Following in the footsteps of Che Guevara and Colonel Kurtz, DASH has journeyed both across South America and into the Heart of Africa.
But what is DASH exactly, and how does it work? In this article we’ll consider what DASH does well, what its shortcomings are and the structure of the unique DASH masternode consensus mechanism.
The DASH Blockchain
DASH was launched in 2014, about five years after the launch of Bitcoin (the DASH whitepaper is available here). At the time the altcoin ecosystem was quite small and there weren’t nearly as many coins as there are today. Ethereum, for example, wasn’t even launched until 2015.
Two key features set DASH apart from Bitcoin.
1) Fast Transactions
Normally a transaction on the DASH network takes about 2 to 3 minutes to clear. However, DASH allows users to send ultra-fast transactions with a feature called InstantSend.
With InstantSend a transaction bypasses the miners and gets broadcast directly to the masternodes (more information about masternodes in a later section). The masternodes quickly approve the transaction and the user doesn’t have to wait for the miners to process it.
The benefit of InstantSend is speed while the downside is centralization. Because InstantSend relies on a relatively small group of masternodes, it is necessarily more centralized than a normal transaction. This increases the chances that a transaction can be censored.
Assuming that the masternodes are honest though, InstantSend is a useful feature that lets people send extremely fast transactions on DASH.
DASH was one of the first cryptocurrencies to recognize the importance of privacy. In fact, DASH was originally called Darkcoin, in reference to the darknet markets where anonymity is crucial.
Just like users can decide to use InstantSend, DASH transactions can also be sent privately using a feature called PrivateSend. PrivateSend is actually a coin mixer that’s built into the protocol. A coin mixer combines transactions and then sends the coins to different addresses, so that it’s not possible to tell who sent what coins to which address.
What makes PrivateSend interesting is that the mixer is built directly into the DASH protocol. There are coin mixers on Bitcoin as well, but third party services run them. This can be problematic because it’s impossible to know if you can trust the person or organization running the mixer.
One way law enforcement has tracked and caught crypto criminals (mostly darknet market vendors) is by taking over a mixing service and recording all of the transactions that come through it.
Having a built in mixer makes it more difficult for law enforcement to track private transactions happening on DASH. However, the downside is that PrivateSend is optional, so normal transactions on DASH are 100% transparent.
DASH Mining and the DASH Cryptocurrency
DASH has a maximum supply of 18,900,000 coins, although currently just 9.8 million of those coins have actually been mined. Mining will continue on the DASH chain until approximately 2150.
DASH is a Proof of Work (POW) cryptocurrency like Bitcoin and miners secure the network with a X11 hashing algorithm. The average block time on DASH is 2.5 minutes, as compared to 10 minute block times on Bitcoin. More information about DASH mining is available here.
The biggest difference between mining on BTC and DASH, is that DASH miners only receive about half of the block reward. Here is how the block reward is distributed on DASH,
- 45% to the miners
- 45% to the masternodes
- 10% to a development fund to maintain and improve the network
This is very different from Bitcoin, where 100% of the block reward goes to the miners.
The recent economic collapse in Venezuela saw DASH (and Bitcoin) adopted as alternative currencies in the country that has suffered huge inflation. This adoption, which followed heavy strategic marketing by DASH, has spread to countries like Colombia and Argentina, where Venezuelans have migrated in search of economic opportunities. It’s an oft-repeated maxim that cryptocurrency adoption will happen first in countries that really need it, and DASH seems to have twigged onto this idea, as they are currently aiming to continue this adoption in African countries.
The DASH Masternode
DASH uses a masternode system and the Masternodes serve several functions.
- Masternodes approve fast transactions for InstantSend
- Masternodes store a full copy of the DASH blockchain
- Masternodes vote on how to distribute the development fund that is collected from the 10% of the block reward
- Masternodes may also vote on other DASH governance questions, as they arise
The only way to become a masternode is to hold 1,000 DASH. At current market prices this would cost roughly $100,000, no small purchase! However, the ROI can be attractive.
Currently masternodes earn an ROI of about 5%, which is paid out from the 45% of the block reward dedicated to masternodes. More information about DASH masternodes is available in our blog post: Best Proof of Stake Coins 2020 for Easy Passive Income.
The Next Five Years for DASH
The problem with DASH is that even though it’s a longstanding cryptocurrency with decent adoption and a raft of partnerships, it’s trying to compete with Bitcoin. The goal of DASH is to function as a store of value and medium of exchange, which is a difficult use case to compete on.
Bitcoin has proven itself as the world’s most valuable digital store of value, and DASH may struggle to compete if the Bitcoin Lightning Network takes away the edge that DASH has with its lower cost and higher speed.
The decline of Ripple’s XRP due to SEC legal problems may see users flee the sinking ship and move into other alternative payment coins such as DASH, but even here the project will be competing with similar privacy-orientated payment coins such as Zcash and Monero.
DASH has built a good, user-friendly product with its PrivateSend and InstantSend features, but only time will tell if it can retain a significant slice of the crypto pie.
This content is for informational purposes only and is not investment advice. You should consult a qualified licensed advisor before engaging in any transaction.