I asked in this question in the slack however it was difficult to clarify with a lot of conversation going on at the time. As had been mentioned at times and pointed out in the most recent video there will at some later date be L2 nodes released - I am interested in the purpose of this as from what I was told there would not be technical differences, merely less upfront cost and less receivable income.
In terms of the quality of the network there is straightforward benefit: more nodes = among other things further decentralization = better network. However the purpose behind 'mininodes' I still find somewhat puzzling. We can consider that by offering a lower price point more nodes will be adopted, this a good thing, however this would come with economic impact to the original, or L1 nodes, eventually deterring investor interest.
At this time the number of nodes is to be fixed to 512. Under this circumstance we have a limited supply 512 nodes that have the right to receive income from the network - or in other words 500k XBY in a node is of greater value than 500k 'loose' XBY as it is effectively working harder. The market determines that value by determining that interest rate, accounting for the associated risk, weighing alternate opportunities and eventually offering a flat price. There is of course opportunity cost associated as the money can't be used for anything else over the duration it is tied up in the node. To draw a comparison we could say a truck costing $500k being worked to near capacity should have greater economic value than $500k stashed under the mattress, but as long as the money is tied up in the truck it cannot be used to invest elsewhere.
By introducing a secondary tier at, for the sake of simplicity, half the price, it would then be possible to buy two smaller trucks capable of earning half the level of income each. Like trucks computers or their connections somewhere along the line can and do fail for periods of time, we love decentralization as it addresses this issue. If we have two then if one truck, or computer were to break down the other is still capable of earning for us. As we never see an uptime of 100% with trucks or computers alike we can expect if we only have one it will from time to time leave us completely out of pocket, this is something that could be reasonably accurately calculated. In addition to this a node cannot be partially sold, and like a truck it must be sold whole if it is to serve an identical purpose. For these reasons I would argue the logical approach from an investment standpoint would be to own two smaller nodes - not only do you have some redundancy in terms of the revenue stream, but also the ability to partially sell off that revenue stream if or when required - greater liquidity.
With what I would consider more attractive nodes introduced at later dates I would suggest this devalues the big 'one piece' L1 nodes, and if we were to introduce L3 down to L20 nodes down the line the L1 begins to look like a significantly riskier behemoth, not only in terms of consistency of revenue but perhaps more importantly liquidity - it would be more difficult to find a buyer and cannot be sold partially vs being able to sell off for example 1/20th of that revenue stream. In my opinion the more liquid alternative would be the far more desirable option. We could consider offering some amount of fees to the higher level options which would offset this, but in terms of the quality of the network I do not find logic in offering more money for the same work.
So, I look to challenge my thinking and seek an argument as to why this system would work better than say, just splitting all existing nodes across one level? And why L1 node holders should not have concerns that their investment would economically speaking devalue over time?
You are deep Karl. Maybe Borz can read and reply when he has time. He probably won't fear this topic and call you a fudder lol. Good luck! In terms of the quality of the network there is straightforward benefit: more nodes = among other things further decentralization = better network. However the purpose behind 'mininodes' I still find somewhat puzzling. We can consider that by offering a lower price point more nodes will be adopted, this a good thing, however this would come with economic impact to the original, or L1 nodes, eventually deterring investor interest.
At this time the number of nodes is to be fixed to 512. Under this circumstance we have a limited supply 512 nodes that have the right to receive income from the network - or in other words 500k XBY in a node is of greater value than 500k 'loose' XBY as it is effectively working harder. The market determines that value by determining that interest rate, accounting for the associated risk, weighing alternate opportunities and eventually offering a flat price. There is of course opportunity cost associated as the money can't be used for anything else over the duration it is tied up in the node. To draw a comparison we could say a truck costing $500k being worked to near capacity should have greater economic value than $500k stashed under the mattress, but as long as the money is tied up in the truck it cannot be used to invest elsewhere.
By introducing a secondary tier at, for the sake of simplicity, half the price, it would then be possible to buy two smaller trucks capable of earning half the level of income each. Like trucks computers or their connections somewhere along the line can and do fail for periods of time, we love decentralization as it addresses this issue. If we have two then if one truck, or computer were to break down the other is still capable of earning for us. As we never see an uptime of 100% with trucks or computers alike we can expect if we only have one it will from time to time leave us completely out of pocket, this is something that could be reasonably accurately calculated. In addition to this a node cannot be partially sold, and like a truck it must be sold whole if it is to serve an identical purpose. For these reasons I would argue the logical approach from an investment standpoint would be to own two smaller nodes - not only do you have some redundancy in terms of the revenue stream, but also the ability to partially sell off that revenue stream if or when required - greater liquidity.
With what I would consider more attractive nodes introduced at later dates I would suggest this devalues the big 'one piece' L1 nodes, and if we were to introduce L3 down to L20 nodes down the line the L1 begins to look like a significantly riskier behemoth, not only in terms of consistency of revenue but perhaps more importantly liquidity - it would be more difficult to find a buyer and cannot be sold partially vs being able to sell off for example 1/20th of that revenue stream. In my opinion the more liquid alternative would be the far more desirable option. We could consider offering some amount of fees to the higher level options which would offset this, but in terms of the quality of the network I do not find logic in offering more money for the same work.
So, I look to challenge my thinking and seek an argument as to why this system would work better than say, just splitting all existing nodes across one level? And why L1 node holders should not have concerns that their investment would economically speaking devalue over time?
It is still experimental and that's why we call it a high risk high reward coin hence the price could (or better will) go 10x/100x/1000x in the future..
