Ok, so after that productive discussion, this is the proposal I have come up with.
Guarantee masternode bonus of 1.25-1.5x (or somewhere in between) as long as 2 conditions are met : the total amount of coins locked in masternodes is less than 50% of the entire current coin supply, AND less than 75% of the total number of coins that are ACTIVELY staking OR in masternodes.
-The limit of 50% of the entire coin supply is to ensure that at least 50% of the total coins will remain liquid and/or staking to secure the blockchain. At 10,000 DNET per masternode, that's gonna leave room for a network of well over 3,000 masternodes by the time PoW ends. That is a hell of a lot of masternodes, so I wouldn't expect that limit to be reached anytime soon. There will be plenty of time and room for newcomers to be able to secure a masternode at the bonus rate for a long time to come.
-The limit of masternodes representing less than 75% of the actively staking coins + masternode coins is because the first condition I laid out would only potentially even begin to come into play YEARS down the road. This second condition is designed to protect the network from getting too lopsided in the early days. We all know that 100% of the coins will never be staking or in masternodes at any given time. Not everyone runs their wallet to stake or masternode 24/7. Some don't at all. I felt it important to separate these into 2 conditions so that the limit could be higher than 50% if only active staking coins and masternodes are considered. If participation in staking is too low and/or masternoders get overzealous, the 50% limit could be reached quickly and newcomers would be discouraged from investing, if we didn't have separate conditions for total coins and actively staking/masternode coins. At the same time, a line in the sand has to be drawn somewhere and 75% sounded reasonable.
As far as rewards go, there will never be a set reward for staking or masternodes. The rewards would change dynamically each block using the "seesaw" mechanism + comparing network weight to the theoretical weight of masternode coins as we discussed earlier.
I know it is intended for there to be a portion of each block allocated to developer budget but let's disregard that for now. For the sake of the example, say the block reward is 100 total. There are 1,000,000 coins actively staking and 500,000 coins in masternodes. Say the masternode bonus is 1.5x. The 500,000 coins locked in masternodes get multiplied by 1.5 to equal a theoretical weight of 750,000. We add this to the actual network weight of 1,000,000 and get 1,750,000. On this block, the staker will receive 1,000,000/1,750,000 x 100 = 57.14 DNET, and the masternode will receive 750,000/1,750,000 x 100 = 42.86 DNET.
It seems a little paradoxical at first, and I can already see newbies complaining "WTF?!?!?! I set up a masternode and my reward lowered!?!??!?!", but I am pretty sure everyone that has been involved in this discussion so far understands that the masternode (in this example) is going to get rewards more often. So even though each individual reward maybe smaller than the staker receives, the more frequent rewards will add up to 1.5x what the staker receives.
Rewards will follow this relatively simply calculation, UNLESS either of the first two conditions are not met. In that case, the masternode bonus will begin to rapidly fall, even sub-1.0 if necessary to encourage some masternodes to shut off and stake instead.
I think that about sums it up. The exact percentages and the masternode bonus can be debated, but I just wanted to pull all the ideas together into one cohesive straightforward post. I think a reward schedule like this would be the most fair and balanced schedule we have ever seen in a PoS + masternode coin, IMO.
Is anyone here capable of coding such a proposal?
