Do Masternodes really help to stabilize the price?

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moxx aka joe

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I mean, the money in circulation isn't really affected by the DASH held back. So why should they stabilize the price?
 

tungfa

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I mean, the money in circulation isn't really affected by the DASH held back. So why should they stabilize the price?
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 ;)
 

Crypto Eric

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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!
 
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kelvin

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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.
 

Crypto Eric

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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.
What do you think of the current model? 45% miners / 45% MN / 10% team
 

amzar

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I mean, the money in circulation isn't really affected by the DASH held back. So why should they stabilize the price?
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
 
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Cart

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Dec 1, 2017
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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 ;)
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.
 

Hossman

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Dec 1, 2017
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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?
 

Alessandro Cecere

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Dec 27, 2017
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Well 60% of Dash circulating supply is held by masternodes. So basic analysis would conclude HODLing equals long term value appreciation. Masternodes are excellent for the ecosystem in the long run
 

solarguy

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Mar 15, 2017
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I think it is more accurate to say that the staked Dash in the Masternodes reduces downward volatility. They are reluctant to sell the Dash and break up the Masternode. Furthermore, there are people who are working toward getting a Masternode, or another masternode, and if the price drops substantially, they see that as a huge gift and buy up some more Dash.

It may actually increase upward volatility, which is a good thing in most but not all scenarios.

Kelvin, "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."

That is technically incorrect. Mining centralization has no effect on the number of Masternodes or how much the Masternodes get paid.

Kelvin, "If transactions per MN fall too rapidly then decreasing returns could lead to a negative feedback loop..."

Again, that's not how this works. Transactions per Masternode have no effect on how much a Masternode gets paid, unless you're talking about a large increase in the number of Masternodes, which would then reduce how much each Masternode gets. But again, the number of Masternodes has been very stable, both through big price dips and big price spikes.

Kelvin, " DASH is highly experimental and fueled by significant amounts of online propaganda,"

Dash runs the same software that Bitcoin runs, with some improvements. So....I guess if Bitcoin is highly experimental, because all cryptocurrencies are highly experimental, then I guess you could make the argument that Dash is highly experimental. A pretty successful one to date I might add.

Give me a specific example of this propaganda you speak of.
 
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Ezio Rojas

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I believe that the MasterNodes do not allow the currency to be as volatile as the rest of the ones that exist in the market. This is an important value if we consider that many of the criticisms of cryptocurrencies are focused on that they are very volatile.
 

FrankWatsonJr

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Mar 17, 2018
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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 ;)
This, I agree with 100%, no one will want to go through the whole process again and again just to move in and out of a masternode

I think its a long-term hodl play
 

Sahabia

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Feb 10, 2018
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Yes I also agree with this 100%. Dash price can fall but not as worse as the other currencies will do.

It always falls in meaningful manner. Others than can just within an hour fall more than 400%. Dash is different
 

pedro sandoval

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Mar 23, 2018
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upload_2018-3-27_23-48-8.png


hey i saw this graph a wile ago, im new in the community but have follow the project for quite some time... this graph the only thing that tell us is that 2000 MNs know each other and made some money between end of the year and the start of 2018, but how do you explain the price did not move in the mean time?...
 

splawik21

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Well there must have been some issue on masternodes.online as the MN count never went so low even on new version updates.
Check this:
 

pedro sandoval

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Mar 23, 2018
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perfect.. where did you got your info? i will send and email asking the source of the data for that pic i showed..... just sharing info, best regards
 
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