One question I hear over and over in our community is “Why will Mastercoins have value when there are so many coins in the Master Protocol ecosystem people could use?”
Up until now, our answer has always been a combination of 1) Preferential treatment for Mastercoin when using advanced features combined with 2) burning Mastercoin for anti-spam fees. Unfortunately, these answers always felt a bit . . . insufficient.
Today I am excited to share a MAJOR improvement to how we will increase the value of Mastercoin. When you use our advanced features (fundraisers, betting, distributed exchange, etc) you will never pay a fee when using Mastercoin. If you use another coin (for instance, a USDCoin pegged to the U.S. Dollar), a small fee (0.3%) will be deducted by the protocol. You might assume that the fee will go to the Mastercoin Foundation, but you would be wrong. The fee will be automatically sold on the distributed exchange . . . for Mastercoin . . . which will be BURNED.
That’s right. The protocol will automatically buy up Mastercoins using these fees, and destroy them forever.
Credit for this idea goes to Dominik (I first heard it from Ron, but Dom came up with it first), and the idea is pure, elegant, simple genius.
Take a moment to appreciate how genius this is:
- Users don’t actually have to hold any Mastercoins. They can exclusively use other coins, and still be burning Mastercoins.
- No extra weight in the bitcoin block chain (the fee, sale, and burning happens automatically in our system as we process transactions)
- People have a small incentive to use Mastercoin, but Mastercoin holders benefit no matter which currency people use
- We don’t have to encumber our features with Mastercoin favoritism
- Mastercoin supply decreases the more other coins are used in our ecosystem
- Once the metacoin distributed exchange (metadex) is live, this fee will automatically be charged to every other currency using advanced features in our ecosystem, including fundraisers accepting bitcoin!
- The size of the fee (0.3%) is not a “magic number”. It can be changed in the future by a vote of MSC holders, hopefully using a voting feature in our protocol which will allow voting on parameters such as this.
Some transactions are exempt from the fee:
- Simple sends (so you can still move your coins around for free).
- Any advanced transaction which directly uses Mastercoin, for instance:
- Trading Mastercoin against MaidSafeCoin on the distributed exchange
- Accepting Mastercoins when crowd-funding
- Placing a bet denominated in Mastercoin
Examples of transactions subject to the fee:
- Trading USDCoin against MaidSafeCoin on the distributed exchange
- Coins sent to fundraisers in currencies other than Mastercoin (including bitcoin)
- Placing bets denominated in USDCoin or MaidSafeCoin
Mastercoin has ALWAYS been designed to be “insanely deflationary”, and this is a HUGE step in that direction. So in the future, when you see people asking why Mastercoins will be valuable, please point them to this blog post!
You can follow progress on this change on github here: https://github.com/mastercoin-MSC/spec/issues/193#issuecomment-45377270
We have some wonkier text about why Mastercoin will have value in the future here (work in progress): https://github.com/mastercoin-MSC/spec/blob/master/WhyMastercoinsHaveValue.md
Speaking of being on fire, huge props to our team, which has been making blazing fast progress lately on a universal, cross-platform, exchange-friendly Mastercoin implementation. News coming about that soon.
edit: Ron asked me to mention that some details of this mechanism are not considered final, and may change based on internal discussion and community feedback.