Dynamic Masternodes - Masternodes` impact on trading volume/liquidity

InTheWoods

InTheWoods

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Foundation Member
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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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 :smile:

Not being a culture of traders also has the side effect of a less volatile price, which is good for adoption.
 
What about if only some limited amount of new nodes can appear on the network each week/month?
That could be a solution ... ?
 
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.
 
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.
 
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.
 
TroyDASH said:
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.
Click to expand...

maybe promoting Shared Masternode Services ?
 
itscrazybro said:
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.
Click to expand...

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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koampapapa said:
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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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.
 
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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tungfa said:
maybe promoting Shared Masternode Services ?
Click to expand...
That could help the volume, sure.
fernando said:
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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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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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.
 
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....
 
TanteStefana said:
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.
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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.
 
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).
 
koampapapa said:
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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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?
 
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.
 
itscrazybro said:
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?
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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.
 
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.
 
Otaci said:
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.
Click to expand...

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.
 
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