Dynamic Masternodes - Masternodes` impact on trading volume/liquidity

InTheWoods

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I believe Masternodes create a positive dynamic in the market; they brings more steady, long term investors on-board. There is a side effect, however, and I'd like to talk about this side effect and how it can be addressed.

I believe Masternodes also create a dynamic that hurts trading volume. Low trading volume is a bad metric which can hurt growth going forward. At the moment Dash has the lowest trading volume of all top 10 coins. Investors and merchants run away from low trading volume which also means low liquidity. Dash is currently ranked 19th by trading volume. This means there are 18 coins out there with better trading volume than Dash currently.

What if Masternodes where to change from having a fixed collateral to a dynamic collateral that would allow those coins to be traded for a certain period of time. Say for example you could trade your coins before returning them as collateral, give Masternode owners a 1 week grace period to return the coins as collateral or something like that. I'm not really sure about all the implications of such a change. I just want to start the conversation about the trading volume implications. There probably are better technical solutions to address this.
 
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fernando

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You'd have the risk of someone being able to start a lot of masternodes with just 1000 DASH during that grace period, which could be really dangerous.

I agree that our low trading volume is a direct consequence of all us being savers instead of traders, but I'm not sure we can change that. With returns available for masternoding, trading needs to offer a higher yield to be attractive, so we will always have less traders than other coins that don't have alternatives. I guess that if the price goes up a lot and masternodes are too expensive for the average small investor, some will go back to trading. But if that happened I'm sure someone would figure out how to do shared masternodes in a trustless way and get things back to masternoding :)

Not being a culture of traders also has the side effect of a less volatile price, which is good for adoption.
 

splawik21

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What about if only some limited amount of new nodes can appear on the network each week/month?
That could be a solution ... ?
 
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koampapapa

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Thanks for creating this thread InTheWoods. This discussion really needs to be had.

When people adopt Dash, the price of Dash will rise. I disagree with the fact that Dash's involatile price is a good thing. I'm not sure it's a good or bad thing, it's just a temporary consequence of low trade volume. And it's definitely not something we should use as a pitch to potential adopters. It's a feature that, mathematically, cannot last if Dash is to be adopted.

I think ideas like DashTrader.info can increase trade volume. I think creating a social network for traders, as I propose in the budget, would really increase Dash's adoption with traders. Compare the "ethereum" subreddit with the "ethTrader" subreddit. It would be great if we could have a place where price discussion was disallowed, and another where it was encouraged, and where traders could earn reputation based on their trades.
 
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itscrazybro

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The main reason it has the lowest trading volume of the top 10 coins is because the other coins get a lot of, if not most of their volume from btc38. I think once coinmarketcap adds our btc38 market then our trading volume should look a lot more competitive.
 

TroyDASH

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The low volume is because the masternode system encourages long term investing, not day trading. When people buy DASH, they tend to buy big (enough for a masternode), and if they create a masternode, that has a certain setup/maintenance to it, and people are less likely to be bringing masternodes up and down all the time in order to transfer DASH to/from trading exchanges. Locking up half of the entire coin supply in masternodes is good for the price in terms of limiting supply, but also results in much decreased volume on average when compared with other coins, with all else being equal. I'm not really sure if there is a solution to this other than just encouraging more adoption for non-masternode purposes.
 

tungfa

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The low volume is because the masternode system encourages long term investing, not day trading. When people buy DASH, they tend to buy big (enough for a masternode), and if they create a masternode, that has a certain setup/maintenance to it, and people are less likely to be bringing masternodes up and down all the time in order to transfer DASH to/from trading exchanges. Locking up half of the entire coin supply in masternodes is good for the price in terms of limiting supply, but also results in much decreased volume on average when compared with other coins, with all else being equal. I'm not really sure if there is a solution to this other than just encouraging more adoption for non-masternode purposes.
maybe promoting Shared Masternode Services ?
 

koampapapa

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The main reason it has the lowest trading volume of the top 10 coins is because the other coins get a lot of, if not most of their volume from btc38. I think once coinmarketcap adds our btc38 market then our trading volume should look a lot more competitive.
This is not true. You can click on the "volume" links on coinmarketcap.com and see for yourself. BTC38 is not a high-volume exchange

Game-changers would be kraken, bitfinex, or coinbase. I'll throw in btc-e and gemini as honorable mentions
 
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fernando

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This is not true. You can click on the "volume" links on coinmarketcap.com and see for yourself. BTC38 is not a high-volume exchange

Game-changers would be kraken, bitfinex, or coinbase. I'll throw in btc-e and gemini as honorable mentions
We had bitfinex in the past and they delisted us because of low volume. Volume doesn't just happen because of exchanges, there needs to be interest by traders too.
 
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stan.distortion

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Anyone know what happens to coins when they've been sent to an exchange? Thanks to the exchanges bitcoin has become a fractional reserve system, I can't prove that but the exchanges can provide prove of their holdings and chose not to, why is that? Mostly due to lack of vigilance by traders, the infallible security of a distributed ledger takes second place to profits... and we get Goxings, naked shorts, all the underhanded dealings that an archaic "trust us" security model cant prevent. Until we have distributed exchanges with provable reserves the liquidity is far safer in the masternodes.
 
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InTheWoods

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maybe promoting Shared Masternode Services ?
That could help the volume, sure.
We had bitfinex in the past and they delisted us because of low volume. Volume doesn't just happen because of exchanges, there needs to be interest by traders too.
Yes and what does this tell us? It tells us that volume needs to be higher to be taken seriously by some of the high profile exchanges. Market cap alone won't do. I see volume spiked up recently with the recent buying to around 400k but seems to be coming back. Prior to this recent rally it was sitting somewhere around 200k. A 200k average volume is not appealing enough to some exchanges.
 
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TanteStefana

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You know, I think in the end, Dash simply has to grow a large enough market cap. It's just extremely undervalued. We do need more liquidity, but I think that can only come with usability, in a natural, organic way. I'm not saying we shouldn't make tools for traders, but that they may not have a huge impact on liquidity. The only thing that will make Dash valuable to exchanges is price. Every other coin is pumped to the stars, except Dash, and that's probably because of the stabilizing effect of the Masternodes. On the other hand, although still undervalued, Dash is consistently rising in price and when the junk falls by the wayside, people will put their funds behind Dash.

And I suspect in a few months, Dash will have a market cap / trade volume that will attract all the exchanges no matter what we do about it.
 

splawik21

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I see some month limit for the nodes to be created...this would
1st - brake down some mn operators and let them think twice before they move the node from its collateral
2nd - bigger stability of MN count
3rd - ppl who take their nodes down will probably put liquidity on the exchange as they will not be able to put the node up if the monthly limit is achieved.

From the other side I started to think if it is good to do ANY limitations hmmm....
 

InTheWoods

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You know, I think in the end, Dash simply has to grow a large enough market cap. It's just extremely undervalued. We do need more liquidity, but I think that can only come with usability, in a natural, organic way. I'm not saying we shouldn't make tools for traders, but that they may not have a huge impact on liquidity. The only thing that will make Dash valuable to exchanges is price. Every other coin is pumped to the stars, except Dash, and that's probably because of the stabilizing effect of the Masternodes. On the other hand, although still undervalued, Dash is consistently rising in price and when the junk falls by the wayside, people will put their funds behind Dash.

And I suspect in a few months, Dash will have a market cap / trade volume that will attract all the exchanges no matter what we do about it.
While I like your optimism TanteStefana there's a bit of wishful thinking there.

Poloniex has become a top exchange because it allows margin trading, shorting and because it pays interest on loaned coins. It's the playground of traders and speculators.

Bitcoin went up a lot in its early days (2009 - 2013) mostly on speculation and media coverage not because of actual Alpaca socks being bought with it. That was a very tiny fraction, the real world use. That part came later, the actual consumer use.
 

TanteStefana

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The volume is calculated in fiat right? Not number of coins. Or? So if the fiat price of Dash goes up, volume goes up, no? Anyway, I don't think it's possible to keep the system safe, and remove the MN requirement, so I'm thinking (though I could be wrong, of course) that the best way to get this into a healthier situation, we need to do more PR to drive interest, maybe let koampapapa make his trading tools and get the price to rise. I think we've (Dash community has) always shunned PR because we're so darn proud, frankly. Everyone should just see how awesome Dash is and come join us. But the truth is, we need to spread the word far and wide, push our technology so people finally "see" Dash for the greatness that it is.

Nobody wants to do PR because we don't have any real adoption yet, so it's the chicken or the egg situation. But I think Dash is very mature as it is today, and even more so when v12.1 comes out (soon I hope). We've started to get buzz here and there, but we need to get serious. There is no reason why Dash can't be adopted as well as Bitcoin is, and it should be even better, especially in retail environments. Lets spread the word.

But again, there just isn't a way to allow MN operators time in the market, and if you did, many or most will lose their funds as they aren't the trading type. Worse still, many won't even try (I wouldn't).
 

itscrazybro

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This is not true. You can click on the "volume" links on coinmarketcap.com and see for yourself. BTC38 is not a high-volume exchange

Game-changers would be kraken, bitfinex, or coinbase. I'll throw in btc-e and gemini as honorable mentions
I have checked out their volume and they are litecoins leading exchange, dogecoins leading exchange, Stellars Leading exchange, Ripples leading exchange besides Ripple Gateways. They are also Bitshares second exchange.
So if thats not high volume then I don't know what is?
 

TroyDASH

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Price appreciation doesn't necessarily translate to higher volume, it could end up just translating to fewer coins being traded for the same fiat volume. Although, higher price typically means higher interest and more adoption, which would be the true drivers of the volume.
 

InTheWoods

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I have checked out their volume and they are litecoins leading exchange, dogecoins leading exchange, Stellars Leading exchange, Ripples leading exchange besides Ripple Gateways. They are also Bitshares second exchange.
So if thats not high volume then I don't know what is?
Yeah, BTC38 has decent volume $5mil/day if you include all the cryptos traded there. Bitcoin is $1.6mil of that. It's great Dash is trading there now. They also have Yuan fiat pairs which means nice access to Chinese money.
 

Otaci

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It's an interesting discussion.

I'm really not decided on the masternodes yet. I see their purpose and I understand the benefits (I think), but ....

I can give you a view as a newcomer: it feels a bit like an old boys club. It took all my BTC to get one masternode, yes I'm not a big investor, and no I don't mind because as far as I am concerned BTC is dead. But still, it's over 4000 USD. So I get my one masternode and I'm happy and waiting for my first payment, when I realize that there are possibly people who own 100's of them, and could probably put up new ones constantly if they wanted.

Owners of masternodes just keep earning, for doing nothing. Bring up the idea of requiring them to summarize budget proposals once every thirty years (per masternode) and that's too much work.

At least miners have to work for it, to keep up with the competition, to balance power costs versus income.

The technical requirements for running one are laughable. I know that Evolution may change this, it will be interesting to see what comes.

The system is very skewed in favor of the early adopters. The problem isnt that the value of their coins increase, but they just keep getting more of them.
 
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TroyDASH

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It's an interesting discussion.

I'm really not decided on the masternodes yet. I see their purpose and I understand the benefits (I think), but ....

I can give you a view as a newcomer: it feels a bit like an old boys club. It took all my BTC to get one masternode, yes I'm not a big investor, and no I don't mind because as far as I am concerned BTC is dead. But still, it's over 4000 USD. So I get my one masternode and I'm happy and waiting for my first payment, when I realize that there are possibly people who own 100's of them, and could probably put up new ones constantly if they wanted.

Owners of masternodes just keep earning, for doing nothing. Bring up the idea of requiring them to summarize budget proposals once every thirty years (per masternode) and that's too much work.

At least miners have to work for it, to keep up with the competition, to balance power costs versus income.

The technical requirements for running one are laughable. I know that Evolution may change this, it will be interesting to see what comes.

The system is very skewed in favor of the early adopters. The problem isnt that the value of their coins increase, but they just keep getting more of them.
Shared masternode ownership is the solution to your concern. If you want to stake your DASH to earn the same (or very close to the same) percentage interest that a full masternode makes, then you can buy a piece of a shared masternode. Currently the only way to do this is with a trusted third party though of course, but there is already at least one such service in existence. The point is, late adopters still can earn masternode interest even if they can't afford the full 1000 DASH to instantiate and maintain the masternode themselves.

Of course, also keep in mind, DASH is still very young. Anyone who buys DASH for the first time today *IS* an early adopter. Think Bitcoin in its second year of existence.
 

InTheWoods

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It's an interesting discussion.

I'm really not decided on the masternodes yet. I see their purpose and I understand the benefits (I think), but ....

I can give you a view as a newcomer: it feels a bit like an old boys club. It took all my BTC to get one masternode, yes I'm not a big investor, and no I don't mind because as far as I am concerned BTC is dead. But still, it's over 4000 USD. So I get my one masternode and I'm happy and waiting for my first payment, when I realize that there are possibly people who own 100's of them, and could probably put up new ones constantly if they wanted.

Owners of masternodes just keep earning, for doing nothing. Bring up the idea of requiring them to summarize budget proposals once every thirty years (per masternode) and that's too much work.

At least miners have to work for it, to keep up with the competition, to balance power costs versus income.

The technical requirements for running one are laughable. I know that Evolution may change this, it will be interesting to see what comes.

The system is very skewed in favor of the early adopters. The problem isnt that the value of their coins increase, but they just keep getting more of them.
Same can be said about the early pre-IPO shareholders of various tech companies. It's probably still early though as TroyDASH said.
 

xdashguy

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I believe Masternodes create a positive dynamic in the market; they brings more steady, long term investors on-board. There is a side effect, however, and I'd like to talk about this side effect and how it can be addressed.
I do not believe that masternodes have any affect on trade volume / liquidity. For purposes of this response, volume refers to the USD value of trading that occurs (not the number of Dash units traded, which is not relevant). Master nodes most likely do have an effect on price, but not on USD trade volume. The effect Master nodes have is reducing Trade-able Supply which is essentially the supply used in a demand / supply relationship. It also may have an effect on Dash units traded, but that volume measure is not important for economics at this time.

Given that Dash is infinitely divisible (for practical purposes), you will not see an effect on volume due to hoarding. Let's pretend one day that all Dash are locked into masternodes such that there is only 1 Dash in Trade-able Supply. Now, let's pretend there is 5 Million USD of demand for Dash at any price. That one coin would just be divided at whatever price would be necessary for the 5 Million USD in demand volume to occur. It would definitely have a huge effect on price and it would definitely have an effect on volume of Dash traded, but it would have no effect on USD value traded which is typically what people refer to when they mean volume / liquidity.

So, given this, Masternodes are non-issues, IMO, in the discussion of USD trade volume.
 

InTheWoods

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xdashguy

Are you aware people can lend their coins on Poloniex and earn an interest on that? This alone contributes to higher volume. No point for Masternode owners to do that since they get a higher return operating Masternodes.
 

TroyDASH

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I do not believe that masternodes have any affect on trade volume / liquidity. For purposes of this response, volume refers to the USD value of trading that occurs (not the number of Dash units traded, which is not relevant). Master nodes most likely do have an effect on price, but not on USD trade volume. The effect Master nodes have is reducing Trade-able Supply which is essentially the supply used in a demand / supply relationship. It also may have an effect on Dash units traded, but that volume measure is not important for economics at this time.

Given that Dash is infinitely divisible (for practical purposes), you will not see an effect on volume due to hoarding. Let's pretend one day that all Dash are locked into masternodes such that there is only 1 Dash in Trade-able Supply. Now, let's pretend there is 5 Million USD of demand for Dash at any price. That one coin would just be divided at whatever price would be necessary for the 5 Million USD in demand volume to occur. It would definitely have a huge effect on price and it would definitely have an effect on volume of Dash traded, but it would have no effect on USD value traded which is typically what people refer to when they mean volume / liquidity.

So, given this, Masternodes are non-issues, IMO, in the discussion of USD trade volume.
It's not the "scarcity" of the coins, as in, the raw total number of coins up for trade that is the reason for the low volume. It's the scarcity of the actual value on the buy and sell orderbooks. And the reason people are not putting up a lot of value on the buy and sell order books is directly related to what people's motivation is for buying and selling. If the #1 reason to buy DASH is to get enough to start up a masternode, those are the types of transactions where the DASH is not likely to change hands very often. But if people are buying DASH in order to spend it on goods and services, then those transactions are very likely to be changing hands often, and the people accepting that DASH will be more likely to be converting to BTC or fiat than someone who is operating a masternode. Something like Ethereum has some very interesting services to offer from the network itself (no comment right now on the pros and cons of ethereum). DASH has a coin mixing service but very few other goods and services available (instantx is great but there is very little real world availability right now to use this to buy an actual product or service). If we want more volume, we need more goods and services that we can use DASH for, whether it comes from more retail integration or network services or wherever.
 

Otaci

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Shared masternode hosting has been brought up a couple of times. I know there is already at least one service offering this. What if this was to happen on a large scale? What if people were able to participate with tiny amounts? If people could earn 11% on any amount, would they just hoard everything? What would this do to the supply/liquidity of DASH?
 

TroyDASH

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Shared masternode hosting has been brought up a couple of times. I know there is already at least one service offering this. What if this was to happen on a large scale? What if people were able to participate with tiny amounts? If people could earn 11% on any amount, would they just hoard everything? What would this do to the supply/liquidity of DASH?
There's going to be hoarding for every crypto, especially ones that are new and that have a finite number of coins. The possibility of shared masternode ownership kind of produces a proof-of-stake effect across the whole network. Whether this is a good thing or not is up for debate. Pretty much ties right back into the topic of the currency being deflationary
 

xdashguy

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It's not the "scarcity" of the coins, as in, the raw total number of coins up for trade that is the reason for the low volume.... If we want more volume, we need more goods and services that we can use DASH for, whether it comes from more retail integration or network services or wherever.
I agree with you. My point was is that masternodes are not related to the issue. If you got rid of master nodes or increased master nodes it will not have much significant impact on USD volume traded. That will be dependent on USD demand. Currently the demand is for masternodes so it is increasing trade volume (not decreasing it) as it increases demand for the coin. If you got rid of master nodes all it does is decrease the USD demand. If you increase the amount of trade-able coins all you do is decrease the price --- the USD demand will still the tstay the same.

The only way to increase volume in USD terms is to increase the attractiveness of the coin for day traders, purchasing products, investing, etc. I am now convinced the #1 way to do this is through ATMs. We need to dot the world with 1000s of ATMs. It will reduce buying friction and each machine will serve as a 24/7 piece of marketing that introduces casual users to the idea of Dash.
 
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TroyDASH

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I agree with you. My point was is that masternodes are not related to the issue. If you got rid of master nodes or increased master nodes it will not have much significant impact on USD volume traded. That will be dependent on USD demand. Currently the demand is for masternodes so it is increasing trade volume (not decreasing it) as it increases demand for the coin. If you got rid of master nodes all it does is decrease the USD demand. If you increase the amount of trade-able coins all you do is decrease the price --- the USD demand will still the tstay the same.

The only way to increase volume in USD terms is to increase the attractiveness of the coin for day traders, purchasing products, investing, etc. I am now convinced the #1 way to do this is through ATMs. We need to dot the world with 1000s of ATMs. It will reduce buying friction and each machine will serve as a 24/7 piece of marketing that introduces casual users to the idea of Dash.
Ok, ty yes I understand your point now & I agree. If creating masternodes makes up a high % of the total demand, it doesn't decrease the volume because it isn't a zero sum in terms of demand for masternodes vs. demand for other things.

ATMs are great in terms of access to the currency but ultimately I think it's all about the end goods and services. If there are so many great things to use DASH for, and people really want to be able to get DASH easily then ATMs are going to be coming out of the woodwork without us even needing to push them that much.
 
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logicalmayhem

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Just read the whole thread
I'm a big fan of the technology behind DASH and if i was going chose an altcoin to be used widely, DASH would be the obvious choice.
The big problem is that the best technology doesn't always win, it's much more likely that an adequate technology that gains widespread adoption will outcompete it (Think IPv4 or VHS).

As a day trader price is the least important factor, volume is by far the most important aspect. Take DOGE for example it has a really stable value but without the volume noone buys at the highs or sells at the lows, so no matter how smart you are there is no profit to be made. Traders work by taking advantage of the dumb money in the system, and there isn't any dumb money trading dash.

No traders == Low volume == not added to exchanges== hard to obtain == no adoption
If DASH has not made a breakthrough by the end of the year i have serious doubts about its viability and survival
 

IronVape

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ShapeShift has changed the equatIon since this thread was last active.
What is your creiteria for a "breakthrough"?