Masternodes - good or bad for the economy?

[Lzeppelin]

One might argue that the masternodes are bad for the economy in that they will initially take many DRK out of circulation and many more through the saving of masternode payments by their owners. This could create a feedback loop where darkcoin keeps getting more and more valuable, as such everyone holds DRK and does not buy with them thus stalling the economy.

However I personally think that masternodes and masternode payments are good for the economy. With earning DRK without incurring the real world costs of mining one could more easily spend their "free" DRK without having to worry about hardware costs, the power bill, etc. Ten percent of everything that will be mined goes to masternode owners and I believe they will be more likely to spend the actual DRK rather than converting it to pay something like utilities.

Just thought this would make an interesting thread, please share your thoughts.

 

[▲ λ έ ξ α ν δ ρ ο ς]

Everyone has a ceiling where they spend I believe. Just a matter of having the places to spend and where the ceiling is (50, 100, 500, 1,000 ? )

Personally I think DRK has more intrinsic value than BTC so the price will be more than that of BTC ultimately.

 

[vertoe]

taking many drk out of circulation might be bad for economy but thats great for investors

 

[fernando]

Truth is, there are not many places to spend darkcoin yet. I agree that the earned darkcoins feel (will feel) like free, so people will be more eager to do things with them than with the mined/bought ones. The real problem for us not spending darkcoins is the soaring price. You get the feeling that you are wasting them. The tshirt I bought with darkcoins is now worth more than 300 usd!

 

[alnoor1231]

Don't you guys have any idea how difficult it is to set up a masternode??
1. You need initial capital of 1000 DRK, which at current prices = $7570 USD
2. You need to buy/rent out a server that's secure and well maintained, which also isn't cheap
Plus, there's no solid guarantee that you 1000 DRK will be safe!
Overall, you might just end up loosing money. It's not the soundest investment option IMO.
-Al

 

[vertoe]

Don't you guys have any idea how difficult it is to set up a masternode??
1. You need initial capital of 1000 DRK, which at current prices = $7570 USD
2. You need to buy/rent out a server that's secure and well maintained, which also isn't cheap
Plus, there's no solid guarantee that you 1000 DRK will be safe!
Overall, you might just end up loosing money. It's not the soundest investment option IMO.
-Al

When this thread was created it was rather $800 than $8000.
Using a cold/remote setup allows you to run a masternode without even having 1000 DRK on the server.

 

[alnoor1231]

When this thread was created it was rather $800 than $8000.
Using a cold/remote setup allows you to run a masternode without even having 1000 DRK on the server.

Seriously? I thought that the 1000 drk was absolutely necessary...
How do you do a cold/remote setup? Would you still reap the rewards of having a regular masternode?

 

[vertoe]

Seriously? I thought that the 1000 drk was absolutely necessary...
How do you do a cold/remote setup? Would you still reap the rewards of having a regular masternode?

They are required, but not on the server.
Remote MasterNode guide UPDATED

 

[alnoor1231]

They are required, but not on the server.
Remote MasterNode guide UPDATED

Cheers!

 

[flare]

Don't you guys have any idea how difficult it is to set up a masternode??
1. You need initial capital of 1000 DRK, which at current prices = $7570 USD
2. You need to buy/rent out a server that's secure and well maintained, which also isn't cheap
Plus, there's no solid guarantee that you 1000 DRK will be safe!
Overall, you might just end up loosing money. It's not the soundest investment option IMO.
-Al

AFAIK this was the original rationale of having masternodes: protect/secure the network by making it hard/expensive to run one.

Masternode Requirements

These nodes are the foundation of DarkSend, all transactions will be routed through these nodes. Each masternode requires that 1000DRK be kept on the node and each time that node is selected the network will dedicate 10% of that block to these nodes. If you are running a masternode you need to be fairly familiar with network administration and securing your host.

The point is to make it very expensive to acquire them. Imagine the following:

FeedbackLoop:
- User asks "Should I create a masternode?"
- it costs $XXX, they would earn $X.XX/day. That's X days till they earn 100% of their investment.
- User buys 1000 DRK, creates masternode
- Price goes higher, 1000DRK gets pulled out of the supply
- Go to FeedbackLoop

This is a feedback loop that this strategy is creating. We should add masternodes until the price finds equilibrium with the masternode capacity.

1x Masternode = 576 blocks * 10% of the reward = 1036DRK/day
8x Masternodes = (576/8) blocks * 10% of the reward = 129DRK/day
16x Masternodes = (576/32) blocks * 10% of the reward = 32DRK/day
128x Masternodes = (576/128) blocks * 10% of the reward = 8.1DRK/day

Let's say after the feedback loop completes the price of Darkcoin is $5 and we have 1200 nodes. At that point we have six million dollar in masternodes, to gain 50% of the network to do an attack would probably cost much more than six million dollars, so it's not possible anymore. Also, an influx of six million dollars would create much higher prices, making it profitable for others to start masternodes again.

So the issue you are seeing here is not an issue, but "works as designed"

Regarding the profitability: Show me another asset with a yearly interest rate of >10% (masternodes return 30% yearly currently)

 

[vertoe]

Regarding the profitability: Show me another asset with a yearly interest rate of >10% (masternodes return 30% yearly currently)

My nodes are currently at ~50% return per year.

 

[flare]

My nodes are currently at ~50% return per year.

Results may vary, i did the math based on

07/18 11:00:41;  node count/len(set(poolhash.org):  696; payment per node/DRK:  0.908;  payment per node/$:  7.006; DRK/$: 7.718;  last 576 blocks supply: 3159

0.2 * 365 days * 3159 DRK / 696 nodes = 331 DRK * days / node --> 33.1 %

 

[GilAlexander]

Having mn reward is nice but price fluctuations are more powerful.
Let I have 1000 DRK and the current price is 0.017. When the price is 0.012 I lose 5 BTC that is 3100$. With the current mn stats this is a reward for 1.2 years.
So it is for crypto enthusiasts or who thinks that prices will go up (as I do). The one question is how pulling out of supply affects prices. I think eduffield's explanation about "feedback loop" is correct because there never will be so much mns to make darkcoin's economy unstable only because of this factor.

 

[SirHikmat]

One might argue that the masternodes are bad for the economy in that they will initially take many DRK out of circulation and many more through the saving of masternode payments by their owners. This could create a feedback loop where darkcoin keeps getting more and more valuable, as such everyone holds DRK and does not buy with them thus stalling the economy.

However I personally think that masternodes and masternode payments are good for the economy. With earning DRK without incurring the real world costs of mining one could more easily spend their "free" DRK without having to worry about hardware costs, the power bill, etc. Ten percent of everything that will be mined goes to masternode owners and I believe they will be more likely to spend the actual DRK rather than converting it to pay something like utilities.

Just thought this would make an interesting thread, please share your thoughts.

Thanks for this important thread! I wish, there would be more discussion about this topic.

We have now a situation in which 37% of the Coins are blocked in Masternodes (1904 MN and 5,118,915 generated Coins). The hoarded Coins have a value of $ 5,807,200. Maybe, we should decrease the MN Payments. Over a third blocked Coins are in my opinion too much for a monetary system.

 

[crowning]

Maybe, we should decrease the MN Payments.

VERY bad idea, it would destroy Darkcoin's credibility. Investors need a stable planning base.

Over a third blocked Coins are in my opinion too much for a monetary system.

This is something no one can predict...we have to wait and see.

Right now the market seems to indicate the opposite, Darkcoin is in a good position and very stable.

 

[flare]

We have now a situation in which 37% of the Coins are blocked in Masternodes (1904 MN and 5,118,915 generated Coins). The hoarded Coins have a value of $ 5,807,200. Maybe, we should decrease the MN Payments. Over a third blocked Coins are in my opinion too much for a monetary system.

You are proposing the exact opposite of what Darkcoin Dev Team had designed: The MN payments will increase during the next years, up to 60% as per 2016-04-11

We did this design decision to emphasize the important role of masternodes in the Darkcoin ecosystem. Unlike pure PoW coins, where all incentives go to miners, Darkcoin splits the incentives to people running masternodes as well. The consequence is astonishing: You will currently not find a coin with such a healthy infrastructure of full nodes as Darkcoin.

As for the coin supply: On what is your opinion based? How many tradeable units does a monetary system need? Even at the current 37% of locked coins there are still 3214915 DRK * 100000000 duffs = 321.491.500.000.000 duffs available for merchants and customers - should be sufficient, don't you think?

 

[SirHikmat]

I see the importance of Masternodes and yes, the DarkCoin infrastructure is at the moment damn stable thanks to the design by the Darkcoin Dev Team! I'm happy to see that you have a precise idea of the future of MN payments and that this information is public for all MN maintainers.

My thoughts about the MN payments are in a very early stage. Please let me some time to finish my thoughts. In the end, (hopefully) I'm totally wrong with my concern over blocked Coins. :smile:

 

[oblox]

I see the importance of Masternodes and yes, the DarkCoin infrastructure is at the moment damn stable thanks to the design by the Darkcoin Dev Team! I'm happy to see that you have a precise idea of the future of MN payments and that this information is public for all MN maintainers.

My thoughts about the MN payments are in a very early stage. Please let me some time to finish my thoughts. In the end, (hopefully) I'm totally wrong with my concern over blocked Coins. :smile:

Your concern would only be relevant if you are thinking in fiat-world terms where everything is a whole coin. The fact that we are dealing with digital currencies means we could go out as many decimal places needed to have viable units to serve economic activity. If you re-read flare 's post, you can see the substantial amount of duffs (units) available to transact with. In no economy will this not be enough to do business. If things really are getting priced in duffs though, it means the value per "whole" coin is worth substantial.

 

[SirHikmat]

Your concern would only be relevant if you are thinking in fiat-world terms where everything is a whole coin. The fact that we are dealing with digital currencies means we could go out as many decimal places needed to have viable units to serve economic activity. If you re-read flare 's post, you can see the substantial amount of duffs (units) available to transact with. In no economy will this not be enough to do business. If things really are getting priced in duffs though, it means the value per "whole" coin is worth substantial.

Only to clarify: my concern is not about the amount of tradeable units. I want to ask about the implication of blocked Coins during i.e. a price shock. But as I said, I'm at the very beginning of my little "research".

 

[oblox]

Only to clarify: my concern is not about the amount of tradeable units. I want to ask about the implication of blocked Coins during i.e. a price shock. But as I said, I'm at the very beginning of my little "research".

They aren't blocked... it's a free market and can be moved (and sold) at anytime. Now with IX, if you want to send them someplace, it's seconds. You're not committing your 1k DRK for any period of time. If you want to run a masternode for a day, knock yourself out but the chances of getting payment is nil (unless enforcement is off) given the count.