How does the masternode network reduce volatility in our markets?
It's best to think of our system has having multiple economies with one greater economy. The masternode network has it's own market cap and so does our currency market. Each have a separate valuation and dynamics, but they complement each other by lowering the volatility of each other and allow much greater efficiency when transferring value.
As an extreme example (it's much easier to show the effect at these levels), lets say the masternode market was worth 1 trillion dollars and we had 99% of the market's total coinage locked up in the masternode network (5643 total masternodes of 5700). It means there's only 57000 coins for the currency market and EACH coin is worth $175,438.00. That means it is going to be insanely difficult to move the currency markets and there's $9B* worth of liquidity in the currency part of the market.
How would this work if we had no masternode market at all?
With a 9B dollar market and 5.7 Million coins total. Each coin is worth $1754. It's much easier to move the market in this case.
What would happen if we had a 1 billion dollar dump with no masternode network and 9 billion dollars of liquidity in the markets? It would cause a 11.1%** decline in price, a much greater impact on the economy. With a trillion dollar market cap however, 1B represents a 0.1%** move in the markets and a much more stable market.
* $9B is just an example, it's a separate market and can't be calculated exactly from the masternode network's market
** Exact percentages would depend on market depth
(Is that correction correct ? - i.e. did you mean complement as opposed to "compete" ?)
I've read this about 4 times now because I couldn't square the idea that you could move the market a lot in one case and a little the another since I always look at it as one continuous coin supply in both cases. But now that I see it as two distinct
commercial markets, each with their own size and dynamics, the implications are just starting to dawn on me.
Basically what you're saying is that the fact that a majority of the coin supply earns a fixed income (percentage ways of the mining supply) for its holders, this has a stabilising effect on the remainder which has to inflate - in dollar terms - to meet the liquidity requirement of the trading market.
That inflation (again, seen from a dollar perspective) then increases the profitability of the masternode network over time, which in turn supports the value of that market sector. A virtuous cycle.
I look forward to seeing where this goes. The currency is looking well primed for each market in its own right - nevermind when they compliment each other like this.
Awsome - both financially and technologically. But then again, what is the point of holding currency if you can't earn interest on it ? It's only what a regular investor off the street would expect (not withstanding ZIRP policies
). The breakthrough here, though, is the marrying of that requirement to finding a way of putting the funds to work that's of service to the network and that earns a return !
