Q&A

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If everyone can stake, does Ryan agree there will be less liquidity on the market? Is that really a good thing?

This question is rooted in the assumption that everything remains static. When you make one change, other changes don't occur in reaction. If we make a change like this, I would postulate that our market cap would be well supported, or at least the profile would be improved, that this headwind we face would go away. That would make Dash a more attractive asset to hold long term. In terms of the units of Dash trading, yes perhaps liquidity would go down, but if the value of the Dash that is trading goes up, overall liquidity could actually rise. I would assume that if people are willing to use Dash, they're willing to hold it, there's always going to be a need to get in and out. If we grow as a network, I would think that the the liquidity itself would grow with it. Again, let's not confuse the percentage of coins that trade hands with the value of those coins. This is another example where there's a confusion between what we mean by liquidity. We need to find ways to make Dash more attractive as a long term store of value, and I think the rest of it would follow. You you grow your community, you gain users, you gain activity, liquidity does improve. And we've also got some features, by the way, that really make Dash attractive for liquidity purposes. We're making real headway in terms of getting InstantSend and ChainLocks adopted on the exchanges. That's going to improve our liquidity profile to a great degree. I can't tell you the number of enquiries I've gotten lately from major players in the cryptocurrency space seeking to borrow millions of dollars of Dash to loan to traders. If you are a whale and are willing to lend, contact me, because there's tremendous demand from traders right now to get their hands on Dash because it is a valuable tool for traders. They don't necessarily want to hold it in their portfolio, I'm hoping to change that for them, but they do want to leverage it in terms of trading. There is demand in the marketplace right now to borrow Dash for traders to be able to leverage it. I see signs that our liquidity could dramatically improve from here.

 

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Q: How much influence do you have on DCG's strategy decisions on business development? Are you happy with the results of DCG's current business development strategy so far? Do you believe that the co-working sessions with other DFO's that focus on business development benefited DCG's progress, and if so would you be willing to increase collaboration?

In terms of the business development strategy that we've been pursuing, there are some I'm more happy with than others, and for varying reasons. I think that remittances has been a real challenge for us because of the infrastructure need. The need to obtain a footprint in local markets throughout Latin America has been difficult. We've had some success there, we recently added an exchange in Mexico, we recently added an exchange in Colombia. We have a number of cash in and cash out services available in Venezuela now. There's an increasing number of ATMs throughout the region. So the infrastructure piece has been really challenging to get through, but we're getting to the point now where I think we're able to to start to really execute on that strategy. Venezuela has been really challenging from a regulatory standpoint. We've been working on some large integrations, directly into point-of-sale systems, and we'd like to get those up and running. But the larger we target, the more concern there is about the reaction of the government to a large integration, and getting the appropriate licenses and things of that nature. That has been successful, but we face some headwinds that I was hoping to be a bit further along on some of those by now. I think we're getting close on both of those.

Cannabis has been really challenging, mainly from a banking perspective. Getting services that are required to be able to fulfill that strategy within the US market is really tough. Obviously Alt36 is the one that has to deal with those issues. We're working with them to try to address what we can, but that one really hasn't worked out as well as I would have hoped. Like I said earlier, there's still benefit in Alt36 growing from here, because they are leveraging Dash. But we don't get to directly interface with the consumer as Dash consumers on that strategy the way that things are operating right now. We have ambitions, and Alt36 has ambitions to change that, but it's not completely up to either of us in terms of whether or not that comes true. So I'd say that one's been kind of the the toughest challenge out of all of them.

Gaming is one area that I think has a lot of potential and we haven't invested as much as we could in there. I hope to allocate a lot more time to that in 2020. The trading strategy is one that we've recently gotten a lot of traction with. When Coinbase decided to list Dash with ChainLocks, that really opened a lot of doors for us. There's a lot of ChainLock and InstantSend integrations underway, and I think once we reach a critical scale there of exchanges, we're going to be able to actively market that one. But absent Coinbase, prior to Coinbase doing that, getting on the major exchanges with some of this technology was really challenging. So that was a big integration with us - not because coinbase is big, but because they're well respected by their peers in the industry. That's really enabling some things for us.

So some that I count as a wild success, some that are challenging and we're working through it, and some that you know we're doing the best we can but it might not work out the way that we expected. And that's kind of the mix that I was expecting. You place your bets based on logic. You try to execute against them, you learn along the way, and you double down on the things that are working well and go find some other things to execute on. We're kind of at that point. I'm deeply involved in business development, Glenn is actually deeply involved in business development, especially in financial services, and then Ernesto and Omar are full-time on business development. So we do manage to get a lot done.

The other teams that are working on business development - there's actually more business development capacity outside of Dash Core Group than inside of it - we've got teams in Brazil, we've got teams throughout Latin America, we've got a team in Mexico, Venezuela, and then we've got DACH Embassy, we've got the Dash Force guys doing business development. There's a large number of teams that have business development capacity. The vast majority of that capacity is outside of DCG. They leveraged DCG a lot of the time for technical expertise, for advice, for coordinating, for getting contacts with other partners. If a partner is a relationship that we built, and they're trying to bring in a partner that would leverage that capability, oftentimes we collaborate on introductions and things of that nature. We work quite well together. The teams have a weekly call on which they coordinate on all of these types of things. I think it's working splendidly. If there are other ways that we can help those teams, we're all ears. I see it continuing to work well, and that collaboration seems to be appreciated by all involved at this point, so it's likely that those weekly calls and the collaboration that results will continue.

 

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Q: As far as the collaborative success that we've had with the business development domain where there's a lot of different teams and because they're all working together and profiting from the core team's expertise that's been successful... what do you think about having the same sort of a set up for marketing or for example media and PR and things like that? Where you would have the core team communicating with other groups about messaging, about plans and where they're reaching out to the media etc, in order to foster that same collaborative environment and network effects?

We already do this with PR. Shift PR is actually hired by the network. Dash Core Group does take the lead in terms of coordinating that, but that asset is available to any of the teams that have announcements or PR related work that is meaningful to the network. Michael is the one on our team that coordinates with Shift, but it's a pretty small amount of their capacity that we have. But they will help some of these other teams with pushing the message out to media and coordinating the message associated with that. So that already happens, and I think that that that is working well, at least from my point of view. I see some of the other teams that get to leverage the resources and it seems like it's being leveraged appropriately. In terms of marketing - I think it's a great idea. Like I said, we aren't doing a great deal of marketing activities ourselves. For the most part, we're limited to our social media channel channels and so on. As we ramp that up, if funding were to become available and more marketing activity were happening outside of Dash Core Group that required this type of coordination, I think we would mimic that process there. Because it is working well in business development and in public relations. So I would absolutely support that type of collaboration. I mean, it's just being a good community member. We're all Dash funded organizations. What's in the best interest of the network is for us to collaborate and work with each other, coordinate on messaging and coordinate with each other. When that doesn't happen it could be detrimental. We've seen the effects of that in the past, and it doesn't help Dash the currency. So I'm always committed to collaboration first.

 

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Q: Regarding staking as a security model, i.e. proof of stake: obviously one of the big challenges with proof of work is miner centralization, whether it be mining farms and pools or manufacturers there become centralized. Exchanges and other large economic actors such as that tend to have access to a big portion of the Dash supply. Is there any kind of a worry that's switching to either partially or completely a proof of state model would be an out of the frying pan into the fire situation? Where now you have a different source a different set of centralized entities controlling a lot of the security model behind Dash?

If we were to move to a proof of stake model, one of the pieces of data that I would expect to analyze from some of our partners like Blockchain Intel is what share of the Dash in circulation resides on various exchanges. What you see with Binance's free staking is with some of these smaller coins, almost all of the coins are parked on Binance, and Binance effectively controls their chain as a result. That is not a good security model. It is also not a good security model to have 1.6 petahashes of our own hashing in the hands of a single miner, which is the case today. That's about 40% of the network. That's not a super position to be in either. If we were to move to proof of stake, my ingoing hypothesis is that we have enough of the large exchanges that no one exchange would be able to control our network currently. But it would remain a risk for the future. So between Kraken, BitFinex, Coinbase and Binance, and a number of others... we're on something like 60 different exchanges globally. I don't anticipate that any one of them has a controlling level of Dash. But that could change in the future. There could be a global leader that emerges and so on. So my answer is, as far as the technologies that are available today, we would need to ensure a) that we're comfortable with ChainLocks as a mechanism to prevent any type of attack like that and b) if ChainLocks were to fail, we would need to have a secure model. I don't know what that would look like. That could be a backup mechanism for ChainLocks that would kick in - call it ChainLocks Lite. That would be "secure enough" if there was a short period of time that ChainLocks were not operating, because we were going through a network upgrade or because of some other issue like a DDoS attack or something of that nature. We need to be secure when those ChainLocks are not available. We need to be future-proof if we're going to go this route. There has been a lot of work done that can make us more able to adopt proof of stake than some of these other networks, and this is all about finding enough security to be comfortable with it.

That word may not sit well with people: what is "secure enough"? Bitcoin does not have perfect security. Dash today does not have perfect security. Is it damn hard to attack the network? Yeah, it's REALLY hard to attack either of those networks. But there IS no such thing as perfect security. Perfect security comes at infinite expense, from all technologies that we're aware of today. Perfect is not an option. So given that perfect is infinitely expensive and not an option, what is the right trade-off? How much should we be spending on security? How hard should it be to attack the network? Because there are diminishing returns with more and more expensive security models. We should be looking for efficient ways to deliver adequate security - "adequate" being REALLY almost impossible to attack. That is the level that we need to target. And I believe that that solution is out there at a lower expensive than we're paying for it today. A lot has happened in the last five and a half to six years, and we should be leveraging those advancements in technology to improve our store a value profile.

 

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Q: I heard discussions on trustless masternode shares as being possibly more difficult to implement than previously thought, and obviously also not solving Dash's key issues facing its tokenomics. Assume there is a hybrid proof of stake/proof of service model, so you can have a masternode or you can stake. Then a smaller percentage of Dash's holders would participate in governance, i.e. have a say, because smaller holders or people who do not want to buy two whole masternodes e.g. buy just one. However they decided to do it, there would be fewer masternodes making decisions for the whole rest of the network, many of whom were involved directly with staking. Now because of that, would there be a value proposition of having a way to create trustless masternode shares outside of staking, so that people could avoid the greater annoyance of setting up masternodes but smaller holders could still participate in the governance process?

There's nothing stopping us from pursuing both. Masternode shares are probably not as complicated as most people are thinking. I think that it would simply be a couple of new transaction types that would register your holdings for the potential of collateral. Whether or not those need to be in denominated units like 10 Dash or 100 Dash or something like that remains to be seen. But basically having the ability to register them as available - I don't know if there would have to be timelocked transactions or something like that - and some mechanism to register a masternode leveraging those. That probably isn't a huge lift in terms of effort, it's possible. There are scenarios in which that could be beneficial or detrimental to the network, both from an economic standpoint and from the governance issues that you're talking about. I think we need to do more to explore what the reaction would be, if we'd see an exodus of masternode ownership and an exit from the network, or whether we would see some other behavior emerge. We'd have to look into that a little bit more. We can do that through masternode polls and other ways that we can gather the information on what people would anticipate they would do. It's absolutely possible to pursue this.

As you pointed out, it doesn't really do much to change the economics of the network. It doesn't do anything to change the expense of proof of work. It doesn't do anything to change our inflation rate for regular users. So I think that it's unclear to me whether you you could do that in parallel with something else. There is another solution too. If you're concerned that the number of masternodes can't change for some reason, like you don't want to see them go down as a result of this change... We operated perfectly fine when there were 4000 masternodes, but if this is nonetheless a concern that we don't want to see that occur, you could do a combination of things. Like increasing the masternode rewards to say 50% while making other changes, including the introduction of masternode shares, in order to offset that and prevent a large number of masternode owners from making the decision to discontinue operating. There is a threshold beyond which if you start providing 55% to the masternode owners, it opens us up to other criticisms. Like masternode owners actually become a larger percentage of the network over time, if they retain their masternode rewards, and therefore become even more powerful entities within the network rather than being diluted like they are today. So I'm not sure how far we could go with a strategy like that one, but I think that all of this is is part of the debate. We need to flesh these issues out as a community and see what we're comfortable with make sure that people voting have a solid understanding of what they're voting for and the consequences of those changes. If we do a good job at having this debate and engaging with the community and engaging with the masternodes that would vote this change in, I think we'll end up with a solution that makes a lot of sense and addresses a lot of the issues. Masternode shares on their own, as I pointed out, do not solve the economic shortcomings of the network. They may mitigate some of it, but they don't solve the fundamentals. My aim in this in raising this issue was to solve the fundamentals. Let's make Dash a great store of value relative to our competitors.