Crypto Market Commentary
8 September 2019
Doc's Daily Commentary
Look for the new “Options for Income Masterclass” which is now live!
The 8/21 ReadySetLive session with Doc and Mav is listed below. We should be back to a more normal publishing schedule next week, and look for new content from our Bali Mastermind session soon.
Decred Staking Analysis
Early research findings
As some of you know, I have successfully landed a proposal with the Decred DAO for a number of packets of research into the Decred on-chain data. This is a really exciting proposition as I truly believe DCR is one of the undiscovered gems in the cryptocurrency space. What I aim to study is why DCR has performed so well in developing and retaining a monetary premium from my previous article (https://medium.com/@_Checkmatey_/monetary-premiums-can-altcoins-compete-with-bitcoin-54c97a92c6d4).
I’m early into this research but wanted to share some preliminary findings which I find quite fascinating.
Follow the supply
The Decred block reward is split three ways going towards the PoW Miners (60%), PoS Stakers (30%) and the Treasury (10%). At the genesis, 8% was pre-mined with half going to the founders who paid $0.5 per DCR for the coins and the other half to a community airdrop to bootstrap the PoS.
Given we can calculate the theoretical supply curves for this asset, we can start looking at where the inflation is heading after it is minted. In particular, I am most interested to see how the ticket behavior and the actions of stakers and miners plays out.
In theory, the 30% staking reward means that stakers are always diluted. In order to keep buying tickets on a consistent basis, you actually need to keep buying DCR, you cant just stake and re-stake and expect to afford a ticket down the line, eventually you won’t be able to buy one. This helps make people commit capital to the chain and feeds the skin-in-the-game aspect of a strong community.
The other component is that Miners can freely mine DCR, sell some to cover their costs and then also stake DCR in tickets with the remainder. This is a fascinating dynamic and as I covered in the Energy Money class, Miners are an important asset to the chain. With ASICs now live on Decred plus the ability to stake, miners are heavily committed to the chain both in terms of their CAPEX and staking their future income.
Figure 1 – Plot of the Decred theoretical supply curves for PoW, PoS and the Treasury against the Ticket Pool
We can pull some interesting observations from the supply curve above.
First, there is a very clear trend of the ticket pool following the PoW supply. This suggests to me that miners are indeed supporting the chain and dedicating their income to staking.
Second, look how in the early days ticket pool follows PoW and does not jump up to meet the 8% pre-mine. This tells that the founders have not and never have staked their founders reward. Indeed, checking block 1 shows that the vast majority of the founders reward has never moved. This is a huge testament to the strength and belief of the team to genuinely build this project out into something important. Dedication.
Also of note, the early stakers took a while to warm up to the whole process. Miners clearly participated in staked here also, bearing in mind ASICs did not arrive until around block 200k so these were hobbyists and early believers also. Remember, a lot of this was early tech, command line driven and coins were lost all the time so the slow uptake makes sense.
In the next plot you can see the period where ASICs came to market and accelerated the hashrate. The ticket pool also approached and stuck with the PoW inflation line. Now once ASICs enter the mix electricity demands shoot up so more DCR must be sold to cover hardware and OPEX costs. Yet still, the ticket pool follows PoW!
This means that for every DCR sold by miners, there are stakers looking to fill their bags. There is strong HODL demand which I’ve not seen in many other chains.
There is clearly a strong community supporting Decred, its one of the key elements that makes me so bullish on the project. Proto-money is bootstrapped by believers and Decred has an army full of them.
Next I want to look into how the transaction flows changed around the introduction of ASICs and how they ebb and flow with price, sentiment and ticket price. There is a lot to unpack for such a young currency but so far, I am continually impressed with what is on offer.
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An Update Regarding Our Portfolio
We are pleased to share with you our Community Portfolio V3!
Add your own voice to our portfolio by clicking here.
We intend on this portfolio being balanced between the Three Pillars of the Token Economy & Interchain:
Crypto, STOs, and DeFi projects
We will also make a concerted effort to draw from community involvement and make this portfolio community driven.
Here’s our past portfolios for reference:
RSC Managed Portfolio (V2)
RSC Unmanaged Altcoin Portfolio (V2)
RSC Managed Portfolio (V1)