Topic: [ANN][DASH] Dash (dash.org) | First Self-Funding Self-Governing Crypto Currency - page 87. (Read 9723776 times)

Lets compare some crypto projects to each other with regards to MRI (Miner's Rolling Inventory), which measures the changing crypto inventory levels held by the miners to determine if miners are hoarding or selling. An MRI above 100% means miners are selling more than they mine and running down inventory. Conversely an MRI below 100% means the miners are hoarding that specific crypto. Lets focus on 5 weeks, as that seems to be used in the first graph which is showing the MRI percentage.

Bitcoin SV Miner's Rolling Inventory (MRI)




Source : https://terminal.bytetree.com/bitcoin-cash-sv
Conclusion : Bitcoin SV miners are severly hoarding Bitcoin SV

Litecoin Miner's Rolling Inventory (MRI)




Source : https://terminal.bytetree.com/litecoin
Conclusion : Litecoin miners are consistently hoarding Litecoin

Dash Miner's Rolling Inventory (MRI)




Source : https://terminal.bytetree.com/dash
Conclusion : Dash miners are selling more than they mine and running down inventory

What i am currently not sure about is if the MRI in Dash case is specific to miners or to miners & masternodes. Which means the following will mostly be my personal assumptions :

I think that Dash miners are currently far more in a selling mood then a hoarding mood and that has been driving the price down. I also think it is far more likely that miners are in a position
that they need to sell their mining rewards to pay for the electricity and possibly pay off their earlier bought mining equipment. Masternode operators on the other hand have relatively low costs, they are not in a position that they need to sell their masternode rewards. They can simply save up their masternode rewards and sell them during a bull market / bull run.

I know i have not been selling any of my masternode rewards, there is just little personal incentive for me to do that, when in 6 months we could be in a drastically different bull market. What i have been doing with my masternode rewards is moving them to a certain exchange, where i can stake that Dash. I am still in the process of determining if that is something i want to do longterm or not (there is risk versus reward evaluation to be done for these kind of centralized staking options).  
  

- 20% Miners - 20% Mnodes (Both with a top in FIAT performance. The Mnodes, in addition to be guaranteed acceptable rewards, would enrich their assets in DASH - and both they and the miners would reduce sales incentives -)
- 20% Treasure
- 60% Donations to the DIF structure and custodied as Reserves in BTC and Gold . And of course a really profesional and absolutely transparent DIF .

if DASH REALLY is looking to optimize as a store of value,  must be backed by proven store of values and OFF CHAIN, which are not affected by speculative attacks against the main asset  ... to have a floor of real accumulative and progressive wealth (On the contrary, speculative bitcoin invasions would enrich DASH both on its entry - Pump - and on its exit - Dump -. In fact, BTC would possibly leave DASH alone and that, to begin with, would eliminate the main factor as the threat of volatility) -. With that, the "big investors" who are said to seek would come in droves. Uncertainty and mistrust is what most conditions the entry into crypto to external capital.

In 3 or 4 subsequent posts basically everything is exposed there.

https://discord.com/channels/370148711088652288/660351836292775936/762057032164442132

I'm trying to see for myself what the correct analysis is of our economics as I agree with at least one point in regards to our economics design. There is a disparity in profit ratio between miners and masternodes. This disparity becomes larger when price rises as masternodes have an invariable cost. This has always been clear to me. I consider it to be fact.

Proof of work / masternode economics

What follows is theory that could be wrong, could be right. It should be further analyzed.

Miners push price upwards due to the cost of mining (theory). There is an economic cost involved to mine coins and therefore they will not want to sell at low prices or at any price. Miners create the supply at great expense and therefore determine or at least have a strong influence on the base price level of a coin. It creates limited liquidity at low prices, because miners need higher prices for their coins to break even or make a profit. Market liquidity is created by miners at higher prices.

45% of the minted coins (in Dash) are however moved to the masternode entity. Masternode returns lead to a downward pressure on the price, because they receive coins whose value far exceeds their economic cost to have them minted. The problem becomes very significant when price rises. Masternodes have the ability to sell their return at low prices or at any price. Market liquidity is created by masternode owners at any price, even at low prices. MNOs are making a profit with their MN returns, but the entire MNO entity has the potential to push the price downward (continuously). Price probably finds an equilibrium again, when the price is in a certain range that doesn't hurt their overall capital value anymore. When masternodes sell their return it effectively results in an overall high network cost, which may indeed not be directly reflected in transaction costs, but that cost is indeed indirectly present and should be taken into account.

Price is determined by demand. Demand is determined by many factors. Demand pushes price upwards, but in Dash this upward pressure is countered by the pressure of masternode owners selling their returns, which they received at low cost. I tend to agree that it doesn't matter whether they sell or not. The fact that they can, will lead to this downward pressure at some point. This doesn't happen with miners. Price goes up, leads to more mining hashrate and increases the difficulty accordingly. It effectively balances out their returns (measured in fiat). This is why toknormal refers to masternodes as zero difficulty miners.

I am leaving out the fact that masternodes need to purchase 1000 coins, which causes upward pressure on the price. Likewise miners need to invest in expensive mining equipment, but this has no upward pressure on the price. Dash likely has both an upward pressure mechanism (high return for MN creates demand) and a downward pressure mechanism (high return for MN creates sell pressure at any price) in its economics design.

In the end it really comes down to the theory whether mining (hash rate) determines a base price level or not. It seems this is a concept which is getting lost as time goes on. It is the oldskool way of thinking present in the crypto world, before proof of stake and other designs became a thing, which are driven by demand only. Is this economics theory for PoW mined coins correct or not? This is what should have been discussed more, as it determines the direction we should take when it comes to our block reward split.

The Dash DCG/MNO community seems a little bit too confident in my opinion that we have an abundance of hash rate and therefore the block reward share for miners can be decreased. The decision is oriented around the assumption that masternode owners are better holders than miners, but this is indeed irrelevant. It is the fact that masternodes get coins at low to no expense which dampens price appreciation. If all masternode owners would sell their return on a weekly or monthly basis, the problem would probably be more visible. Because a share of the masternode owners do not, the effect is probably not that visible or the effect is delayed (spread out over time).

Any reasoning in terms of environmental impact is largely irrelevant in regards to our economics.

Any mentioning of capital gains tax or otherwise should be considered irrelevant as it is external to our ecosystem. There may be a point here, but it is outside our core economics design. This is simply out of our hands and there is nothing we can do about that. It pollutes the discussion in my opinion.

This seems to be a bit of a clash in (ideological) thinking when it comes to our economics. Ignoring this potential flaw in our economics will not make it go away.


Reallocation hard fork - 60% block reward share for MNs

I never wanted the Dash MN return to go beyond 20% (first design). I think 45% (second design) is far too much. 60% (third design) seems a little outrageous to me. I know the intention is absolutely positive. It is intended to make our store of value better. It has nothing to do with making masternode owners richer. It is intended to beneficial for everyone. The line of reasoning is that masternode owners are better holders (irrelevant argument) and it increases demand for masternodes (correct, but perhaps a simplistic analysis) which leads to a better (perceived) store of value.

The problem is, if DCG's analysis is flawed and I always suspected it is, it has effectively made our economics even worse. That's why I wouldn't have touched it, until the matter was better understood. DCG should be fully focused on Dash Platform & Dashpay and nothing else to be honest.

Additionally, the fact that MNOs voted for the change, doesn't mean anything. It's just basic psychology, follow the leader who may have (unintentionally) gaslighted most of the community with potentially entirely incorrect assumptions. Additionally, MNOs may simply have decided to give themselves more out of self interest, unaware of the full effect it may have on our price or even the attack (troll) vector it creates for our adversaries. It looks bad, even if the intention is good. The fact that miners accepted it, also doesn't mean it is the right decision.

If the basic theory described above is indeed correct, masternodes would need to take a counter intuitive decision and lower their return, which should result in a much higher price for Dash. This should then give them a much higher profit in terms of increased capital value for their overall Dash holding. Even though their return in Dash for running an MN is much lower, it would still be profitable in terms of USD. In that case it should not affect our masternode count, as it would still make sense to operate a masternode.


PS: I'm aware that (yet) another block reward split is going to be proposed.

The taxman is only interested in operating profits and the Dash protocol imposes a huge asymmetry on operating profits between miners and masternodes. Right now for example almost ALL of masternode reward is exposed to taxation whereas in most cases NONE of mining reward is according to prevailing mining conditions.

That's half the coin supply on an ongoing basis. 100% mined coins do not have this type of problem because they are generated with a pre-existing cost base (which also represents the 'opening price' b.t.w.), not with a zero cost base as pure profit for the "miner".

Yes I know, it was pure fiction from me, granting you superpowers to restore equality between masternodes and miners.


There is no such thing as “symmetry” or “asymmetry” for the taxman. Even if both vertical bars (miners/MN) were equal (red/white wise) according to your wishes, how would the overall tax pressure be different?

I think (respectfully) that you've introduced the tax factor much too recently in your arguments. That factor smells funny.

---

Also: I suspect that selling pressure from MN is lower than the one from miners (who are pure mercenaries (good for them)). And not every MNO is taxed at reward's reception. And not every MNO prefers cruises to the Dash project.

[moderator's note: consecutive posts merged]

@dafdaf I think you mis-understood the chart. These are operating profits, not reward share. The protocol cannot "decrease the miner's red part", it's set by the free market = mining competition.

Tax pressure is as illustrated. Massively asymmetric.

Sorry Tok but I don't get your chart.

Let's focus on the tallest vertical bars on the right, and let's suppose that the profits are made equal in both cases (i.e. you have equality superpowers and you decrease the miners' red part to increase the masternodes' red part, while keeping a high Dash price: 50%/50% of allowable costs, or even 80%/80% or 90%/90% if you will). How would this differ from the current situation? The taxman does not care if gains come from masternodes or miners. Overall the tax pressure would be exactly the same on the whole Dash system.

Lots of chaff, hand waving and clownery do deflect from the core principle expressed here.

Which is asymmetric profitability of miners and masternodes resulting in outsized exposure of half the coin supply to statutory selling pressure all year round.

This is yet another adverse effect of not targeting broad parity between mining and masternode profitability resulting in a glass ceiling on price that snaps us back down when the difference between the two gets unsustainable. And now here comes Spork 21 to make this disparity even more acute.

In our mined competitors, all that red zone is invested straight back into the chain as wealth preservation capital in the form of upwards difficulty adjustments. The white zone is effectively given away with a zero cost base. This keeps masternodes in holiday cruises but drives the price down chronically over time.

You can see it. You can feel it. Best to address it rather than deny it.

I agree and I am going to give it a rest now that I destroyed Tok's argument and understand his misstep.



Yep, tax regs differ from region to region, something Tok chooses to ignore.


Ding Ding Ding Ding Ding  BINGO !!!!

Smashed the nail on the head right there!  Tok is simply applying the same crony accounting as his government is doing and coming up with the right answer when using the wrong equation, he is subservient his Majesty and apparently free from independent thought.  DASH like Bitcoin transcends imaginary borders and state lines, it is truly global in nature and needs to be accounted for as such.  Trying to pigeon hole it into some crony institution’s understanding of it will only lead to grave errors in the accounting of it and ultimately for Tok heartache and upset as he fails to understand why the coin does not adhere to his faux model applied to it.

Only this was missing!   Now, settling the particular fiscal interests of a couple of hundred "apostles of decentralization." Any resemblance to the optimization of a decentralized monetary structure that you hypocritically defend as such is purely coincidental.

The splendid decentralized gem that Duffield designed, even with a view to its future financial freedom by guaranteeing its self-financing (because THAT was the excellence of the monetary distribution beyond the miners: guaranteeing funds for the growth of a collective project - the Mnodes were the necessary workers that has ended up disgustingly distorting its role to trick, marginalize, manipulate ... and orient everything to its fucking benefit -).

Now DASH is conditioned by a couple hundred kidnappers when they farting, giving their girlfriend a gift or renewing their car insurance ... then you paint it pink as a general interest like RTaylor and his "Store of value that never existed "... and fixed, with the libertarian flag in hand. And the excellence of decentralization in the midst of the crypto revolution, at the expense of what the political parasite of the moment in any corner of the world imposes on his citizen submits.

The centralized slop that you have turned into one of the jewels of the crypto world is worthy of an Olympic podium. But hey ... to continue the show selling smoke and catching small coins !

Maybe we should all move to Germany, crypto is considered there private money and tax free after having hold it for a year.
Which means masternode collateral will be tax free (i don't see those spend within a year) and masternode rewards can just be saved up for a year,
and then also become tax free.

Or maybe move to Portugal  


Source : https://news.bitcoin.com/eight-countries-that-dont-tax-your-bitcoin-gains/

What i am currently doing here (not selling my masternode collateral, saving up my masternode rewards and paying property tax), i could actually do there tax-free.
Unless the OECD comes up with something in the nearby future, that will overrule that.

There is an effort to make crypto taxation the same across all jurisdictions... hopefully they come up with something fair...

https://btcmanager.com/crypto-tax-reporting-standard-2021-oecd-director/?utm_source=onesignal&utm_medium=push&utm_campaign=push%notification

As for me, mining/masternode coins are taxed as 100% income but only at the price they are sold at. Until they are sold, they are not taxed at all and considered as part of your business inventory.

The US taxes mining/masternode coins as if you sold them the day you received them, which creates an accounting nightmare for anyone mining or hosting masternodes for more than a few different cryptos.

I am just gonna stick with property tax, as that is what it actually is.

And yes, a low Dash price at the start of the new year, followed by a Dash price rise later that year would be a nice outcome for property tax that only get measured at the start of each year
and resets to zero at the end of that year. 2017 had a very nice outcome in that regard (measured at Eur 11,36 at the start of that year and then grew rather high during that year).
I kinda hope on a repeat of that for 2021. Although you do need to be prepared to face a potentially higher measurement price the next year (2022).

It doesn't matter, go back and read your own country's rules. It's an effective income tax because your masternode reward will simply be filed as a capital gain from the start of the tax year (Jan-Dec) with a zero cost base. Same difference and same asymmetrically applied sell pressure compared to mining. The only advantage of that system is that you don't incur a liability if your overall holdings incur a capital loss which offsets the annual reward earned by the node. So you'll have incurred no liability the last few years.

But you need for Dash to be a poor store of value and decrease in price for that to work. (Well it's worked for you the last few years )

Not to our tax agency, sorry. I live in The Netherlands and actually report property tax on my crypto, so i know what i am talking about.
Please don't make things up, just to serve your assumptions (which are clearly incorrect for The Netherlands and i suspect for Germany as well).

US, The Netherlands and Germany together form the largest concentration of Dash masternodes. Two of them in Europe have a crypto-friendly stance, geared towards
property tax and private money classification. US seems more geared towards income tax.

I think this will affect how masternode operators in those countries treat crypto, plan their strategy around it and base their assumptions on it.

Go back and read this post.

The principle being described is one of asymmetric profitability amongst reward categories in the Dash protocol. The aspect of taxation only comes into it because it's a general principle - anywhere - that it's the net profit element of a business that exposes it to taxation. So it follows that masternode rewards incur a massively disproportionate selling pressure from statutory sources compared to miners. An asymmetry which only grows as price rises. Also, it's a general principle in good business practice that paying excessive tax is a waste which indicates you've got something wrong with the gearing of your operation (such as not investing enough back into it).

Contrary to your assertions, the Netherlands is no different from anywhere else in observing this principle. Masternodes ARE businesses and if your idea of growth is that they remain as a server in some teenage kids basement rather than the kind of institutionalised operations that we started to get a hint of during the last bull run then you've set your sights lower than me.

That is for registered businesses, not for masternode operators that have some 1000 Dash on a hardware wallet somewhere.
It is just property tax then (box 3).
Source : https://tokentax.co/guides/crypto-taxes-in-the-netherlands/#overview-of-dutch-crypto-taxation


This just shows how little you know about how taxes on crypto are applied in Europe (outside the UK), yet you continue to make assumptions based on that.
Which is why discussions are pointless, you only look at it from an UK stance (masternode rewards are subject to income tax) and you are turning a blind eye to the jurisdiction of
other European countries, that have far more masternodes located then the UK.

Operating costs miners / masternodes : irrelevevant
Fixed / Variable costs : irrelevant

Dash / Bitcoin / Euro on bank / traditional stocks : all the same. Either its property taxed (The Netherlands) or after a year it falls under private money and gets exempt from capital gains tax (Germany). No wonder the number of masternodes in Germany is rising so rapidly, directly challenging the US. Most are hold longer then a year and then fall under private money and are exempt from capital gains tax. If i was a German masternode operator, i would also save up my masternode rewards for at least a year (if my situation would allow it).

Incorrect. It's exactly the same in the Netherlands as everywhere else.



The Dash protocol is also the same in the Netherlands as everywhere else because operating costs are fixed whereas mining operating costs are variable. Therefore almost all of the masternode reward is exposed to taxation whereas only a small portion of mining rewards are and this asymmetry only becomes ever more staarlas price rises.

UK has income tax on Masternode rewards. Of course that is not the same as The Netherlands where it all falls under property tax.

Also incorrect for The Netherlands and Germany (where most of the Dash masternodes are located in Europe).
They are either both taxed under property tax (The Netherlands) or after a year private money and exempt from capital gains tax (Germany).

You are basing your assumptions on the UK jurisdiction, you are just not willing to admit it.
Which is fine. It will however mean there will never be any middleground. Ever.

The difference is the same in any country. Re-read me previous remark from 2 posts back.