Five major complaints against Divi
Examining the issues with this cryptocurrency and project.
The Divi Project has been around since mid 2017, and the blockchain has been in existence since the end of September, 2018. So the Divi Project has been through all the trials and tribulations of a huge bullrun, the utter bloodbath of the crypto-bubble burst, and has come along nicely, raising coin value about 10x in the last 2 years, with even more value gained by stakers and masternode rewards as they helped support the network. But, like all projects it is facing challenges, and if these are not adequately addressed, this project is going to end up in the dustbin like so many others. So let's take a look at the five major objections people have about Divi. To cut to the chase, here they are listed:
- Divi is centralized
- Divi has no use case
- Divi inflation is bad (no max supply is bad) leading to dumping, and price drop
- The rich get richer
- Development doesn’t exist/slow
Let’s get into these one by one. I grant that this is a long article. If I were reading this, I would just skip to my biggest gripe.
Divi is centralized?
Centralization can come in three forms: Coin ownership, node dispersion, and braintrust. Let’s look at all three.
Centralization via coin ownership
This one is the easiest to refute. It’s simply not true. Let’s first ask how the coins got here. The background is that the Divi project made ERC-20 tokens that were to be exchanged by token holders into Divi coins when the main net came online. Divi only held 8% of these tokens. When the time came and the main net was launched, each token was swapped for 100 coins for each token holder that did the swap. This is a swap, not a pre-mine.
A pre-mine would have looked something like this:
Divi creates 6,171,606 DIVX ERC-20 tokens. Then they allowed everyone to swap their token for 100 coins, resulting in 800 million Divi coins right out of the gate. See what happened? 140 million coins appear out of nowhere and ended up in Divi’s pocket. This is NOT what happened. There was a clean 1:100 swap and that was it.
As for the state of coin ownership now? The best way I know how to determine that is via the CryptoID chainz website. Let’s look at wealth distribution among a few coins:
The takeaway here is that coins are distributed better in the Divi ecosystem than even litecoin, while Dash and PIVX are just silly. Looking at coin decentralization, Divi is a clear winner.
Centralization via node ownership
This one is a little harder to show. There are currently about 1770 masternodes and thousands of stakers. The telegram is filled with people from the US, Costa Rica, Venezuela, Denmark, Netherlands, Nigeria, South Africa, Poland, Italy, Spain, China, Japan, Korea, Brazil and many many more. Those that are not running a masternode are staking, as Divi has two types of nodes, and the masternodes are tiered. This is designed to do exactly what it is doing, lowering the bar to node ownership. It only takes 10K Divi to run a staking node while the tiered masternodes require more. So we want, and expect, a lot of copper nodes and fewer diamond nodes, which is exactly the result we get.
These masternodes are all over the world, North America, Europe and Asia, in about equal quantities.
Now a claim could be made that most of these masternodes are of the MOCCI variety (about 3/4), the technology Divi developed first to implement a 1-click launch of a masternode. This is true. However, MOCCI is a service and not required at all. Divi developers could get hit by a meteor tomorrow, MOCCI could completely die, and there would still be a lot of masternodes hosted by other platforms, and anyone else could still launch them. It is true, at this very moment MOCCI masternodes are deployed in a few large countries. Soon, that will no longer be true, Divi is further decentralizing as we speak. New deals with new hosting services are in the works all the time.
Finally, another dispute about centralization could be made that other coins have more nodes in more countries. This is totally true….for top 50 coins! When Divi is there, I am sure the map will change.
Centralization via development
This is common for most crypto projects. Almost every cryptocurrency on the planet has a single, core development group for blockchain, and then other developers make things that use it. While Bitcoin and Dash and Energi and Grid have core blockchain development groups like Divi does, other developers make wallets, tools, and informational outlets based on the blockchain. ADA has IOHK, Polkadot has Parity. Divi is no different, anyone can develop good and serivces on the Divi blockchain, and contribute to the blockchain itself. I myself, not an employee of Divi, have created tools for their CLI wallets, experimented with different hardware for running the wallet. Polispay and Midas Protocol have incorporated Divi into their wallets. PolisPay in particular, right now offers gift cards and debit card features for Divi. Coinpayments have incorporated Divi into their suite of payment utilities making Divi a payment possibility at thousands of places. Development that utilizes the Divi blockchain is not bounded by the actions of the Divi Project or Divi Labs. They are just setting the blockchain free for everyone to develop on.
Development for Divi is not centralized, or at least not more centralized than any other blockchain, importantly, it’s not closed at all to developers.
Divi has no use case?
This one can be dismantled pretty easily: Divi is a currency and its use cases are the same as for any currency including the US dollar or the Euro.
Divi is a better blockchain than Bitcoin or Litecoin for any use case they have. Divi (and frankly, almost any coin) is faster, has a more psychologically conducive price point (and will forever), and the project is dedicated to making it easier for everyone to use via finally making a UX for the masses and lowering the barrier to entry (psychological and financial) as much as possible. Bitcoin and a few others have had a decade to achieve this. They are a shambles in this arena. Keep in mind, cryptocurrencies have no adoption at all relative to fiat on this planet. So the future use cases of Bitcoin, Dash or Litecoin that you may have in your head, are also use cases for Divi. Look at what Divi will be releasing soon in terms of usability, most to be released this year (2021). we can find these by looking at their roadmap.
- Launching masternodes from a phone wallet
- Launching staking vaults from the phone
- Launching nodes of other coins from the wallet
- Swapping between coins within the wallet, not a separate service
- Swapping between fiat and crypto within the wallet (with the help of the bank they bought, Ridivi, more on that later)
- Using debit card features from within the wallet
- In wallet global remittance features
- 1-click KYC for any add ins to the wallet via Ridivi
- Divi Bond an investment product that combines Divi staking with traditional assets
- Lightning Works, a divi powered NFT based, digital media company
- Siege Worlds, a Divi powered Massively Multiplayer Online game.
- Maya Energy, payment method for 20 foot shipping containers that supply renewable energy, communication and clean water to remote areas of Africa.
- Permatek, a crypto community being built in Costa Rica that only uses crypto for goods and services within it.
- Divi Everywhere, here the key is to get representations of Divi onto other blockchains for use in services on those blockchains. To start with Stakehound is creating stDivi for DeFi efforts on Ethereum. Zap is working on a version of Divi that can be put on multiple chains. Divi held in these representations will inherently stake, so just holing the wrapped Divi will allow you to earn.
This and much much more, with laser focus attention to making it easy for everyone. Because adoption will not come through utility alone. People have to want to use it, and better yet, be able to use it without instruction or getting a PhD in the use of cryptocurrencies. That is what the new Divi wallet is offering. Until this is the norm, adoption simply will not happen anywhere.
So if you can list off what you think are the use cases of Bitcoin as a currency, you are listing the use cases of Divi, but Divi can do it faster, cheaper, and easier for the user. Further, some say that what makes a good currency is scarcity. This is simply untrue. Scarcity is not a characteristic of a good currency. Scarcity is what makes Bitcoin a good store of value. Speed and ease of use are what make Divi a superior currency, and not a store of value.
One more note on blockchain use cases. There are almost none in the grand scheme of things that can’t be handled by fiat. The great majority of DAPPs are on only three chains ETH, TRON, and EOS, and most of that is on Ethereum, and most of the rest are clones of gambling programs. That’s it. Cardano, PolkaDot, XRP, etc don’t have any use cases outside of trading the coins with each other on their journey to utility. Same with Divi. This will all change soon as we all participate in the greatest wealth generation event in human history.
Is Inflation leading to sellers and no buyers?
This claim, that all rewards are being dumped, can be dismantled in several ways. When someone says this (and it happens often), they are demonstrating that they are conflating crypto monetary inflation with fiat monetary inflation.The difference is vast. I often wonder if most people understand that BTC is currently inflationary and will be for a century.
When the government and banks add to the monetary supply that money is used by the government and banks. When the banks use that money to extend loans, and consumers go shopping — that monetary inflation turns into price inflation by diluting the value of that financial unit (like the dollar), because not enough is done to regain the value. An increase in production costs and wages can also lead to price inflation. However, it is a common misconception that monetary inflation will automatically translate into price inflation. If it is spent on debt, or hoarded by banks, or worse — used for speculation, it does not create velocity(this is why we have not been experiencing the runaway hyperinflation everyone has been calling for over the last decade — because the environment is too deflationary despite their best attempts). Thus the people who are mostly helped by monetary inflation in a fiat system, is the government and the banks, everyone else tends to suffer.
This is not necessarily true in an inflationary cryptocurrency. The Federal Reserve’s deranged and wholly experimental attempt to create illusory paper “wealth” is through speculative overvaluation, which creates more wealth transfer and wealth disparity (by printing money and lowering interest rates to zero, thus hurting savers and encouraging speculation). The most important aspects to note is that the Divi inflation is distributed to node owners, NOT 100% to the Divi project (some of the inflation goes there to pay for development, marketing and charity — 17% total). Meanwhile all the rest goes to benefit node owners directly. Only if our supply on exchanges was high (ie people wanting to “spend”) would it affect the coin value.
Right now the vast majority of the DIVI community see the value of this project, and keep holding (90% of coins are held in staking wallets or masternodes). If people aren’t spending all those printed dollars it’s hard for prices to rise and the dollar to fall in value. If people aren’t selling all those minted Divi it’s hard for the price of Divi to fall.
The difference here is, this “monetary inflation” goes to help Divi holders and their savings so to speak. The fiat monetary inflation goes to help bankers and speculators and hurts savers
Ok, so the contention is that these rewards just get dumped on the market. Some certainly do. But here is a super important point: if you don’t keep buying, your ROI goes down. That’s because Divi is not inflationary on a percentage basis (like say EOS). Each block reward of 1150 Divi (on its downward path from 1250 to 250 per block), is a smaller and smaller portion of the total supply. So the expansion of the supply is not exponential, it’s asymptotic to zero…almost like… Bitcoin.
Think of this another way. Bitcoin has only 21 million coins that will ever be mined. For all intents and purposes, Divi is the same, but with a far higher number. That’s ok, it’s a currency, if the price only gets to $1, that will be fine. You can see this by the following graph. In time, the growth of the supply is virtually nonexistent.
If inflation is bad, then Divi will have dropped its inflation rate further and faster in its first 15 years than Bitcoin will have. If inflation is bad, then Divi has the ability to change to lower inflation or even no inflation. Can anyone predict what the market conditions for crypto will be in 20 years? What happens if China chooses to raid the mining facilities to control bitcoin? Will it matter if there is a coin supply cap? Can you actually tell a tangible difference between Divi and BTC in year 70 that matters or has relevance?
Frankly, unlike in Bitcoin, if the people running nodes don’t like this inflation, they can change it. The important part to realize is that inflation is high in the beginning in order to attract people to get in while earnings are higher. To maintain their reward rate, they will have to continue to buy.
Most of the Divi is locked up in nodes. Check out this chart:
This is the current state of the Divi ecosystem. 52% of all the coins are locked in about 1770 masternodes. Based on staking returns, we can estimate that 80% of all remaining coins are in staking nodes (it’s a good assumption, there are great benefits to staking as opposed to masternodes for those who can keep a computer going). Thus it can be assumed that 90% of the coins generated are held in nodes, not getting dumped on the market.
The Divi Project has written a whole article around inflation and the various methods by which they can have monetary inflation while controlling price inflation (These are two different things). Mostly, the ideas are around gamification of the economy.
Finally, if all people are doing is dumping coins on the market lowering the price, how do you explain this?
- How did the price of Divi rise 17x, while BTC “only” rose 12x?
- How are there times where the price of Divi rise while BTC was falling?
- Why, throughout the years, if “everyone is dumping” does the Divi price rise despite the supply increasing over 360%?
The answer is: because Divi continues, week by week, to add value to their blockchain, wallet, ecosystem, and community. All four are important, scarcity doesn’t drive price by itself. Something can be scarce and valueless (lots of art fits in this category). But even things with a large (not infinite) supply have value, like water or sand, or Tomagotchi eggs. That is why the market cap of Divi has risen by 3200%. Value AND supply are increasing.
Nick Saponaro said it best. “What if we released MOCCI and then said, ‘OK we are done’”. In that case, Divi would already be long gone. The monetary inflation would cause the price to fall (Hello, GINcoin). But that is not what is happening here as you can see.
Each month, the community and cryptoverse gets a video update. Sometimes it’s about technical achievements. Sometimes it’s about commercial achievements. Sometimes it’s about social achievements. Each month, specific advancements have been made and this constant plodding forward, constant innovating, constant relationship making, drive the price up because the added value outstrips the added supply.
Clearly, people are not just dumping rewards (Although it has definitely happened). Low liquidity coins are susceptible to this. Cleary, Divi has and will continue to innovate and improve the cryptocurrency so that the hodling mentality remains in the coin and community.
The Rich Get Richer
I was extremely tempted to leave it at that because this is not a technical issue, nor is it an issue of capabilities. This is a philosophical and social issue. If this weren’t true, the rich would not invest at all. It would become a charity, with negative growth, and everyone involved would lose money and there would be no project.
It is, in fact, designed into the system. No, I dont mean designed into the Divi system (although that’s true too). I mean, it’s designed into life and the success of humans. If there isn’t an opportunity for greater wealth (which can be wealth of money, time, social capital, privacy, etc), then people won’t invest what they do have in them. Why would they?
What are the core issues around this problem are twofold:
- Unfair, excessive wealth generation by the wealthy.
- Lack of wealth being shared or being made available to those with less.
While multiple Ph.D. theses could be written around this (and probably have), let’s focus on Divi.
Unfair wealth generation is not a function of blockchain, it’s a function of government or social interactions. Governments adhere to the whims of the wealthy. This is not an extraordinary claim. They put in social and financial policies that benefit the wealthy. You must comply with these policies or you will go to jail. THAT is an unfair reason that the rich get richer.
In Divi, it's programmed. It doesn't matter if you are best friends with Nick Saponaro or Geoff McCabe, you will still make the same percentage on the masternode tier you have as everyone else. If you are staking, you will make around the same as all the other stakers (if you haven't mucked up your wallet). There are no laws, limitations, or barriers to overcome. It doesn’t matter if you are black, white, green, poor, rich, fisherman or rocket scientist. You will earn a programmed amount of income based on your contribution to supporting the network. And yeah, those who spend more (risk more) to support the network, earn more. If they are running a masternode, they earn more on a weekly basis, and on a percentage basis. So, in all Proof-of-Stake cryptos, the rich get richer, but the poor get richer also.
It should be noted, that it is important to have some strong nodes in a PoS blockchain, they help to stabilize the network and prevent forking. Those who provide this stability are rewarded a little bit extra. To be clear, a copper return rate right now is 19.7%. A diamond masternode gets 20% higher than that, so it gets 23.6% returns (some people think they would be getting 39.7%, this is wrong).
This is part of the gamification of the blockchain and it helps to keep coins in masternodes and staking nodes. It’s programmatic, and that is all. In the future, these numbers can change based on the feelings of the Divi community, not the whims of some legislators you didn’t vote for.
The Divi lottery has been a pain point for Divi. It was, in fact, a place where the system was designed to unfairly benefit the wealthy. It had nothing to do with masternodes, as masternode rewards are not eligible for the lottery. So large staking wallets, would get to have many more entries into the lottery and were given a FAR greater chance to win it than those with less with no additional risk. It literally changed the chances for those with more. Solutions have been proposed, and the team listened. Now the large wallets can not win more than once in a drawings nor more than once a month. The new system can be gamed of course also, but it is far better now, and under constant review and improvement.
But what about Bitcoin? You can earn bitcoin without having any bitcoin at all. This is true, but that doesn’t mean you are guaranteed to get any bitcoin at all. Do the rich get richer there? Even in Bitcoin, the richer you are, the more equipment you can afford, the better network you can afford, the more cooling you can afford. The rich get richer in Bitcoin too.
The rich invest their time and money into things that earn them more than the poor earn doing the exact same things. But in crypto the percentages are the same (with some small exceptions), and everything is above board, and it doesnt matter who you know. But when it comes to laws and taxation making it harder for the little guy, well that’s a bug (or feature, depending on who you are) of government, not blockchain, or Divi.
Sharing the wealth
Without a doubt, it is a legitimate claim, that wealth growth for the rich doesn’t do any good for most people in a society whose expenses match their income. I have yet to meet ANYONE in crypto who thinks this should be the case. Everyone want’s crypto to help people, in ways never before possible, to lift themselves out of economic hardship. I grant, you find many of the dudebros who have a “screw them” attitude. That element of society exists in crypto, wall street, real estate, and government. What does Divi do differently? The Divi community gives, globally.
Tipping is a large part of what makes the Divi community cohesive. People will tip others to help bring them on board. But mostly tipping is done for rewarding activities that help with the project. Or sometimes it’s becuase something was funny (and maybe because someone wrote an article…hint hint). Tips are also an easy way to fund charitable activities, as you dont need an address, you just tip the person. Many hundreds of thousands of Divi have gotten sent this way to fund some of our community members who are performing important charitable services in Venezuela.
The community really came through for delivering over 100 bikes to a township in South Africa. These bikes made it easier and safer for kids in the township to go to the store or get to school.
These are just a few of the examples of the sharing of earned funds that happen on a daily basis directly within the Divi community and around the world. And it is just the start.
Imagine a time and place, where a whole community just uses Divi to trade goods and services. The very act of just holding their money allows their wealth to grow. This is the exact opposite of what happens with fiat, where bank interest rates don’t even get close to inflation rates.
Is Divi actually developing anything?
The Divi Project started at the end of 2017. Where is the mobile wallet? Where are the account based transactions? Where are the vaults? The wallet looks basically the same as the one released in 2018.
Of all the complaints, this one is the only one with any actual merit. I will say this: almost no one that I have talked to who harangues the community about the development speed have themselves built a project nor run a business developing a new technology. It’s not just Divi, I see this in almost every crypto project I am in, those with the least ability to create something are the loudest about the speed at which brand new technologies are built. Having been the lead director for new technology development in other companies myself, I can sympathize with Divi.
And there are truly new, never before existing, technologies in the Divi Project. True 1-click masternodes are not just some script. It’s an entire platform that brings together wallets, hosts, and an blockchain in the most decentralized way possible. No other project had such a thing when this came out, and I still think none are as easy as what Divi built. Staking vaults, done in a truly decentralized manner, are also something brand new to the field. Lottery blocks, while not as technically difficult, were new too. And the new wallet coming out is going to be best in its class. mMocci (mobile mocci), the one-click masternode system imbued in the new mobile wallet is a brand new technology that no one else has. It required, design and development on multiple platforms, coordinating multiple systems and is unique enough for patent protection.
These technologies and products, require tremendous work, refinement, testing, etc. And you have to remember, unlike ADA, PolkaDot, and EOS, Divi barely raised any funds during their ICO. Originally the development was done with three people who were paid in Divi. This same group of developers made it through Crypto Winter, and carried on, delivering improvement after improvement on these four core technologies.
Now that the project has gotten up off its knees, the development team is far stronger and more experienced and more organized. But this team also had to follow along with the constantly shifting regulatory landscape. The team constantly needed to watch for danger for themselves and for their coin holders, making sure the evolving regulatory seas were navigated safely. As these boundaries shifted over the last three years, they needed to redo and re-imagine entire parts of the ecosystem.
Finally, I think it’s fair to say that Covid really gave them a punch in the gut. Developers were having to deal with lockdowns, losing family members or at least losing access to them. Without a doubt this caused enormous delays.
I talked to Nick Saponaro about this topic, he feels far more secure in their development team and talent than he ever has. This year and next should be pretty amazing with regard to products and services coming out of this project.
Do we have a problem?
I think its fair that these five issues are the largest complaints against Divi. But most of them are just complaints about blockchain projects in general, and the way people act around money. Some of them spring from a fundamental misunderstanding of monetary policy and the creation of value, or the way blockchain works, regardless of which project.
The validity of the complaints about development speed are really in the eye of the beholder. It is what it is. If this rate isn’t good enough, and you can’t recognize that the team is in its best position ever, then, for you, maybe it is time to move on. But I think the best is yet to come.