Dash Core Team
Dash Support Group
- Feb 13, 2016
This thread captures questions asked and answered by Ryan Taylor, CEO of Dash Core Group, during the June 2020 AMA sessions regarding improving Dash as a store of value.
Dash Nation Discord AMA, 2020-06-10 23:00 UTC
Dash Nation Discord AMA, 2020-06-10 23:00 UTC
- Q: What is the action plan if the move towards lower mining rewards produces the opposite desired effect or other undesired effects that we are not in a position to predict?
A: We have been especially cautious in our approach to avoid as much risk as we can arising from unforeseen effects. However, if there were concerns that the changes were causing greater harm than good, we could conceivably submit another decision proposal to freeze the allocations wherever they were, or even revert to the previous allocation settings.
- Q: How are we going to keep track of the effect of lowering the mining rewards? What are the key metrics and what noise should we zero-out (if any)? For example a sharp rise in valuation a month or two after the switch cannot be correlated 100% to this decision (or vice-versa).
A: The changes are targeting to slow the growth rate of circulating supply. This is easily measurable on a quarterly basis, and can be compared to the range we projected in our models. Because valuation is affected by many other attributes, I would not attempt to measure the results based on price.
- Q: In the past you have commented on the diminishing marginal benefits of PoW mining as a key reason why it was good for Dash to adopt our current 45/45/10 split of the block reward instead of Bitoin's 100% PoW allocation. In the recent Tokenomics presentations, the focus has been more on providing price support by controlling our expected rate of increase in "circulating supply", as opposed to optimizing our block reward for maximum efficiency.
The new proposal, which is 0-20% flexible treasury with the remaining block reward split 60/40, would reduce the effective miner compensation of the block reward from the current 45%, to somewhere between 32%-40% depending on the size of the treasury. The assumption must be that we are paying for way too much PoW at 45%. How do we know that 45% is too much PoW overkill, and how do we know that 32%-40% for PoW is not still too much PoW overkill?
A: The primary goal is to stabilize the growth of Dash's circulating supply, which would have a stabilizing effect on value over longer periods of time. The reason I illustrated the diminishing returns of incremental hashrate previously was to help illustrate how we can achieve this without a major impact to security of the network. I would not describe the primary goal to be to minimize the amount spent on hashrate... you always want a significant buffer, which this plan retains.
- Q: I can recall that in the past the option to have collateralized mining was also on the table of discussion. Since the proposed changes are aiming to provide price support by reducing our inflation could that option be opened up again for consideration? New required collateral can help in the locking up of Dash just like MNs do. Do you see any obvious faults with it from the get-go or are there any reasons that we shouldn't even explore that possibility?
A: Because of the sensitivity of the network economics, introduction of completely new concepts like collateralized mining carry greater risks. It would also require much greater development efforts to pursue this route. Given that we believe we have a solution to the stated problem (circulating supply growth) that requires little effort, results in predictable outcomes, and wouldn't risk dramatic unprojected changes to the circulating supply, we feel this is a more prudent path.
It is possible that some form of collateralized mining could cause sustained demand for Dash that could reduce our circulating supply, it could risk over-shooting what we need and result in a smaller base of circulating supply than we intended. If that were to happen, we would find ourselves with a similar situation just a few years down the road.
- Q: How are we going to keep track of the effect of lowering the mining rewards? What are the key metrics and what noise should we zero-out (if any)? For example a sharp rise in valuation 2-3 months after the switch cannot be correlated 100% to this decision (or vice-versa).
A: Even if we do this change, I don't think there's really any good way to prove that it worked or it didn't. If the price goes up we can't know for certain that it wouldn't have gone up even more if we had stayed put; and conversely if it goes down there's no way to know for sure that it wouldn't have gone down more if we had stayed put,...etc. IMO we can only go based on the economic model, either you buy into it or you don't; there's way too much market noise in the wider market for other factors. Unless there's something I'm missing?
- Q: Followup to previous question Re: having a significant buffer of hashrate:
What are some ways to evaluate how much of a buffer is needed in terms of PoW hashing? How do we know that we're not already going too low on the buffer with this proposal, or if we still have way more than enough (where we could consider reducing it even further long term, in order to allocate to other purposes)?
A: There are several ways to measure this.
1) "nicehashable" / excess capacity that is currently available for rent vs. hashrate of the network, 2) Dash's share of X11 hashrate across all coins,
3) allocation toward miners per unit of time.
- Q: It is obvious that the gravity of influence from DCG towards the proposed changes is considerable. Bundling this with the fact that the MNO network has a tendency towards reactivity instead of proactivity when it comes to voting or researching on proposals in general I would assume the influence on this proposed change (reward re-distribution) is even greater. Since the provided research was spearheaded by DCG, in the event of the proposed changes not achieving our aim and the nature of the proposal not being a deal-breaker, in the sense that the MNO network would not want to defund DCG for just this one mistake, how would DCG react acountability-wise in order to restore the would-be damage on the trust relationship between network and DCG?
A: The changes are targeting to slow the growth rate of circulating supply. This is easily measurable on a quarterly basis, and can be compared to the range we projected in our models. Because valuation is affected by many other attributes, I would not attempt to measure the results based on price. So the best way to measure the success imo, would be to measure the actual vs. projected change in circulating supply growth rates. If the results don't match the models, we should reassess.
- Q: Will Dash's total coin supply emission rate always be kept exactly the way it is currently predicted/expected to be? Is there a way for masternodes to guarantee or promise never to manipulate it in the future? Does someone investing in Dash not have to worry that coin supply won't someday be manipulated by the masternodes who control it? Is Dash scarcity as immutably certain as Bitcoin's?
A: Coin supply in Dash - just like any cryptocurrency network such as Bitcoin - is dictated by consensus. Therefore, no network can ever guarantee there will never be a change in supply. If for example, Bitcoin network's security was beginning to risk compromise because the block subsidy was gone and fees were insufficient, it is conceivable that the network could resume a block reward if consensus was reached from the decentralized network. So I think I can only say that we don't have that intention, but it's also not in DCG's control that a change in supply would never occur at any point in the future. But that's no different than any other consensus based network.
- Q: What do you think about the idea of fixing the mining reward allocation, and leaving the flexible treasury to only cut out of the MN-reward portion, in order to have a stronger incentive for MNOs to vote optimally? (Voting for a proposal means voting to spend 100% out of MN possible reward, as opposed to 40% coming out of someone else's money/rewards)?
A: The primary issue with this approach is that it misaligns incentives in a similar fashion to networks that rely on donations for development. It basically requires one group (MNs) to shoulder the full costs of proposals that likely benefit the entire network. If a particular proposal adds value to Dash that exceeds its cost, the system should encourage it to be pursued. The miners would presumably benefit as well, so I think having them share proportionally in the cost help the MNs reach more rational decisions without the burden of coat-tail-riding beneficiaries that don't contribute.
The risk is that good proposals may not pass simply because the burden of funding them falls on a subset of the network.
- Q: Just to clarify my concern regarding the accountability question. I do not sense any ill intention from DCG on the proposed changes but I do like the quote "Plan for the worst, prepare for the best".
I would be concerned that MNOs might overreact if they view the changes as a solution to a price problem instead of growth rate of circulating supply (even though it has been clearly stated as the second) or as a situation that "We trusted you on this one but it failed" and backlash in the form of downvoting all or part of other proposals from DCG when it's clearly foolish to do that. A what-if contingency plan to any proposed changes is something that I like to see, that's all.
A: Understood. I think it would be difficult to predict the range of possible future outcomes and reactions from the MNOs to build a reliable plan. We always try to listen to the MNOs and community as a whole and react positively to their concerns. I would of course commit to continuing to do that. If many things are going wrong, though, that are impacting DCG's reputation and causing dissatisfaction overall, you could argue that any resulting changes may have been warranted.
- Q: Granting that it's impossible to know in advance how strong the community consensus will be on this proposal, but assuming that MNOs are on board with this change with minimal tweaking, how quickly could this change go through the pre-proposal, proposal, implementation & testing, and deployment? (How soon from now until we could see the first hardforked block from the gradual transition?)
A: I disagree. I think you can measure the number of MNs predicted by the model and actual. By definition, you are also therefore able to compare actual vs. predicted circulating supply growth. If the model is correct, you should see the effects in those numbers, and the effects would be largely independent of price (which I agree is impacted by too many other things to measure success of this effort on).
- Q: Concerning the increase of the budget by 10% maximum possible to date, to 20% possible, on which economic model an increase in production expenses (the development of the Dash protocol) can this lead to an increase in the value of Dash?
A: That depends on whether the approved proposals deliver more value to the network than they cost. If the MNs make high-quality decisions and approve mostly worthwhile proposals (there will always be some failures) then I think a larger proposal funding allocation could conceivably deliver far more value to the network than the miner allocation it would mostly come from, yes.
- Q: This brings the possibility that not 10% but 20% of Dash created will be directly put on exchanges and thus double the available quantity. How can this be beneficial in terms of scarcity/availability?
A: Miners typically operate with narrow margins, so approximately 55% of rewards distributed today are directed toward activities that may require a high share of proceeds to be liquidated to cover expenses. Under the proposed plan, even if the full 20% were allocated to proposals, this would mean 32% would be allocated to miners (e.g., 40% times the remaining 80%). This means even in the most extreme example, 52% would be directed toward activities that may require liquidation, which would represent an improvement. If less than 20% were allocated to proposals, this percentage would be even lower.
- Q: So, in your opinion, would it potentially be easier in Dash for masternodes to reach consensus and manipulate our coin supply than it would be for Bitcoin to manipulate its coin supply? Is that a relevant danger? Is being a solid store of value less important to Dash than Bitcoin?
A: I think coin supply is something that most people in crypto (including our MNOs) recognize the importance of. So I would assume that if it ever were to happen, it would be for some very good reasons. For example, security concerns that would make the network unsustainable, or heavy duty research that shows some benefit. I don't think this is a remotely serious near-term threat.
- Q: The 20% cap budget is too high for me. Maybe 15% or even 12% to start and see how it does...
A: Thank you for the feedback. I mostly hear the opposite actually, that most people want no cap at all.
- Q: From my perspective Dash is better than bitcoin at quickly adapting to what the network needs. In bitcoin what would likely happen is a very high profile long drawn out community split where you end up with two competing chains, and then only time would tell which one made the right decision.
A: Dash "halves" every 10 years rather than four, so Bitcoin, BCH, and LTC will need to grapple with that question long before we will.
- Q: Seriously if we look at all the history of our budget we had more waste than positive and great ROI from so much proposals.. We waste so much money.. I don't want to increased this waste...
A: I'm not an advocate for no cap at all. I think that falls into "too many changes at once" for my taste. Especially since you always can retain the option to change it later. I think you need to be conservative with these changes.
I think the fact that proposal funding would affect MN rewards would help address this issue. But still, I would want the cap there in case we are wrong.