Ryan Taylor discusses new economics changes coming to Dash

0:19your explanation of what is – to someone who is familiar with Bitcoin but they're not super technical sure so – is a digital currency very similar to Bitcoin in fact – is a fork of bitcoins codebase however it's really focused on the payments use case so being pure – pure cash that means several things it

0:47means a high degree of scalability low transaction fees and probably most importantly is instant confirmation if you're going to be using digital currency as cash you needed to confirm quickly and so transactions on Dash's network take between one to two seconds that's about as fast as a credit card authorization and so it really makes it useful for the point-of-sale Wow

1:15and I know that you have experience in the payments industry from even before knowing about Bitcoin and you saw the value in Bitcoin early but you also saw the limitations that are currently in Bitcoin you know what was it specifically about – that interested you of actually getting deeply involved into building the next payment system well I think that there's a few usability

1:43aspects of Bitcoin that have obvious limitations to them one is the transaction speed that we talked about already but beyond that I what initially attracted me to – was the fact that it was being set up to be flexible and there's a couple of prerequisites that I think you need to have as a decentralized project in order to be

2:11able to move forward effectively and innovate and the founder of – Evan Duffield had articulated a vision for how that could occur and so in – there's a couple of different ways that it's different in terms of the way it incentivizes behavior on the network one of those is it's the first coin that I saw that recognized that there's more than one activity that adds value to the network

2:42and should be incentivized in the case of Bitcoin a hundred percent of the transaction fees and a hundred percent of the new coins that are created through the protocol are distributed to minors or the computing network that actually secures the network but beyond security you also need other things like developers you need legal work performed you need business development you need

3:10marketing you need infrastructure that will host full copies of the blockchain that will relay these messages around the network at very high speeds all of those other components are not incentivized within the protocol of Bitcoin and this was really the first project I saw where there was an attempt to try to solve some of those things so the way – solves them is it splits its

3:37block reward and transaction fees across multiple parties the three main ones being the miners same as Bitcoin another chunk goes towards the masternodes these are special nodes on our network or servers on the network that keep pull copies of the blockchain and relay messages around and perform other services that are important and the last is what we call our proposal

4:04system this is everything else these are developers these are teams locally working on the ground towards adoption and in bit in Dash's network those are paid roles anyone can put a proposal up to that system to receive funding propose what it is they're going to do for the network and receive funding and that's how it actually we're – core group gets its funding from that's

4:27great and I could definitely see you know incentives to a community making it grow that much faster and yeah it seems with Bitcoin a lot of people are just volunteering and working you know for the future of Bitcoin and the goodwill on you know the improvement protocols but to have it coded into the blockchain is something that is very unique so that's really interesting and I not get

4:50better it better aligns incentives to when you think about an organization like block stream that does provide a lot of the developers for Bitcoin they don't necessarily have the best interest of the user in mind because they have their own solutions that they're trying to sell to the market and they have an incentive to keep capacity on bitcoins blockchain quite low and so you can see

5:13that it can develop into outright conflicts of interest when you allow outside funding sources to dictate the development path yeah and this is new news but I know that you know you're excited to talk about it this week about how – core group has proposed some changes to Dash's economics in terms of the you know the coins and how it functions and can you talk about you

5:39know what are the changes that have been made and how has it improved the system well – has evolved its economics throughout time the most recent change though was all the way back in 2015 when the proposal system was added prior to that it was the only incentivized roles were miners and masternodes and that really opened up a whole new world to the network in terms of how it developed

6:06itself and how an allocated the rewards to people that were benefitting the network and it served us very very well since that time but we have noticed that there are some shortcomings in the way that occurs there's also some complex economics with the masternodes because in order to upgrade your node on the network to a master node you need to

6:37prove ownership over a thousand – and so as people are spinning up masternodes they're actually sequestering portions of the supply and that creates some really long term effects on Dash's ability to act as a store of value it can cause the price to spike very quickly or to drop off very quickly over over long periods of time

7:05and so we've done some analysis around this we've learned a lot about how masternode owners or operators react to those incentives and we think that we've come up with a solution that helps smooth some of those effects out and avoid some of the price spikes and drops because at the end of the day price spikes and drops are not desirable for

7:35users right they don't necessarily want to see high volatility in the in the token price def – was the first one to innovate with masternodes and I think having the foresight to see how all of these dynamics would play out was almost impossible I think at this point we have enough data to know how those interactions take place and we're proposing a small shift from in the

7:59reward structure from minors towards masternodes it's only about 10% – the reward a little bit less than 10% of the reward actually and it's going to take place over a long period of time say five and a half years actually and so it's a very subtle change it's a gradual one we don't want to make this change abruptly but the effect that it will have is it will have a dampening effect

8:27on our volatility and so it should have benefits to end-users it'll certainly benefit masternode operators who will be able to collect a higher portion of the reward it actually has benefits in the short term to miners because they you know it's counterintuitive but the way that the rewards are distributed will encourage the creation of more masternodes that

8:52will act we pull additional coins out of circulating supply and into collateralizing masternodes and that'll have a positive impact on the price that will more than offset the reduced rewards to minors and then it's of course beneficial to proposal owners too if it has a supporting effect on price because it will make the proposal system larger or the funding available

9:21through that larger in terms of its value and so it really captures a lot of the values some of the technologies that we've rolled out over the neck last few years that allow us to safely do this without compromising the safety of the network and it has benefits to all participants in the network and so it's really complicated stuff we actually have two presentations

9:45on this one back from December at our open house that you can watch if this is a topic of interest to you that kind of lays out what the problems were and the potential solutions that we were evaluating at that time and then the one that we released this week is the one that really lays out the specific proposal that we plan to move forward with and it's all focused on the token

10:10economics there is a separate change that we're proposing and that is to make our proposal system more flexible during 2017 and early 2018 when when the entire crypto space was going through a giant bubble we found that this fixed 10% that is currently allocated to the proposal system doesn't necessarily function all that well what we ended up

10:37seeing was a lot of that went unused or dubious proposals or proposals that had maybe limited value an endorsement from a celebrity say god approved on the network and they didn't have any lasting effect right and so you saw this kind of attitude of we better spend it or it's wasted and I think that created a really unhealthy dynamic at the other

11:05end of the spectrum back in December of 2019 the price as low as $39 on – and at that time the proposal system was insufficient to even fund basic operations and we were really digging into our reserves to be able to continue operating and a lot of valuable teams got defunded at that time and so I think we're trying to create a more flexible system that recognizes that 10%

11:33isn't always the perfect allocation and allows the network to flex above or below that number as needed so these are really fundamental changes to our protocol and the way that our protocol functions from an economic standpoint and we're really excited to see these improvements rolled out we didn't take it lightly we spent you know five six months researching this and

11:56statistically analyzing the behavior on the network to make sure that we've got things right yeah that sounds like a great proposal and is this effective immediately or is there an upcoming timeline on when these changes will actually occur the network if it's approved so first we have to put a formal proposal to the network for a vote what we've done is we presented

12:21this initially we're going to be holding some Q&A s over the next couple of weeks both you know in a video chat as well as you know with the community through a mas and things like that to make sure that it's well understood then we're gonna put a bit what's called a decision proposal to the network and it's a simple yes note decision on whether or not to implement these things there'll

12:44be separate votes on each because one could be implemented without the other and vice versa and so we certainly hope they both pass if they pass they will be implemented into the protocol one of those changes is far easier to make than the other and so we'll probably code them in as time permits but we'll we'll look to move quickly and get those into

13:10the protocol as quickly as we can we're probably looking at the fall for implementation assuming that they pass and this is something that's really unique to – is you know if you want to get a new feature into a Bitcoin or other protocols that strictly rely on the miners getting it through is a monumental task it requires a you know super majority of

13:37the network like eighty ninety percent support rate in order to see those things get implemented and with our system we actually just get to vote and you know as long as the super majority meaning like more like you know sixty percent of the votes come in favor and forty percent against it's something that we can implement safely and so the voting

14:02system is something that is that – pioneered and has allowed us to do more controversial shifts perhaps or you know do so in a safer manner and so as a result we're able to do these types of innovations without splitting our network into mmm-hmm that's great and I like that you mentioned one of the goals as being bringing price stability right

14:29because a lot of adoption of these digital currencies is coming from especially with – you know in South America a lot of countries that are experiencing hyperinflation like Venezuela for example and there's great adoption towards – but even for and you know it's it's very stable in comparison to the Venezuelan Bulevar but increased stability I could imagine would make it

14:51even more attractive to use so that's that's good to know and you know we're running out of time Ryan but what is the best way for people to learn more about this vote about the mining and the masternodes and just getting involved with the – community well we will we have the videos of the two presentations one is from our open house back in December and one was just here that this

15:19last week and they're entitled improving – as a store of value and those are accessible on our YouTube channel our YouTube channel is – pay and to learn more about the project in general the place to start is really and on our website – to work we've got links there to all the different social media that's available chat groups look like we've got a couple of chat groups

15:47on discord we've got a link to reddit and our reddit channels YouTube whatever your your venue of choice is we've got a great following on Twitter and just follow the project and those are great ways to kind of hook in to what we're doing and the changes that we're making and so yeah I we're always looking for ways to expand our users and our user

16:15base and there's a lot of great resources there one example is our gift card program you can earn discounts on gift cards if you pay in – that's at gift cards – charge and so we like to bring in people who want to incorporate this into their day to day life not just hold it but actually use it and use it like it's meant to be used as

16:42currency and so those are the types of resources that you'll find on our web page definitely and that's very valuable to get those people that are actually using the currency so I will leave those links down in the description box below for the viewers thank you so much for your time run I really appreciate it all the best moving forward with – and let's

17:03follow up in the near future all right thank you very much