The rapidly proliferating cryptocurrency ecosystem has brought its own set of problems of choice for investors and traders. There are coins that claim to be true inheritors of bitcoin founder Satoshi Nakamoto’s vision. There are privacy-focused coins.

And there’s Dash.

Launched in 2014, Dash was originally known as Darkcoin and was designed to ensure user privacy and anonymity. In fact, the cryptocurrency’s whitepaper, co-authored by Evan Duffield and Daniel Diaz, describes it as “the first privacy-centric cryptographic currency” based on Nakamoto’s work.

While it still features strong encryption features, Dash has since recast its ambitions. The cryptocurrency now aims to become a medium for daily transactions. “Dash is Digital Cash you can spend anywhere,” its website boldly proclaims.

The shift in Dash’s vision has served it well. As of this writing, it is the world’s 12th most valuable cryptocurrency. In 2017, its price jumped by more than 8,000% amid a sea of rising valuations for cryptocurrencies.


How Is Dash Different From Bitcoin?

The main difference between Dash and bitcoin lies in the algorithm used by them to mine coins. Dash uses X11 algorithm, which is a modification of the Proof of Stake algorithm. It also uses Conjoin mixing to scramble transactions and make privacy possible on its blockchain. On the other hand, bitcoin uses a Proof of Work algorithm.

Besides this, there are other points of difference between the two cryptocurrencies.

For starters, both have different systems for handling transactions. Transactions on bitcoin’s blockchain need to be validated by all nodes within a network. The process, which is designed to ensure consensus without authority, requires substantial investment infrastructure for full nodes or nodes dedicated to mining. In this system, bitcoin miners running full nodes commit to increasing amounts of time and money to ensure optimal operations. With the scaling of bitcoin’s network, this becomes an impossible task.

As recent events have indicated, the process is time-consuming and fails to prevent clogging, as slow processing results in a backlog of transactions within bitcoin’s memory pool. In turn, this can lead to high transaction fees and make bitcoin unsuitable as a cryptocurrency for daily transactions.

Dash has used economic incentive as a starting point and instituted a system of Masternodes to simplify the verification and validation of transactions. Masternodes are essentially full nodes with a starting stake (or, a “bond of collateral” as it is described in Dash’s whitepaper) of 1,000 DASH in their systems. “This allows the users to pay for the services and earn a return on their investment,” the cryptocurrency’s co-founders write in their whitepaper.

It also solves scalability problems for transactions. This is because they reduce the number of nodes required to successfully approve a transaction to a manageable number. They are responsible for approving transactions from the miner network and providing services, such as payment and privacy, to the Dash network.

As of Feb. 16, there were 4,719 Masternodes in Dash’s network. That figure was an increase from a count of 4,510 Masternodes in December 2017. The increase in Masternodes occurred despite a precipitous decline in Dash prices from $1,600 from the start of this year to $388.

The second innovation within Dash’s ecosystem lies in its governance model. Bitcoin and Litecoin, two cryptocurrencies with similar aspirations as Dash, grew out of academic institutions. To a large degree, future development of these cryptocurrencies is dependent on largesse from these institutions.

Dash has pioneered a self-funding model by splitting block rewards between three stakeholders – Masternodes, Miners, and Treasury. The first two get a 45% share each. The 10% share accruing to the Treasury is used to finance future development projects at Dash. Masternodes play an important role here as well: their votes determine future development directions for the cryptocurrency.


Does Dash Have Competitors?

Yes. Litecoin and Bitcoin Cash both have ambitions to become a medium for daily transactions. Litecoin’s price spiked in 2017 after Steam, a popular gaming platform, announced plans to replace bitcoin on its platform with Litecoin.

With the introduction of Lightning Network on its platform, bitcoin itself may become a competitor to Dash. But Dash has taken a head start over competitors.



Source: investopedia 

Image Source: bitcoinist

Load More By Robert Zackman
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