How masternode payments might cause a bubble

[xjones]

Running a masternode requires an investment of 1000 dash. The masternode operator then gets an annual return, currently around 11 to 12%, previously much higher, of that investment, paid in dash.

That's an excellent rate of return. As a result, many people have acquired the necessary dash and set up masternodes. This has created a demand for dash.

Many people are buying dash primarily to set up a masternode and get a return on their investment.

As more and more people find out about the high return on investment offered by running masternodes, they will buy dash to do so. The market value of dash will increase. This has been happening already.

But this increased market value does not reflect any inherent value of dash itself.

This positive feedback loop cannot go on forever. At some point, if dash has not acquired value for other reasons (such as usefulness as a currency), this loop might collapse, and the value of dash could fall steeply.

If that happens, then we will retroactively know that a bubble had formed and then burst.

To prevent this happening, dash must acquire market value primarily for reasons other than its demand for running masternodes. So long as a major factor in the increase in the value of dash is demand for setting up masternodes, a bubble will occur and it will eventually burst.

 

[rustycase]

Running a masternode requires an investment of 1000 dash. The masternode operator then gets an annual return, currently around 11 to 12%, previously much higher, of that investment, paid in dash.

That's an excellent rate of return. As a result, many people have acquired the necessary dash and set up masternodes. This has created a demand for dash.

Many people are buying dash primarily to set up a masternode and get a return on their investment.

As more and more people find out about the high return on investment offered by running masternodes, they will buy dash to do so. The market value of dash will increase. This has been happening already.

But this increased market value does not reflect any inherent value of dash itself.

This positive feedback loop cannot go on forever. At some point, if dash has not acquired value for other reasons (such as usefulness as a currency), this loop might collapse, and the value of dash could fall steeply.

If that happens, then we will retroactively know that a bubble had formed and then burst.

To prevent this happening, dash must acquire market value primarily for reasons other than its demand for running masternodes. So long as a major factor in the increase in the value of dash is demand for setting up masternodes, a bubble will occur and it will eventually burst.

Of course.
12% return is not outrageous as 1/2% presented by fiat bankers.

Please consider, this is voluntary participation, within a scheme NOT mandated by the Powers That Be.

If you wish, I shall pull up the links for Amanda B. Johnson presenting Irina, speaking of 'cryptocoins' and you may compare that with Janet Yellen speaking, (from her script), of what 'she' claims is the direction of the NY Federal Reserve Bank. ( BY golly, it sure appears as though someone off-screen has a voodoo doll of her and is sticking pins in her throat ! )
Yes, I said that. rc

Making a contribution to the strength of DASH by exchanging hard-earned fiat for DASH would be a Very Risky Investment from many points of view...
unless a person truly feels there are superior options for P2P intercourse.

IMNewbieOpinion, this is the best thing to come along since sliced bread.
Well, I'm doing my best to stay off the wheat based products, loaded with HFC, but I hope you get the point.

Did I say... I'm leaning towards being a Michael Pollan fan.

Best
rc

 

[TaoOfSatoshi]

Running a masternode requires an investment of 1000 dash. The masternode operator then gets an annual return, currently around 11 to 12%, previously much higher, of that investment, paid in dash.

That's an excellent rate of return. As a result, many people have acquired the necessary dash and set up masternodes. This has created a demand for dash.

Many people are buying dash primarily to set up a masternode and get a return on their investment.

As more and more people find out about the high return on investment offered by running masternodes, they will buy dash to do so. The market value of dash will increase. This has been happening already.

But this increased market value does not reflect any inherent value of dash itself.

This positive feedback loop cannot go on forever. At some point, if dash has not acquired value for other reasons (such as usefulness as a currency), this loop might collapse, and the value of dash could fall steeply.

If that happens, then we will retroactively know that a bubble had formed and then burst.

To prevent this happening, dash must acquire market value primarily for reasons other than its demand for running masternodes. So long as a major factor in the increase in the value of dash is demand for setting up masternodes, a bubble will occur and it will eventually burst.

I believe that is the focus of the d10e event and the flagship merchant integration project right now, and others to come through budget funding. Creating an ecosystem of merchants and customers using Dash will take a while, but it's something you have to build, one step at a time. But, with the strength of the network, we will be able to offer a more stable, secure product, so there's a greater chance of attracting interest.

 

[halso]

Tha

Running a masternode requires an investment of 1000 dash. The masternode operator then gets an annual return, currently around 11 to 12%, previously much higher, of that investment, paid in dash.

That's an excellent rate of return. As a result, many people have acquired the necessary dash and set up masternodes. This has created a demand for dash.

Many people are buying dash primarily to set up a masternode and get a return on their investment.

As more and more people find out about the high return on investment offered by running masternodes, they will buy dash to do so. The market value of dash will increase. This has been happening already.

But this increased market value does not reflect any inherent value of dash itself.

This positive feedback loop cannot go on forever. At some point, if dash has not acquired value for other reasons (such as usefulness as a currency), this loop might collapse, and the value of dash could fall steeply.

If that happens, then we will retroactively know that a bubble had formed and then burst.

To prevent this happening, dash must acquire market value primarily for reasons other than its demand for running masternodes. So long as a major factor in the increase in the value of dash is demand for setting up masternodes, a bubble will occur and it will eventually burst.

That is true, a lot of the new demand is rent seeking by people setting up MNs.

But there is an element of self correction, if people drop off the network, the rate of return increases, thus attracting investors back.

But ultimately even that isnt good enough. You are right, If Dash doesnt find a real world use it is toast. However, this is also true of all cryptos. Only BTC has found a world use so far (buying stuff on the dark web).

The reason i like Dash is that the incentives are right, and the governance system works.

I reckon it has the best chance of all the alts to succeed.

The roll out of evolution will be very important. I wish it could happen sooner.

 

[GrandMasterDash]

Running a masternode requires an investment of 1000 dash. The masternode operator then gets an annual return, currently around 11 to 12%, previously much higher, of that investment, paid in dash.

That's an excellent rate of return. As a result, many people have acquired the necessary dash and set up masternodes. This has created a demand for dash.

Many people are buying dash primarily to set up a masternode and get a return on their investment.

As more and more people find out about the high return on investment offered by running masternodes, they will buy dash to do so. The market value of dash will increase. This has been happening already.

But this increased market value does not reflect any inherent value of dash itself.

This positive feedback loop cannot go on forever. At some point, if dash has not acquired value for other reasons (such as usefulness as a currency), this loop might collapse, and the value of dash could fall steeply.

If that happens, then we will retroactively know that a bubble had formed and then burst.

To prevent this happening, dash must acquire market value primarily for reasons other than its demand for running masternodes. So long as a major factor in the increase in the value of dash is demand for setting up masternodes, a bubble will occur and it will eventually burst.

This is true. At this rate of development (business and code), I feel it's inevitable that dash will eventually collapse and never recover. It's not just the slow speed of development, it's more about inertia compared to other competing and emerging cryptos (Ethereum etc). You can also add these mistakes to the list:

• given up on privacy; MN are basically the fall guy for other people's privacy, sitting on public IPs
• willingly accepting centralisation e.g. server acquisitions, google apps, MNs on cheap cloud services etc
• over-committing to fiat gateways instead of building out it's own ecosystems (gaming rewards etc)
• devs unwilling to give more control and responsibility to MNOs e.g. allowing MNOs to dynamically determine their own rewards or blocksize without depending on devs
• devs unwilling to provide a plugin system for both the client and server side.. because a server that allowed third-party plugins - and able to provide specialist quorums - would mean that devs lose control
• no appetite to give MNOs more tasks and responsibilities.. just setup MN and watch the free money roll in
• unwilling to work with other cryptos e.g. merged blockchains with shared benefits (quickly dismissed)

The whole selling point for crypto in the first place was to escape the madness of fiat and central banks... to escape centralisation that it can't be over-thrown or infiltrated.. and in 2016, where is dash / crypto heading? - a small pool of devs with the technical skills to hold everyone else to ransom. Just look to The DAO and see how hard forks are being normalised.

As a MNO, the key is to not be greedy and don't pour all your money into it; "invest what you can afford to lose". Syphon off the profits and diversify.

 

[aka5]

Let me guess you are one of the individuals who shorted around 0.01 instead of around 0.02 1 month ago, and now you are coming up with storys like that to save your short? And hopefully get some momentum on sells ...

For real - every crypto (even bitcoin) is mostly speculation - we have the masternode system going for a long time now, the price was higher and lower, and still they are holding strong, why is it just now you come up with that story? What has changed? - Right - nothing! - you just seem very biased ...

 

[Naruto]

Running a masternode requires an investment of 1000 dash. The masternode operator then gets an annual return, currently around 11 to 12%, previously much higher, of that investment, paid in dash.
................

To prevent this happening, dash must acquire market value primarily for reasons other than its demand for running masternodes. So long as a major factor in the increase in the value of dash is demand for setting up masternodes, a bubble will occur and it will eventually burst.

If the price drop a lot, there will be demand for speculation. I am not worry if the bubble burst. Honestly, I would like it to happen.
Just like mining. If the reward is not enough to support miner, they will drop out. And then will be correction until it become profitable again. This is how the system works!

 

[GrandMasterDash]

If the price drop a lot, there will be demand for speculation. I am not worry if the bubble burst. Honestly, I would like it to happen.
Just like mining. If the reward is not enough to support miner, they will drop out. And then will be correction until it become profitable again. This is how the system works!

I think @xjones was speculating on more than bubbles as they closed by saying, "dash must acquire market value primarily for reasons other than its demand for running masternodes. So long as a major factor in the increase in the value of dash is demand for setting up masternodes, a bubblewill occur and it will eventually burst." Maybe I interpreted it wrong, but I think the implication was that dash needs to be more than self-indulgent, it has to extend it's value proposition to a larger audience. If that's the case, then I agree.

An explanation of equilibrium is not going to guarantee anything because dash does not operate in isolation. The competition is very stiff and, frankly, the timeline for Evolution is much too long to be sure of any long term success. At it's current rate, I fear dash will eventually become just another hobby coin. In the short, maybe within 12 - 18 months, I expect there to be some very nice price rises.. it's just my long term view that is bearish.

 

[halso]

I

I think @xjones was speculating on more than bubbles as they closed by saying, "dash must acquire market value primarily for reasons other than its demand for running masternodes. So long as a major factor in the increase in the value of dash is demand for setting up masternodes, a bubblewill occur and it will eventually burst." Maybe I interpreted it wrong, but I think the implication was that dash needs to be more than self-indulgent, it has to extend it's value proposition to a larger audience. If that's the case, then I agree.

An explanation of equilibrium is not going to guarantee anything because dash does not operate in isolation. The competition is very stiff and, frankly, the timeline for Evolution is much too long to be sure of any long term success. At it's current rate, I fear dash will eventually become just another hobby coin. In the short, maybe within 12 - 18 months, I expect there to be some very nice price rises.. it's just my long term view that is bearish.

I agree. I think there needs to be more concentration on strategic partnerships. Like Western Union or Money gram. These companies are shitting themselves that they will be disrupted out of existence. Why not offer them a new platform to carry out their business.

I haven't seen any news or information that these type of partnerships are even being considered.

 

[halso]

Does anyone know the formula for calculating the ROI on a dash masternode? (i'm talking dash volume return, not $ return).

 

[UdjinM6]

Does anyone know the formula for calculating the ROI on a dash masternode? (i'm talking dash volume return, not $ return).

I would go with smth like this:
block reward / 2 / total number of masternodes * avg number of blocks per day * number of days per year / cost of single masternode * 100%
i.e. 3.88 / 2 / 3896 * 550 * 365 / 1000 * 100% = ~9.996%

 

[demo]

I would go with smth like this:
block reward / 2 / total number of masternodes * avg number of blocks per day * number of days per year / cost of single masternode * 100%
i.e. 3.88 / 2 / 3896 * 550 * 365 / 1000 * 100% = ~9.996%

2 is a hardcoded number.

Why (block reward / 2) and not (block reward / 3) ??

 

[UdjinM6]

2 is a hardcoded number.

Why (block reward / 2) and not (block reward / 3) ??

50% goes to miner, 50% goes to masternode

 

[demo]

50% goes to miner, 50% goes to masternode

It was obvious, I already suspected that.

But the question is, why 50-50 and not 30-70 or 70-30 or 49-51?
50-50 is a hardcoded initial number. So it is a wrong number.

50-50 assumes that the value of miners is equal to the value of MNs.
Even if someone believes that this 50-50 fits perfectly to the dash community of today (but how can he prove that?) it is 100% sure that this 50-50 will not fit to the dash community of tomorrow.

As theory says, hardcoded numbers whithout a theory behind should be voted, and voted using numbers.

 

[camosoul]

If DASH doesn't actually do anything with its feature set, someone else will. That will happen faster than an MN bubble.

 

[halso]

I would go with smth like this:
block reward / 2 / total number of masternodes * avg number of blocks per day * number of days per year / cost of single masternode * 100%
i.e. 3.88 / 2 / 3896 * 550 * 365 / 1000 * 100% = ~9.996%

I followed your methodology, but got slightly less. I think because i used 45% instead of dividing by 2.

 

[halso]

Using the workings above, I tried to work out the ROI per MN as the MN count increases. I have graphed two scenarios; 1. Red line is Dash ROI assuming no hosting costs. 2. Blue line is Dash ROI taking into account Node40 hosting costs (28.608 Dash - yearly discounted rate). What i don't understand is current ROI for scenario 2 is currently around 6% yet Node40 is advertising a 8.19% ROI. Can you help @orangecycle

 

[UdjinM6]

I followed your methodology, but got slightly less. I think because i used 45% instead of dividing by 2.

View attachment 2536

3.88 already includes substraction of 10% of block reward for budgeting purposes, so it should be 50%, not 45%.

 

[orangecycle]

Using the workings above, I tried to work out the ROI per MN as the MN count increases. I have graphed two scenarios; 1. Red line is Dash ROI assuming no hosting costs. 2. Blue line is Dash ROI taking into account Node40 hosting costs (28.608 Dash - yearly discounted rate). What i don't understand is current ROI for scenario 2 is currently around 6% yet Node40 is advertising a 8.19% ROI. Can you help @orangecycle

View attachment 2538

I had some different numbers for Dash per block and blocks per day. I have updated the script based on what UdjinM6 posted and the volume gain is now around the 9% you are showing. That number is the estimated volume gain of a masternode. It is not the estimated volume gain after you pay for service.

 

[halso]

@UdjinM6 revised numbers and graph below. @orangecycle Maybe the website should make it clear that the expected volume gain doesn't deduct the cost of MN hosting.

The key take away for me in terms of the graph is that once the return goes sub 5%, the investment starts to look a bit "ordinary". And new demand may dry up.

If you require hosting (like me) this is likely to occur at around 4800 MNs (see blue line). Which, if we keep adding MNs at current rates will happen in around 8 months.

It would be good if we could see some evo progress before then.

Revised numbers