Another Dash Budget Proposal Cycle is coming to an end shortly, which means Masternode owners are scrambling to evaluate proposals and cast their votes before the deadline passes. With the total monthly amount available now exceeding $4 million, the stakes have become considerably more significant than when the Budget System began. Although there is no way to know, I would guess that the vast majority of Masternode owners have never had to manage a $4+ million/month budget. How to decide which proposals are worthy of a “Yes” vote? How to determine which proposals are worth what they are asking?
I’d like to focus on just one aspect of evaluating a budget proposal: the worth of a proposal in relation to the amount requested. I’ve noticed in recent months that some community members are intimidated by the large amounts requested; I’ve seen comments like “They are asking for $1 MILLION!!!” suggesting the amount alone should disqualify the proposal. Some Masternode owners appear to be acting as if the Budget System is their own personal bank account; since they have no experience ever spending that kind of money, they can’t grasp spending it on something like a PR campaign (for example). These perspectives fail to fully understand how the Budget System allocates funds.
There are three possible outcomes—and only three outcomes—for the funding requested by a specific proposal:
- The proposal receives the funds.
- Another current proposal receives the funds.
- No proposal receives the funds, and the funds are instead “burned.”
Nothing else can be done with those funds. Saying, “Those funds could be used for x instead!” is irrelevant if “x” hasn’t been proposed in the currently monthly cycle. For example, say a proposal requests 100 Dash for a marketing campaign. There might be the objection, “That 100 Dash would be better spent on more developers.” Perhaps, but if no one is asking for that 100 Dash for more developers, then that argument is moot. The funds won’t go to pay for more developers no matter what. They will either go for the marketing campaign, or for other existing proposals, or they will be burnt and never exist.
(Note: burning funds does in theory increase the value of Dash, albeit only slightly. It means there will be less total Dash created, which makes each Dash worth a bit more. But that value increase is very small.)
Not a Typical Budget
The Dash Budget System differs significantly from a typical corporate budget. In the case of a traditional corporation, when money is not spent on a specific project, it will still eventually be used. It might be saved for a future project, it might be allocated to research and development, or it might be returned to investors as a dividend. It will not ever be “burnt.”
Because of the limited outcomes for Dash proposals, a Masternode owner should ask, “Is this proposal the best possible use of these funds?” Note the emphasis on “possible”—one cannot save these funds, so it does no good to compare a proposal with non-existent proposals; compare it only to existing proposals or burning.
Using the Whole Budget
The current budget cycle is a good case study. If all the proposals that currently have positive net votes (i.e., more “Yes” votes than “No” votes) to pass the 10% threshold, then they will all receive funding, as the total amount asked for is less than the total amount available. So when voting for one of the proposals this cycle, the question becomes simpler: is the proposal a better use of funds than simply burning those funds?
Thus, if a Dash proposal this cycle asks for 1,500 Dash (almost $1 million at the current Dash price), do not ask, “Is this proposal worth $1,000,000?” Ask instead, “Is this proposal worth more than if those 1,500 Dash were to never exist?” That bar is significantly lower than trying to place a value on the proposal returns itself.
Now, one could argue that this way of looking at proposals is more likely to “waste” money, for undeserving projects are more likely to pass. This is probably true. But ultimately, unless the Dash allocated is taken away from an existing worthy proposal (which hasn’t really been an issue yet due to the low number of proposals), then the only real downside that occurs is that the Dash allocated exists instead of being burned, which results in a minor decrease in the value of Dash. The fact that a failed proposal owner is possibly richer is irrelevant to the evaluation.
As more proposals enter the system, and the total amount requested far exceeds the total amount available, then the competition will become more fierce. Then the Masternode owner will have to compare proposals to see which are worthy of a “Yes” vote. But even then, the question, “Is this proposal worth x Dash?” is still not the right question. The question then should be, “Is this proposal worth more than other proposals asking for funds this month, and is it worth more than simply burning the funds?”
Thus, I would argue that Masternode owners should be more generous with their “Yes” votes than perhaps a Board would be in a traditional corporation. The Dash Budget System, while it is similar to a corporate budget, is an unprecedented mechanism. While Masternode owners shouldn’t automatically vote “Yes” to every proposal in the system, it would be better to have a few failed projects than to consistently reject proposals for fear they’re not worth the funds requested. As long as they’re worth more than burnt funds or borderline proposals that might otherwise fail, then they are worth a “Yes.”