For a Masternode Coin Developer to base rewards off of the block chain is like ‘Throwing Darts Blindfolded’
Question: What is the one big unknown for Masternode Coins?
Answer: The number of Masternodes competing for your Blocks.
So I posit the following: How can you devise a rewards schedule that’s block based if you don’t know how many Masternodes will be competing for those blocks?
The answer is you cannot! I will not address the situation where ‘crap coin’ developers create their rewards schedule to flood the market with coins knowing full well that the coin will collapse under its own weight in first several days or weeks. They don’t care because they raise the number of BTC they targeted and go back and do it all over again and a lucky few early adopters make some money while the majority of the late arrivals lose money.
In this article I am talking about serious coin developers who want to:
a) get their coin launched with reasonable ROI and reward early adopters
b) not flood the market with coins that will lead to a collapse
c) maintain a reasonable ROI long term to support a network of hundreds of Masternodes for sustainability.
I will digress for a brief moment and discuss my background in Crypto before I became involved in Masternodes. Masternode Coins are no different that any other coin. A coin is like a pie that gets baked every day. The pie is a certain size. It’s never bigger and never smaller. It’s the same size every day (there are some exceptions like ill-designed coins that adjust their difficulty very infrequently), but the majority of coins generate the same number of blocks every day. Therefore the more people mining that coin (i.e the more hashing power thrown at the coin) the smaller the slice for everyone. It’s simple math. Which is exactly why multi-pools have such low returns, when compared to a smart well equipped individual miner. A multi pool switches to a coin, throws a lot of hash at the coin and in effect puts all the pool members on that coin, so they’re all fighting for a piece of the pie and they all wind up with smaller slices. This is stupidity at it’s finest. The best time to mine a coin is when difficulty is low and Network Hash is low. I developed such a system for my own use that monitors dozens of scrypt coins and switches my machines automatically to the coin where there’s the least competition (of course it takes coin value into consideration and block emission rates, etc) and it works great. Why fight for coins when with the proper monitoring technology you can just walk in and take them — which bring me to back to Masternodes.
We’ve brought the same kind of insight to Masternodes and have done this with the release of our new coin called CatoCoin.
We had three goals in developing this coin.
First: Create a reasonable and sustainable return without flooding the market with coins.
Second: Be able to control coin emission rates based on the number of Masternodes competing for the coin.
Third: Create an environment that made the Masternode become more valuable over time to ameliorate the desire to cash out and dump collateral.
Those three goals led us to conclude the following: The only way to control emission rates was to base rewards on the number of Masternodes and there was no coin technology available so we developed it. In addition, it was necessary to increase rewards over time to so as not kill ROI when there are hundreds of Masternodes and finally incentivize Masternode owners to keep their Masternodes running and not sell their collateral …‘dump’ coins.
The First goal was actually fairly easy based on a number of mathematical models we developed followed up by simulations.
The Second goal was bit more complex since no code base existed that could meet our needs. The beauty of the Masternode marketplace is that most coins fail and implode, so for us there were dozens if not hundreds of “how not to do it examples”. So we set off a few months ago developing new routines to base rewards on the number of nodes, not block counts and it works great.
The Third goal was the most complex to address because it truly is a multi headed beast. We have seen coins fail under their own weight and the response from the developer (when they did respond) was to fork the coin and increase the collateral to take coins out of circulation and get them ‘locked’, in effect reducing the number of coins that could wind up on an exchange for sale. These approaches are ‘temporary’ and like in the movie “Goundhog Day’, the same events happen all over again and the re-release of the coin slowly goes down hill over a few weeks, until there simply are no buyers for the coin and the death bell tolls.
Therefore: We concluded the best way to incentivize Masternode owners was to give them a reason to keep their Masternodes running and the best way to do this was to make it more expensive to replace the Masternode in the future. Since no one (including us) has a crystal ball and can predict the price of our coin in the future, the easiest method was to simply raise collateral at various times. However, forking a coin and asking hundreds of Masternode owners to install new wallets was simply not in the game plan so we developed code in our wallet to allow Masternodes to continue to run even after raising the collateral for newer Masternodes. I won’t go into the details because it’s all explained in our Whitepaper that can be found on our website at https://catocoin.net
In summary — nothing has really changed at all in Masternode Technology since the advent of Dash, even though the fundamental problems have been there since the beginning.
We feel that CatoCoin will start a new era in Masternode Coins and of course our innovations are free for all to use and hopefully improve the state of all Masternode Coin technology, because we believe that “A Rising Tide Raises All Ships”.
