By Shaun Neal
The Dynamo roadmap contains several exciting developments over the next few months. These developments require careful planning and consideration on economic impacts and the future direction and price structure of the coin. The following details the three main proposed enhancements and the related considerations from a technical and economic standpoint.
The proposed enhancements are — smart contracts, proof of stake and proof of storage. Smart contracts and POS were both originally part of the roadmap and are in the original whitepaper. Proof of storage was widely requested by the community after NFTs were developed. Neither NFTs nor proof of storage were proposed in the whitepaper or on the initial roadmap.
Implementation timeline is also important. Each of these enhancements requires a hard fork, which requires miners and full node operators to work together and fully agree, or a contentious fork will occur. Implementing three hard forks is disruptive. Conversely, implementing three large economic changes is complex and prone to failure.
Finally, the procedural process on voting, and even the process on how to decide how to vote, needs to be created and agreed upon. Any process to vote can be created, but there needs to be a process to decide the process first. None currently exists. The whitepaper proposed an on chain voting mechanism after smart contracts were implemented which was based upon the number of coins held. There are no other proposed mechanisms currently, however that does need agreement somehow.
Before considering the proposed enhancements, it is important to list out who the Dynamo stakeholders are so that an analysis on the impact of their past investments can be made. Each enhancement has the possibility to financially harm some group of stakeholders and the possibility to potentially alienate otherwise loyal parties who have helped the project come so far in such little time.
1 — Miners. Miners have invested their time and capital to secure the blockchain from its very earliest days. Miners are likely the largest holders of coins and probably have the most financial investment in terms of capital that could have been committed to other coins and time spent learning how to mine and then maintaining the mining operations.
2 — Investors. Investors have purchased coins over time and created liquidity in the exchanges. There are likely a small number of investors who hold coins and are possibly 10% of the total outstanding coins in existence as of the writing of this article.
3 — Users. There are not many users of Dynamo yet. The first main user will likely be the game company under development which is being designed to create liquidity and a use case for the coin.
4 — Community members. There are a few dozen active community members, primarily in our Discord group, who regularly contribute ideas and foster communication with new members and bring on other people who would not otherwise know about the project. These members may or may not have coins and may or may not overlap with other stakeholders.
Given the four constituencies above, it’s important to consider the impact that any enhancement will have on all parties who have spent their valuable time and money on this project.
ENCHANCEMENT 1- SMART CONTRACTS
Deploying smart contracts on chain requires the development of a virtual machine. The Dynamo codebase contains about 50% of the implementation in the full node for a VM. The miner does not have any code developed for a VM. The VM features are well documented and tasks are clearly detailed.
Generally, smart contracts will allow developers to create applications on chain which are executed by sending coins to the contract. The contract can then store the coins, send them to someone else or return them to the sender. Outside data providers, often called Oracles, can post data on chain to be read by contracts in order to bridge real world events and data points.
Smart contracts should be Turing complete, but time limited. It is important to prevent a malicious developer from deploying a contract which executes forever, thereby halting the mining of blocks. Other chains have implemented gas fees which limit execution and incentivize developers to be efficient in their use of limited resources, particularly on chain storage. In this scheme, a cost is associated with each operation and that cost is assessed to the sender of the coins. This has the downside of not scaling well when the coin becomes financially successful because the price to execute contracts tracks directly with the real world price of the coin. Some chains pay the gas fee to the miner and others burn some or all of the fee.
- Should contract execution incur a gas fee?
- If contract execution incurs a gas fee, should it be paid to the miner, partially burned or fully burned?
ENCHANCEMENT 2- PROOF OF STAKE
Proof of stake security allows owners of a coin to commit their coins for a period of time and claim a reward based on the amount committed and the time the coins are locked. Proof of stake suffers from the “nothing at stake” problem which allows stakers to mine alternate chains with almost no disincentive. To combat this, some coins have implemented slashing, which results in loss of coins if a staker mines an alternate chain for too many blocks or otherwise does not respond to a staking request ticket quickly. This scheme leads to centralization of staking providers on major hosting platforms because of the 24/7/365 uptime requirement and the fear of economic loss if the stakers internet or computer goes offline.
The Dynamo whitepaper proposes a hybrid proof of work / proof of stake system which provides superior security to either pure POW or POS alone. The hyrbid solution provides the same “lock up” economic benefits which constrain supply and it does not suffer from the nothing at stake problem, nor does it require slashing, thereby leaving the chain to be decentralized and outside of major hosting providers.
Proof of stake requires a reward per block for coins staked. Currently, the Dynamo block reward is 1 DYN to the miner and 0.1 DYN to the foundation. The whitepaper proposed that the 1 DYN miner reward be split in some proportion with the stake reward. The reason for that proposal is to maintain the economy which early miners bought into. By increasing the block reward, the coins held by early miners become diluted over time due to inflation. Investors who purchased coins pre-POS would suffer the same dilution.
Finally, proof of stake requires that stakers lock up a meaningful amount of coins in order to sign off on transactions. Someone who stakes 1 DYN should not receive the same reward as someone who stakes 100 DYN. There needs to be a mechanism that allows anyone to stake and earn, but provides rewards in proportion to the amount staked.
- Should the 1 DYN reward be increased to include a new reward for stakers or should the existing reward be split between miners and stakers?
- If increased, what is the new per-block reward to give to stakers. If split, what is the proportion of reward given to miners and stakers?
- What mechanism should be used to incentivize people to stake more coins? Earn the per block reward more frequently? Proportion of per block reward based on amount staked? Something else?
ENCHANCEMENT 3-PROOF OF TIME/STORAGE (NFT)
Many Dynamo community members have expressed interest in committing hard disk storage for POTS, in particular, to accommodate the storage of NFT binary data. Reliable decentralized storage is also a real world use case for Dynamo which could attract new users to the ecosystem.
Unlike other NFT implementations, Dynamo stores the NFT data on chain. The existence of the binary is guaranteed by the nature of the chain’s design. This is similar to Storj/Filecoin/etc, but with the added benefit of having NFT metadata associated with the binary data and the ability to transfer NFT ownership on chain in a publicly verifiable way.
Because NFT data is stored on chain, in perpetuity, there is the potential for the data set to grow very large. This leads to the possibility of creating a distributed storage system based on consensus for which the storage providers are compensated. The compensation could come from the consumers (e.g. NFT owners) or from block rewards. Consumers could pre-pay “rent” for their NFT data which is then paid out to POTS providers on a pro-rata basis. If the rent is depleted, then the POTS provider would no longer be obligated to provide proof of its storage and is free to delete the data. Alternatively, POTS providers could be paid from a portion of the block reward on a pro-rata basis of data/time stored.
- Should Dynamo include a proof of time/storage mechanism?
- If so, should the reward be rent based or block based?
- If block based, should the 1 DYN reward be increased or split? If increased, what is the POTS reward / if split, what is the proportion?
- If rent based, what is the rent mechanism and charge?
Dynamo coin is moving forward with important and exciting enhancements in order to maintain a competitive advantage and attract new use cases. These enhancements require careful consideration of the economic impacts on existing early adopters who took large risks to bring the project to where it is today. A means of voting needs to be created so that each of these important questions can be answered and development can commence.