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Crypto 101: An Introduction to Dash (DASH)

Crypto 101: An Introduction to Dash (DASH)

Few cryptocurrencies have reinvented themselves as successfully as Dash (DASH). Launched in 2014 by Evan Duffield and Daniel Diaz, DASH began life as Darkcoin which had a special focus on privacy.

If you think about privacy-focused cryptocurrencies today, Monero or Zcash will most likely spring to mind. That is interesting because it testifies to the reimagination DASH has undertaken, from a privacy-centric crypto to the definitive payments solution on the blockchain.

More specifically, DASH claims to be “Digital Cash you can spend anywhere.” We will look into the accuracy of this statement later, but for now, it’s worth noting the success of this veteran cryptocurrency. Over the last four years, DASH has established itself among the top twenty cryptos, garnering plenty of good-will from the community. That is why personalities like Amanda B Johnson are turning to DASH and helping to spread the word.

This turn of events is perhaps unsurprising because modern-day DASH has many of the qualities which first attracted people to bitcoin.

  1. It is electronic cash which can be spent easily and almost anywhere
  2. It allows users to stay anonymous
  3. It’s open source and peer-to-peer

Understanding DASH’s value proposition

Now that we have a basic understanding of what DASH is and where it comes from, it’s time to look at what makes this cryptocurrency so special. DASH is one of the most innovative projects in the crypto-space because it boasts a raft of interesting features.

Perhaps the most well known, are the InstantSend and PrivateSend features, but Sporks, Dark Gravity Waves, and special Governance are equally as compelling. Let’s look into these now.

Understanding PrivateSend

PrivateSend does pretty much what it says on the tin. It allows you to obfuscate the origins of funds. As is the case with most cryptos, the contents of your DASH wallet is comprised of various inputs. The PrivateSend feature mixes your inputs with the inputs of two other people, similarly to Monero’s ring signature solution.

Initiating your first PrivateSend is quite trivial and consists of five basic steps. First, your transaction is broken into standardized denominations, which are typically 0.01, 0.1, 1 or 10 DASH. Then, your DASH wallet communicates your now broken down transaction to special nodes unique to the DASH network called masternodes.

Once the masternode receives two additional transfers the mixing begins. Ingeniously, your wallet then pays the mixed transaction into a change address. This process is repeated multiple times to ensure that a high level of privacy is reached.

The final step simply involves making a payment. The previous measures ensure that your coins are already anonymized so you are able to spend quickly and efficiently.

Understanding InstantSend

If you have been around the crypto scene for a while, you will know how important transaction speed is to the entire ecosystem.

I should clarify at this point that most crypto payments are theoretically instant, but are unconfirmed. This means that a bitcoin transaction for example can be cancelled as long as it hasn’t been confirmed on the blockchain.

A confirmation on the bitcoin blockchain is meant to take around 10 minutes, and six confirmations are used as the standard for an accepted transaction. This means that users need to wait at least an hour before a payment can be accepted as immutable.

Using DASH’s InstantSpend however, users can enjoy instant, confirmed transactions due to an innovative new way of finding consensus. More specifically, DASH uses a secondary layer filled with masternodes ten of which form a quorum to check if a transaction is legitimate or not. If at least six out of the ten masternodes agree, the transaction is accepted as legitimate.

This represents an interesting new take on the Proof-of-Stake consensus model which is gaining in popularity.

Understanding DASH’s Governance

Governance is a topic which is often overlooked because people naturally gravitate towards the technology stack and the value of the coins. This lackadaisical approach towards such a crucial topic has caused many significant issues such as the now infamous war between SegWit and Bitcoin Unlimited.

DASH, on the other hand, has taken a far more proactive stance, making governance once of its key features.

More specifically, the team behind DASH has implemented a Decentralized Governance by Blockchain (DGBB), which shares ideological traits with ethereum’s DAO experiment.

Perhaps the most important governance problem to figure out, is how to make the project  financially stable. As Amanda B. Johnson puts it in this video, DASH is essentially offering Money-as-a-Service, and as such needs a way to fund that service.

In order to do just that, DASH splits the block reward into three parts. Unlike almost all other cryptos, only 45% of the reward is paid out to the miners, while another 45% is given to the masternodes, and the final 10% is paid into the Treasury.

The Treasury is designed to give the DASH network the ability to function as a decentralized organization. More specifically, DASH stakeholders can make proposals as to what the network should prioritize. Members can then vote on these proposals, meaning that a roadmap can be planned in a democratic manner. The project which receives the most votes receives the money collected in the Treasury.

This is no paltry sum, with the current allocated budget for the next project valued at roughly $230,000 or ~1,100 DASH. By allocating a fraction of the block reward to the treasury, DASH has found a way to allow democratic participation by stakeholders and give the network financial clout to execute on decisions.

Understanding mining on the DASH network

Cryptocurrency mining (see our guide for more info) refers to the process of solving mathematical puzzles as a way of securing blocks on the blockchain.

In order to compensate miners for expending the resources necessary to solve these puzzles, a block reward is paid out for every block of transactions which is successfully verified and added to the blockchain.

In DASH’s case, a block is confirmed every 2.5 minutes, and miners currently earn around 3.35 DASH per block (~$688). Interestingly, core developer Evan Duffield created a new hashing algorithm called x11 specifically for DASH.

X11 has a number of key benefits but was originally designed to aid the decentralization of the network. More specifically x11 uses 11 different hashes which makes it much harder for third parties to create ASICs (Application-specific integrated circuit), – specialized hardware designed to mine blocks.

As can be seen by the current hashrate distribution of bitcoin, ASICs typically cause the centralization of computing power and gives small groups of miners a disproportionate amount of power to influence the entire network (more on that here).

By implementing the x11 hash algorithm, DASH managed to avoid this level of centralization, although specially configured ASICs are now hitting the market, such as the Antminer D3.

Understanding Dark Gravity Wave

A key feature that underpins mining is referred to as the difficulty. In order to understand this concept we first need to look at the dynamic environment in which all blockchains operate.

As you can imagine, the hashrate of any given network is in constant flux. Miners go offline and new ones join the network on a daily basis, meaning that the total hashrate of the network increases and decreases all the time.

In order for blockchain’s to keep running, it is crucial that blocks be mined at a predetermined and predictable time. DASH blocks are mined every 2.5 minutes, and this should stay the same whether the network boasts a million miners or only one.

The difficulty of the mathematical puzzles which are required in order to mine, must change dynamically in accordance with the hashrate of the network. To do this accurately and efficiently, DASH recalibrates the difficulty after every block. This makes the network more powerful because the difficulty is far more in sync with the network hashrate than most other blockchains.

In Bitcoin’s case, the difficulty changes only after 2016 blocks, meaning that there is a significant lag in terms of the synchronization of the network hashrate with the difficulty algorithm.

Understanding DASH evolution

Last but by no means least, we should discuss payments from the perspective of both consumers and merchants.

For merchants, DASH offers a plethora of payment processors which integrate with almost all popular eCommerce content management systems. Using GoCoin for example, Shopify sellers can easily accept DASH in their stores. Similarly, CoinPayments allows WooCommerce, ZenCart and Prestashop users to accept DASH with minimal fees.

From a point of sale perspective DASH also offers impressive usability, with over 12 providers to choose from. You can check out what accepting DASH in your coffee shop would look like here.

As is to be expected, consumers enjoy a similarly impressive user experience, especially when using debit cards. Wirex, Shakepay and Paycent are just a few providers offering consumer debit cards, which can be charged using DASH.

These debit cards can be used to withdraw cash from an ATM, pay online or at any point of sale where debit cards are accepted, making DASH very easy to spend for consumers.

Finally, it’s worth talking about DASH evolution which promises to overcome one of the biggest hurdles for usability in crypto – the alphanumerical wallet addresses. Instead, DASH users will be able to generate usernames, like Twitter handles, which can be used to accept and send payments to others. This feature is still being tested but you can watch the first demo here.

Conclusion

Through its impressive technology stack and compelling governance model, DASH has managed to carve out a significant place in the cryptocurrency landscape.

Finally, recent partnerships with FanDuel and Subway give observers further cause for optimizing and make it one of the most intriguing projects to follow this year.

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