Ryan’s dash tokenomics talk was poorly timed and poorly delivered

At the dash open house on the 7th of December 2019, Dash Core Group CEO Ryan Taylor gave a talk about ways he thinks dash could become more stable and stop its slide down the coin market cap rankings. You can see the talk here.

Ryan proposed major changes that he is in a position to implement so it has everyone in the dash community talking.

The event was supposed to be dash platform’s coming out party. Unfortunately Ryan overshadowed that with an off message unrelated talk that got most of the attention and headlines. Here are my take-aways.

Good idea – Reduce reward to proof of work miners

Miners have to sell most or all of their rewards to cover their costs causing downward price pressure. Mining is also environmentally problematic due to high energy consumption. I agree with most of Ryan’s anti proof of work points shown below.

However that does not necessarily mean dash should give those coins to someone else. Dash could just not issue them and head toward the same max coin supply more slowly. That would reduce inflation which Ryan thinks will improve dash as a store of value.

Ryan proposes giving rewards to stakers. Dash must only do that if the stakers do something useful to serve dash, like process transactions by producing blocks. Dash must not give out free money for doing nothing but holding dash.

Bad ideas

Raise fees

(timestamp 1:23:09) I am glad to say this brain fart of an idea has gotten no support that I have seen, and everyone I have interacted with agrees it’s a bad idea. It would remove dash from all microtransaction use cases like internet of things (IoT), gaming and per second streaming. Even dash platform state changes as transactions need very low fees, it should not cost a cent to reject a contact request or to update your profile pic.

Ryan’s justification was strange but typical of the speech. He assumes that giving all masternodes in total $75 per day (roughly $0.015c each) would lead to 9 more masternodes and he assumes this would increase the price of dash.

Rayan also says dash’s low fees leave it vulnerable to spam. This is incorrect because the fees are a free market mechanism, if transactions were approaching capacity or the network wanted fees to go up for spam prevention or any other reason, they would go up without any code changes.

Set stakers rewards higher than masternode rewards

(timestamp 0:50:35) This proposal is nonsensical given Ryan gave the impression that stakers would provide less services for the network than masternodes and staking would be easer than operating a masternode.

Ryan points out that theoretically this should self correct by masternodes owners taking down their masternodes leading to more frequent payments and a higher return on investment for the masternodes that remain. But why risk the turbulence? Specially given in this talk Ryan speaks against ideas that he assumes would quickly change the number of masternodes and in favor of ideas that he assumes would stabilize the number of masternodes.

Reading tea leaves

At timestamp 0:08:11 Ryan starts with the tea leaf reading which continues throughout the talk. Ryan claims to be able to explain why dash price rose and fell when it did. Of course what he reads in the tea leaves supports his “how the leopard got his spots” type narrative. 

For example he says the price crashed when there was a messy network upgrade that went wrong and caused a fork and network instability. But when the price recovered, instead of accepting the obvious explanation that it was because the fork was resolved, the mistakes from the upgrade were fixed and the network was stable again, instead of that explanation Rayan says it was because Evan Duffield announced a masternode allocation of 20%. This was was never permanently implemented but if that was the reason it would support his subsequent points.

In a recurring theme throughout the talk Ryan then takes that possibly correct or incorrect assumption and builds on top of it, does calculations from it and makes conclusions from these castles made of sand as if he is on rock solid foundations backed by data and evidence. 

Too long and too many irrelevant details

This talk should have been limited to 50 minutes plus 10 minutes for Q&A. Instead there was so much waffle that it went for 95 minutes!

Ryan talked about relocating proof of work reward to proof of stake for 75 minutes. That should have been the end of it. One big topic. Instead he went on to discuss other unrelated changes, like changes to the treasury and fees. As just one example of dozens, here is what he rambled about at 0:18:27 

We know they were bought on the open market because there was a large seller back here in 2016, at one point there was one owner who had somewhere around 600 masternode and they had been selling them in large chunks to investors that were interested and by this point they had basically run out of those that they were willing to sell and so it caused all of this buying to occur on the open market…

This may be right or wrong but most of all it’s irrelevant, stick to the point. The price went up during that time because demand exceeded supply, no need for the behind the scenes deconstruction of over the counter vs open market trading. You’r not chatting with fellow dash fanatics over drinks, you are giving a public presentation, get to the point. 

Inconsistent and contradictory

At timestamp 0:17:52 Ryan points out that an increase in masternode count caused a price increase, then at timestamp 0:20:09 he says that a decrease in masternode count caused a price increase. These were both written into his slides

This means new MNs creation accelerated in Q1 2017 to ~475 to offset Duffield’s 265 and continue toward equilibrium collateral demand, pushing price 564% higher in one quarter

Then on the very next slide

masternode counts declined rapidly in early January and early February which triggered a massive increase in price

So rising masternode count increases the price, and falling masternode count increases the price; makes sense? No, no it does not and it feels like tiered thinking. Again this is just one example of many.

Conclusion

Overall this was a bad talk. Too long, rambling, off topic for the event then off topic with itself for the last 25 minutes when Ryan discussed possible changes other than reducing reward for proof of work mining.

It was full of questionable assumptions with calculations then conclusions based on those uncertain assumptions. It had bad ideas, tea leaf reading, inconsistencies, low res video and low quality audio. It was unpolished and you could tell it had been rushed in to the schedule after being considered for only a couple of weeks as Ryan himself revealed.

Also this talk took the focus off how great dash platform is about to be, which was supposed to be the point of the event.

Still the big takeaway will hopefully be the proposal to reduce proof of work mining reward, and I think that would be a good thing.