What is Dash (DASH)? A Project Deploying Masternodes but Some Question Its Decentralized Model
The most significant improvements of Dash over Bitcoin are its transaction speed, anonymity and governance. Those key features are implemented within a network of dedicated servers known as masternodes.
What are the key features of Dash?
Dash is a cryptocurrency focused on the payments segment of the market. Its name is portmanteau of “Digital Cash”. Dash was launched in January 2014 from Evan Duffield after a fork of the Bitcoin software. Its first name was actually Xcoin, later rebranded to Darkcoin and in March 2015 Darkcoin became Dash.
The most significant improvements of Dash over Bitcoin are related to transaction speed, anonymity and governance. Those key features are implemented on top of a network of dedicated servers known as masternodes. In short, their role is to provide consensus faster.
Dash goal is to be the most user-friendly and most on-chain-scalable cryptocurrency in the world, so transaction speed and low fees are a top priority for the development team. As of July 2018, Dash supports ~56 transactions per second, the size of one block is 2MB with 2.6-minutes block time. However, one of its goals, written in their roadmap is for Dash to achieve on-chain scaling of up to 400MB blocks using custom-developed open source hardware.
In addition, a service called InstantSend allows transactions to be fully confirmed within 2 seconds. This is one of the functionalities which set Dash apart from every other blockchain. Most other digital currencies need to have several confirmations before a transaction is considered irreversible. All of this is made for security reasons but imagine a world where every time you buy your groceries in the supermarket, you have to wait for 30 minutes to make a successful payment. The awkward silence between you and the cashier will be the least of your problems.
Another key feature that differentiates Dash is the so called PrivateSend. As you may suggest it is made to give the users the ability to save their financial privacy. As a fork of Bitcoin, Dash’s digital ledger can also trace back the origin of every Dash in existence.
However, if you want to make an anonymous transfer you can set apart some funds for private transactions and then the PrivateSend feature in your Dash wallet will make it practically impossible for anyone to connect those funds to your public address. The innovative process mixes your inputs with the inputs of two random people and these mixing rounds can continue multiple times. The end result is a practical mathematical impossibility of tracing where the funds have gone.
Governance and funding in decentralized projects may be a serious challenge for cryptocurrencies because by definition they have to be autonomous, with no central authority on top. For example, all of Bitcoin Foundation income is donation based.
Dash vision is that there is a better way of funding a decentralized project and that’s why Dash became the first digital currency to create an explicit governance model with an associated self-funding mechanism. In other words, Dash decided to function as a Decentralized Autonomous Organization (DAO), which is basically a company that doesn’t have CEO but it is rather made from volunteers all over the world.
Just like Bitcoin, Dash uses Proof-of-Work (PoW) consensus mechanism, however, unlike Bitcoin when a block is created on the Dash blockchain the reward is splitting in three. A total 45% is paid to a miner, 45% goes to the masternode and 10% goes to the so called treasury.
This treasury fund covers all the expenses needed for Dash to continue to be a “money as a service” provider. This is how Dash achieves its self-funding and stays independent.
Masternodes – the decision makers in Dash
Masternodes are part of Dash’s solution to the scalability issue that cryptocurrencies face. Their role is to make fast decisions, such as locking transactions with InstantSend, coordinate mixing of coins, and voting on budget funding. Each masternode has 1 vote and this vote can be used on budget proposals or important decisions that affect the future of Dash.
The reason they are bestowed with authority to make network-wide decisions is primarily that each of them must prove ownership of 1000 DASH. As of July 2018 you will need USD 230 000 to become a masternode, because the price of one Dash is USD 230. Currently, the total number of masternodes across the Dash network is 4800.
In order to receive rewards, a masternode should stake those 1000 DASH. The coins can be moved at any time, but if a masternode decides to do so, this will result in lost earnings. The idea behind this method for decision making is that with this kind of wealth at stake masternodes will be the most incentivized to make good decisions, because if they don’t – they lose money.
In exchange for voting rights and rewards, masternodes must perform three tasks – to keep and update a copy of the blockchain 24/7, and to provide the network with the InstantSend and PrivateSend functionalities.
Dash main competitors
The main goal of Dash is to serve as digital cash, so it faces a lot of competition in this field. Bitcoin, Litecoin and Bitcoin Cash may be considered as some of the main competitors of Dash. Although all the projects use Proof-of-Work, we already learnt that Dash also has masternodes, which enables some features that none of the above have.
One of the key differences between Dash and the other three currencies is the InstantSend functionality of Dash which processes the transactions in seconds. In all other projects you have to wait for several confirmations in order for a transaction to be considered irreversible.
The other feature that masternodes enable – PrivateSend – may put Dash into the same category as Monero, Zcash, PivX and Zcoin – anonymity focused coins. However, Dash enables privacy through uncertainty, not through obscurity.
This means that in most of the privacy focused coins you can’t follow the origin of a coin through the blockchain at all, while in Dash transactions can be traced back to your input. However, the same transactions lead to many other user inputs. This way it is uncertain which wallet originated a transaction.
We may say that Dash PrivateSend is a good compromise between better privacy and usability because in order to use the other cryptocurrencies you need a full copy of the blockchain. The increasing size of every blockchain basically puts those currencies onto desktops and makes them unusable on mobile devices.
Dash sees this as a compromise which is in contrast with its goal to be the most user-friendly and most on-chain-scalable cryptocurrency in the world.
Dash increased its value 145 times in 2017
As of July 2018 the price of one Dash is USD 230, the circulating supply is 8,196,238, while the max supply is 18,900,000.
Dash was trading at USD 0.22 in February 2014 when it first hit the exchanges and in just three months its price surged to USD 15. However, shortly after that it suffered a significant correction dropping to around USD 2.
It reached USD 15 once again almost three years later – in January 2017. The cryptocurrency began the year changing hands for just USD 11.30 and reached its current all-time high at USD 1642 on December 20. This is 145 times increase.
2018 so far is bearish for the crypto market as a whole and Dash followed suit, dropping to USD 208 on July 13, which at the time of writing is the lowest trading price of Dash for 2018.
Controversy and speculation about Dash future
Dash innovation to the crypto market consists of the introduction of masternodes and the self-funding model of the project which allows Dash to stay independent.
However, as with most cyrptocurrencies there are people who believe Dash is not as decentralized as it is claiming to be. There is one main controversy surrounding Dash since its initial launch and I believe anyone who is interested in investing in Dash should know about it before making the final decision.
Many people doubt in the honest intentions behind the creation of Dash because within the first 24 hours of its launch, 1.86 million coins were mined, which is around 23% of the current circulating supply. This Fastmining was not intentional as the founder of Dash Evan Duffield said adding that it was because of a bug and it took him some time to adjust the difficulty and stop the process.
In short, the suspicions around Dash are that the founders knew about this bug and mined most of those coins. In addition, there are facts that some believe are proofs that the founders made it as hard as possible for random users to mine the coin during the first 2 days.
For example, at first, mining was available only on Linux, while most of the people used Windows to mine. No one can say with certainty who mined those 1.86 million coins and how many of them are still held by a few people.
There is no clear way to determine how many people are running those 4800 masternodes. As a response to the criticism Evan Duffield said in 2017 that he is holding 256 000 Dash and intents to distribute 80% of the coins back to the community through the treasury fund.
At the end of the day, I think if you are considering investing into a cryptocurrency, the smart thing to do is to put under question the official statements coming out from the founders of decentralized projects. Always make your own due diligence and never put your all your eggs in one basket.
Regarding Dash, in the mid-term I believe the project has its place in the crypto universe, despite all the controversy surrounding it. The project just became more successful than what probably its own founder imagined. Even if the conspiracy theory is true and the founders hold most of the initially mined coins, it will be more profitable for them to run masternodes than to dump them at once.
However, if I have to make pure speculation about the far future, I think Dash won’t have many competitive advantages over Bitcoin as a digital currency, once it resolves its scaling issues and there will be far better alternatives if you need to use a privacy coin.
Disclaimer: The views and opinions expressed by the contributor in this text should not be considered financial or investment advice, neither treated as an expression of Cryptovest’s view. Neither the author nor the publication takes any responsibility or liability for any investments, profits or losses you may incur as a result of this information.
Cryptocurrency trading and investing is risky and market participants are advised to always conduct a thorough research.