Dash Financing and Management System

When the Dash integrated self-financing cryptocurrency system was first presented to the public, the creator of Dash (Evan Duffield) called it “Decentralized control using the blockchain” or “DGBB”. This is a great name, but is it really? Is budgeting a management method?

First of all, I think that budget financing is incredibly important. As far as I know, Dash is the only cryptocurrency that finances its own development without donations (which are rare and non-permanent) or centralized funding (organizations such as Blockstream and MIT play a significant role in the development of Bitcoin). Since Dash has become a self-financing project, you can be sure that it is not controlled by anyone’s outside interests. Moreover, you can be sure that it will continue to develop steadily. All Dash developers are good people and specialists (this is my opinion), but they all ultimately want to be rewarded for their work. Some remuneration may be formed due to the increase in the cost of their investments in the project, but this may take many years. Paying Dash developers a “salary” (albeit small yet), the Decentralized System encourages them to continue developing, and in addition, it becomes attractive for new developers.

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Consider the potential of a self-financing software development environment and infrastructure development for Dash. For example, other cryptocurrencies should hope that some exchanges will eventually spend their own resources on their integration. Dash also has a budget for self-pay for this work, which will lead us to most exchanges faster. Other projects should wait and hope that someone will give a chance and spend money on developing solutions with debit cards for them. We can finance this development and make it happen much faster. Note that Bitcoin, if it had the same budget that Dash has (10% of each new block's remuneration), would have managed $ 19.4 million a year, which they could pay developers, use for quick launches of infrastructure projects, use in advertising, marketing and so on. About 20 million dollars available for independent use! (Of course, after halting the remuneration soon, this would reduce the budget).

Now let's look at it from the other side. Dash now has a very different emission level, so let's look at it from that position, as if Dash had the same market capitalization as Bitcoin. Then the price of 1 Dash would be $ 1100 - this means that we would have more than $ 100 million annually for budget financing! (and it would decrease by 7% per year if the DASH rate remained unchanged). This is a huge amount of money from any point of view. And all this would be aimed at making Dash better in some way. When you look at it from this point of view, spending some time to secure potential millions of dollars in future financing looks very justified.

Secondly, most of the project of Evan Duffield on the “new financing system” is not so much about budget money, but mostly about management. Bitcoin’s biggest problem is not in block size and not in slow transactions, Bitcoin’s biggest problem is in management. If Bitcoin had a well-designed control system, it would have come to consensus a long time ago. People have forgotten, but debates about the size of the block appeared (in a more relaxed form) as early as December 2013, when I was just busy with cryptocurrency.

The Bitcoin development team is fragmented, and the blockchain itself is controlled by miners, who have more incentives to sell currency to pay bills than to save it. As a result, the entire Bitcoin economy is controlled by a handful of people (pool operators and large miners) in China (there is cheap electricity and labor), whose interests run counter to other Bitcoin users.

Dash fixed one part of the management problem, as the Masternods control the network (and not the miners), and the Masternods have an independent voting system with positive feedback (at least in terms of budget funding). For example, a Dash developer can pay from his pocket for flights to the conference, and Masternode operators cannot stop it, but they can prevent the payment of appropriate compensation to him. This serves as a deterrent in case Masternode operators dislike something. Similarly, they cannot force the developer to work on a specific thing, but they can stop financing it if he does something wrong. Anyone who has read Freecomics understands that money is a powerful factor in almost everything. The financing system (through Masternody) controls the money and, as a result, management itself takes place through it.

I will answer my own question: yes, the financing system is definitely an important management tool. Of course, it was not made “once and for all”, and the Dash team understands this (therefore, they are working on its regular updates in version 12.1). Currently, the volume of financing from the budget system (in fiat terms) is too small to be an effective form of management, but the system has been created and it is already working. One day, Dash will increase in price, and the increased budget of the financing system will be used as a powerful tool. When developers are paid an adequate salary, they will be strongly interested in fulfilling the wishes of the network, otherwise funding will be stopped or reduced.

It is important to note that no one can force anyone to do work or write code if the developers themselves do not want to do this. For now, the financing system can be used as a way to vote “Masternod” to “officially” express its attitude: what the network thinks about a number of issues. But it is not able to force the development team to develop alternative code to implement some of the wishes of the network. On the other hand, the network can use a financing system to pay for third-party developers to implement changes in software, but in this case, budget funding (in fiat equivalent) should be much larger. To implement such a scheme, the Dash course must first grow significantly.

As a result, we have an excellent progressive development environment. We spend time on doing everything right, while everything is relatively easy to make changes (the current budget of funding is $ 50,000 per month), and we don’t wait until everything becomes too difficult to edit (when budget funding will be $ 500,000 per month, for example). Money is a great tool for creating the right positive and negative incentives, and as the funding system improves (and the value of Dash grows), it will become an increasingly effective management system.

Most importantly, Dash is controlled by the network of its own Masternodes, which determine which software updates of the main team will be implemented, and thus are able to “strengthen” the network protocol, up to the rejection of the “bad” blocks. In Bitcoin, the same network is controlled by miners, deciding which transactions will be included in the blockchain and which software updates from the development team will be accepted. This is the important difference between these two cryptocurrency networks. The interests of Bitcoin miners do not always coincide with the interests of Bitcoin users, investors, exchanges and businesses. For example, miners are more likely than users and investors to sell large amounts of cryptocurrency, because miners have to pay their costs. An excellent demonstration of these differences in incentives is that miners oppose changes (increasing block size) that are supported by many users / investors and Bitcoin businesses.

Many Bitcoin users and businesses support an increase in block size, because it will allow transactions to complete faster and, as a result, will reduce transaction confirmation delays, because the blocks will not overflow so quickly. The Miners, for their part, are mainly against the changes, since for them this will mean that the blocks will take longer to broadcast to the network. Since the majority of miners are located in China, and the Great Chinese Firewall still filters (and therefore slows down) traffic entering the country, this will put miners from China in a less advantageous position.

Dash is different: in view of the fact that each Masternod is secured with a pledge of 1000 DASH - those who have invested more money in this project actually receive a greater share of control in managing the network. Miners are still important for filling in blocks and creating Dash hashes, but the network is controlled by those people who are most interested in its success.

Don't underestimate the power of the right incentives! I am reminded of the story of how the Indian government, in striving to fight the rat invasion, offered a reward for every dead rat. At the beginning, the rat population gradually declined, but then jumped rapidly. As a result, India received a much larger population of rats than it was at the beginning of the action. Why? Realizing that they could receive income from a government award for dead rats, the cunning people began to breed them, then kill them and bring them to the government for receiving the award. Needless to say, that payment action for dead rats did not last long ...

PS Opinion of the translator (mine) may not completely coincide with the opinion of the author. Nevertheless, I hope that the efforts for translation are not wasted, and you will appreciate them positively. Thank.