afbitcoins, I have read your paper. I agree that there is more than just securing the network. There are monetary principles at stake and these are the ones I am currently trying to understand.
And I am much closer to you and toknormal in this regard than what transpires from my earlier posts. I may come back talking about competitive mining and scarcity as related to Dash when I am ready.
But first I want to understand what I currently do not:
The point of Tok (as I understand it, oversimplifying it) is that the masternodes get "free" coins for their service, contrary to the miners. They need to pay it with electricity bills. That is the "pressure" force.
How and why this 'pressure' on the investors is manifested? Should the investor be interested in how much the distribution of the block rewards is skewed from an 'optimal|ideal|equilibrium'? He cares about the emission schedule and what not, but not about the 'inner' distribution of rewards and who bears the cost of producing the block. What is a mechanism that restores the equilibrium?
Ok, maybe this answers my questions:
Where I struggle is at the beginning, point 1. that looks at the cost of producing the block. I know that it costs to miners to find blocks, but the link of this cost with the block reward is what bothers me. The block rewards are created by software independently of the mining cost.
Sure, you can look at it that way. i.e. The block has value..."because"...rather than the block has value "because the prevailing level of competition to mine it represents the starting value for the block".
However, taking that approach has consequences - namely that half the supply ends up being held at a zero cost base and free markets do like to massacre high margins where they have the option. So you end up with chronic profit-takes from masternode rewards competing with miners for limited fiat liquidity and undermining them (because they can afford to right down to a price of zero).
It doesn't matter which way you model it IMO, the long-run behaviour (in the absence of massive added service value to justify the MN rewards) tends towards chronic loss of marketcap share.
Hmm .. I am almost starting to understand your point.
But why don't the miners start shutting down their mining equipment and purchase masternodes instead then? The mining rewards would go up, masternode rewards down and soon the equilibrium would be reached (The difficilty adjustment would take care of the rest).
Why it is the market that intervenes to massacre high margins?
This is the part I don't understand. Unless ... the investor values the "mining" more than other services.