Dash is one of the first altcoins created. And even though it resembles Bitcoin in many ways, Dash has some distinct characteristics like encryption algorithms and its original governance system.
The primary focus of Dash coin creation was to support security and privacy, and that’s why it is valued by many. Because of its philosophy, Dash offers unique features you won’t find with any other cryptocurrency.
Want to know what they are? Keep reading.
Exploring the Background of DASH
Dash first appeared in 2014 under the name of Xcoin. After that, it was renamed to Darkcoin in 2015 and later Dash. The word “Dash” is a derivative from joined “digital” and “cash”. From the name, it’s clear that Dash had a big goal of becoming the ultimate cryptocurrency, a universally used alternative to Bitcoin. To be exact, Dash was derived from the Litecoin protocol originally. But Litecoin was also forked from Bitcoin; thus Dash has features of both.
The founder of Dash studied Bitcoin and considered Bitcoin’s insufficient anonymity a drawback of cryptocurrency. With security and privacy in mind, Dash was created.
Dash coins are a cryptocurrency focused on anonymity, and as such, protect users’ data by making the transactions anonymous through its technology.
Dash started to position itself as an open-source cryptocurrency aimed at anonymity, ensuring the speed and security of transactions.
Before 2016, Dash got much criticism because people allegedly used it to perform transactions on the black market. In 2016, the allegations were dropped, and Dash’s community was steadily growing.
Dash shares many similarities with Bitcoin but adds the option of private transactions, meaning that transactions aren’t public.
In-Depth Analysis of Dash
Dash was built on Bitcoin and Litecoin codes, but the low speed of transactions and public transaction history associated with the cryptocurrencies of origin weren’t options for Dash. Dash was created to address the drawbacks of Litecoin and Bitcoin.
But what made Dash popular?
The main reason is, of course, the limited supply and scarcity associated with it. Dash’s cap is $18,9 million. The limited supply always draws in higher demand; from that, digital coins tend to grow in value.
And the main advantage of Dash is its innovation. It holds together tested security measures, privacy novelty, and good technical performance.
Besides, with its governance model, Dash is self-funding due to its stakeholders – masternodes, miners, and treasury.
With all the innovation, Dash has a straightforward objective – to be a digital currency for everyday transactions.
Dash vs. Bitcoin
Dash and Bitcoin have a lot of similarities, as much as they have differences.
Like many other altcoins, Dash resembles Bitcoin in many ways but has its idea of cryptocurrency application.
For example, Dash’s transaction speed is much higher than Bitcoin’s: Bitcoin takes up to 10 minutes to issue one transaction, while Dash takes four seconds. Dash also has a lower transaction fee compared to Bitcoin.
However, Dash and Bitcoin are still similar in a lot of ways.
- Idea. Dash and Bitcoin share similar protocols and the overall concept of cryptocurrency used as a transactional value.
- Decentralization. Dash and Bitcoin are decentralized, as no central authority controls the transactions.
- Limited supply. Dash and Bitcoin have a limited supply: for Bitcoin, it’s 21 million; for Dash – 18,9 million.
- Transaction fee. Dash has a lower transaction fee than Bitcoin.
- Governance mechanism. Bitcoin is governed by the nodes that comprise a blockchain; a Decentralized Autonomous Organization, which consists of Masternodes, governs the Dash project.
- Anonymity. Dash has a PrivateSend protocol that allows all transactions, past or present, to be untraced; Bitcoin has a public transaction history.
- Mining. With Dash mining, 45% goes to Masternodes, an equal share of 45% goes to miners, and 10% goes to maintaining the network; Bitcoin doesn’t have the same structure.
- Transaction speed. Dash has an InstantSend protocol that allows transactions to be issued in a couple of minutes max; large Bitcoin transactions can take up to several days to complete.
- Consensus mechanism. Bitcoin is built on the “pure” PoW consensus mechanism; Dash uses PoW with additional features.
Also interesting: Crypto Tokens vs. Coins: Understanding the Fundamental Difference
Dash’s Unique Design
There’s something unique about how Dash coins are designed. Three aspects differentiating Dash from other cryptocurrencies are Masternodes, PrivateSend, and InstantSend.
One feature, particularly, that separates Dash coins from other crypto is Masternodes. Masternodes facilitate InstantSend and CoinJoin features and make up the Decentralized Autonomous Organization that governs Dash.
InstantSend ensures the high speed of transactions, while CoinJoin adds extra security to them. PrivateSend, in turn, ensures that transactions are anonymous.
Masternodes refer to users who have more than 1000 Dash coins. Such users have more influence than regular users and can utilize certain functions of the Dash’s blockchain and govern the network. Masternodes exist along with the traditional Bitcoin Proof-of-Work mechanism and create a layered network structure. Dash’s PoW works like Bitcoins: miners have to solve mathematical equations to add new blocks to the blockchain.
Dash utilizes the X11 mining algorithm, which makes mining quicker and more efficient. X11 is a hashing mechanism that transforms data to fixed-size output. X11 algorithm proves more secure than, for example, Scrypt and more energy-efficient.
Besides, Dash has a strong community supporting the cryptocurrency. The community’s effort added Dash as a payment method and streamlined improvements in Dash’s overall design.
Governance Mechanisms in Dash
Dash, like many other cryptocurrencies, is decentralized. However, it is governed by a Decentralized Autonomous Organization. DAO, in turn, consists of Masternodes. Masternodes perform the same functions as other nodes, for example, representing the copy of the blockchain and issuing transactions. Dash also has conventional nodes and miners. The difference between traditional nodes and Masternodes is that anyone with more than 1,000 Dash coins can run Masternode.
Masternodes also function as regular nodes and support the network by providing digital transactions through PrivateSend and InstantSend.
Masternodes allow its owners to put proposals for updates or changes forward. Such proposals can be submitted directly through the blockchain. The 10% mentioned that go back to Dash are used to fund the elections. Here, only users who run Masternodes can participate in polls. Dash has more than 4,000 Masternodes, meaning that its P2P network is one of the largest in the world.
Bitcoin Magazine called the project for the creation of DAO the “largest crowdfunding project in human history,” raising $100 million in two days. According to Dash, it was initiated to overcome “one of the greatest challenges of building a cryptocurrency platform – ensuring the creation of a decentralized system of governance to manage, fund, maintain and expand the project”.
Consensus Mechanism of Dash
Dash is mined through a Proof-of-Work consensus mechanism with an additional encryption algorithm by CoinJoin.
In Dash’s PoW, both traditional nodes’ and Masternodes’ runners can get rewards for mining. On the Dash blockchain, smart contracts are processed through Masternodes. Mining rewards are split between Masternodes (45%), miners (45%), and Dash itself (10%). The mentioned 10% goes to funding the projects that get the biggest number of votes.
Having Masternodes also allows Dash to issue other kinds of transactions, like IntantSend and PrivateSend. With InstantSend, regular PoW mining is unnecessary; this feature requires confirmation from Masternodes.
Evaluating the Pros and Cons of Dash
Dash has certain advantages over conventional fiat operations and other cryptocurrencies. The main ones are:
- Advanced security and privacy features
- A decentralized governance system
- Low transaction fees
- High transaction speed
Dash focuses on increased security and privacy, thus offering users features to reflect that. Each Dash transaction is heavily encrypted, so no one can trace it back to a user. Dash also provides features for users who value anonymity. A unique PrivateSend protocol mixes multiple transactions together, making it harder to trace them to the user who has issued them.
Dash also has a unique approach to decentralization. Other cryptocurrencies are typically run by developers, and Dash’s governance system revolves around its community. Such a system was created to ensure that decisions on the further trajectory of Dash’s development were made following democratic values, where everybody gets a vote.
Dash’s transaction speed makes it one of the fastest coins on the market, with transactions that can be confirmed within seconds with InstantSend.
Dash also offers lower transaction fees compared to other cryptocurrencies, which is an appealing feature.
However, as with anything, Dash has disadvantages, one being the adoption rate. Even though several significant retailers accept Dash, its adoption rate is relatively low compared to other cryptocurrencies.
Another aspect that can be considered a disadvantage is Dash’s volatility. The value of the Dash coin tends to fluctuate, making it an unreliable investment for some.
There are also stereotypes around Dash’s application. Since it offers extended privacy features, there’s an assumption that Dash coin is not legal or is used for illegal activity.
The Current State of the DASH Cryptocurrency
Most exchanges, including Binance, Coinbase, etc., support Dash. Different Dash wallets, including desktop, mobile, and hardware, are also available.
Even though Dash resembles Bitcoin in many ways, it doesn’t stop it from being among the 30 leading cryptocurrencies on the market, with a market capitalization close to $1 billion.
There are currently 10.7 million Dash coins in the supply, meaning that over 50% of the 18,9 million cap has already been mined.
At the end of 2021, the price of Dash coin had risen a couple of times, followed by a downward trend. In 2023, the Dash’s price is $26,88, with some analysts saying it can increase to $28,7 by the end of the year. How good of an investment Dash is a question with multiple answers.