that simply "existing" stabilizes prices. The MN system poses a risk in that mining centralization through ASIC production in a relatively small transaction volume environment can reduce returns to MNs as well as miners by creating too many MNs. The reward structure is that 45% of a block reward goes to miners, 45% goes to MNs. If transactions per MN fall too rapidly then decreasing returns could lead to a negative feedback loop where MNs liquidate their position to book profits and diversify into chains that offer better opportunities. This is a fundamental and proven risk of PoS. Instead of "stabilizing" what you find is that an artificial supply constraint causes prices to run up quickly and then at a certain price level the incentive to take profit becomes so high that stakeholders all try to beat each other to the exits, causing massive price crashes that cascade repeatedly until the coin is basically worthless. See for example NXT, the first PoS coin, and others that have demonstrated the inherent instability of PoS design and have sufficient chart history to show this instability in action. I wouldn't say this characteristic applies in exactly the same way to DASH since the hybrid structure and relatively small number of stakeholders seem to be more stable in practice but I'm not exactly clear whether this has more to do with loyalty, some other reason, or financial incentives.

    The reason Ethereum is moving very slowly towards PoS is partly because they don't fully understand the game theory or the economics behind it. In many ways DASH is highly experimental and fueled by significant amounts of online propaganda, which is a reason to be skeptical of their governance and the potential for price manipulation. Ultimately, all that matters is that they increase their user levels at a reasonably high rate, which would lead to higher prices and stronger incentives for a stable MN network and miner network. If MN levels more or less track changes in transaction levels then I would say there's not much risk to the system. If MN levels increase at a higher rate than transaction levels then that might pose a risk since the price "pump" could create incentives for MNs to exit due to diminishing returns.
     
  5. Crypto Eric

    Crypto Eric New Member

    Joined:
    Nov 13, 2017
    Messages:
    10
    Likes Received:
    5
    Trophy Points:
    3
    What do you think of the current model? 45% miners / 45% MN / 10% team
     
  6. amzar

    amzar New Member

    Joined:
    Nov 16, 2017
    Messages:
    25
    Likes Received:
    3
    Trophy Points:
    3
    Dash Address:
    Xt3zMYG3avwA4fy45eNL9v4Yu4izbU2Dy8
    IMHO, MNOs program make things much more better and healthier for Dash itself. Why ?

    1) Basic economy is supply and demand. When supply is retain, demand rise, price will rise. supply retain, demand retain, price retain. What will happen when supply out of sudden increase ( due to cancellation MNOs program ), Dash price will go down really bad even demand is either retain or slightly rise.

    2) Based on 1st point, current statistic, we have 4234 MNOs out there means approximate 4,234,000 Dash been locked for MNOs. It will greatly help to control supply / Dash circulated in market then.

    Me personally, do really agree with MNOs program to ensure Dash price wont go wild at all.

    Its just my 2 cent opinion.

    Cheers
     
  7. Cart

    Cart New Member

    Joined:
    Dec 1, 2017
    Messages:
    7
    Likes Received:
    1
    Trophy Points:
    3
    Good point, I think that is the main point. Having it all set up and running you are happy with your dividend and don't worry about trading or other things. Also there might be tax problems if you sell and rebuy all the time.
     
    • Like Like x 1
  8. JarlMickel

    JarlMickel New Member

    Joined:
    Dec 2, 2017
    Messages:
    8
    Likes Received:
    2
    Trophy Points:
    3
    There is less supply so its helping to stabilize the price
     
  9. Hossman

    Hossman New Member

    Joined:
    Dec 1, 2017
    Messages:
    5
    Likes Received:
    2
    Trophy Points:
    3
    I was thinking about this very thing on my commute. over half of the dash in the world is tied-up in master nodes. Joe is wise to ask, essentially, what difference does the money not circulating make? I was trying to remember intermediate macroeconomic., and monetary theory. I do remember this. The money supply in absolute terms matters, but, also, the money velocity matters. Essentially, in some ways, the supply of dash is actually something like 3.5 Mill., as the rest is tied-up in master nodes.

    In traditional economics, assuming a nationalized currency, prosperity increases the money velocity, which is a good thing, essentially, if there are more goods and services being bought with the same money, it changes hands faster. When the economy slows down, there's less demand for credit, and, (before fiat) this reduces the interest rate, as there's money sitting not doing anything that can be lent for cheap.

    What I'm trying to decide with Dash's model, when the price of Dash goes, am I less likely or more likely to leave it in a master node?

    If I had been an earlier adopter, worked a 9-5, and dropped $5,000 to set up a master node a couple of years ago, now it's worth $0.75 Million, do I quit my job, sell the Dash, start my dream business/retire, or, is that block reward more of an incentive now. This is the behavioral side I don't have figured out. It seems the number of master nodes are correlated with the rise in price. Is this a temporary thing, as when it was cheap, and you had say, 500 dash, it wasn't worth the hassle. Now, if you have 500 Dash that you're HODLing, you'd be foolish not to get in on some sort of master node shares program.

    Maybe this will be stabilizing especially if the Evolution savings account feature comes. I imagine guy in Crypto, has a down market, and some unrealized losses. He could sell his other cryptos, take the write-off, and move into Dash, where he at least has an income stream. I suppose it works the other way too. If Dash way out-performs, is there temptation to lock in a gain, and diversify into other coins?
     

Share This Page