It has been 15 years since the first cryptocurrency, Bitcoin, was created. A lot has changed in this market, new coins and platforms have appeared, offering users new opportunities. Nevertheless, their program code is based on the Bitcoin protocol.
The goal of developers who create chains based on the code of Bitcoin and other well-known networks is to improve their functionality by adding new options. One of the key problems of the Bitcoin network is rather slow transaction processing.
The solution to this problem may be to change the structure of the chain and use a different consensus mechanism. This is exactly the path that the creators of the Dash chain took. You can learn more about other developments in the field of digital currencies by reading the article "Cryptocurrency rankings."
Bitcoin Chain Problems
Bitcoin is the first chain technology based on blockchain. The emergence of this technology revolutionized finance and opened new possibilities for transferring and storing currencies, as well as generating revenue.
In blockchain, all transactions are recorded in blocks, which are later combined into a chain, hence the name blockchain. However, before a record is entered into the blockchain, the data must be verified. This is done by miners who have special computing power to perform such actions.
Once the transaction is verified and recorded in the blockchain by one of the miners, the chain is changed, but the data on all nodes of the network must be coordinated with each other. This is accomplished using a consensus algorithm.
The Bitcoin chain uses the PoW mechanism, the very first and most reliable protocol. This means that the miner who first solves the problem is authorized to add another block to the network. This process requires a huge amount of energy and has been much frowned upon lately.
Two key issues that Bitcoin suffers from are slow processing and a lack of privacy. Each transaction in this network is verified by miners and then written into blocks. This takes quite a long time—about 10 minutes, and sometimes more, resulting in a queue.
At the same time, information about the address from which the currency was sent, the amount of the transaction, as well as all previous transactions with this coin, is publicly available.
Nevertheless, there is no work on improving this situation in this network. However, the code of the Bitcoin blockchain is open, which is used by many developers who use it to create something new, but with some additions and improvements.
What is DASH
The name Dash comes from the combination of two words in English, "Digital cash", which literally translates as electronic money. The creators of this currency intended not just to create another cryptocurrency, they wanted to emphasize its practical application in real life.
The Dash platform is based on the code of another digital currency, Lightcoin, which is a fork of Bitcoin. Forking means making changes to the blockchain code that allow the system to be split into two parts, meaning a new network in addition to the existing one.
Dash is referred to as a faster and more anonymous version of Bitcoin. This is due to the special two-tier structure of the chain, which involves not only miners but also masternodes, and special servers that perform their functions in this chain. We will talk about them in more detail later.
This structure makes it possible to conduct transactions in the normal way, as in any other blockchain network. It also allows transactions to be made anonymously using the PrivateSend function and to be made instantly using the InstantSend option. These functions are optional and are available for an additional fee.
To ensure the confidentiality of transactions, each amount that is sent by one user to another is divided into several parts. Then, these parts are mixed with transactions from other users, after which the required amount is collected in the recipient's wallet.
In addition, transaction fees in the Dash chain are much lower than in the Bitcoin or Ethereum networks, where they are about $10. In this case, the average commission is about $0.0013, which makes this network even more attractive for users.
History of creation
The project appeared in 2014. However, it was not immediately called Dash. Initially, its name was Xcoin, then it was renamed Darkcoin. However, after the currency became associated with operations in the darknet, it was decided to get rid of this name. So, the currency and the platform of the same name were renamed Dash.
The main developer of this project is a programmer from the United States, Evan Duffield. As already mentioned, the code of this network is based on the code of Bitcoin, which has been slightly changed and improved. The main idea was to boost the speed of transactions and their confidentiality.
The developer of Dash started thinking about how to upgrade the Bitcoin network back in 2012. However, he realized that his ideas were unlikely to be accepted by the creators of Bitcoin, as they believed that it was impossible to make changes to the original protocol of this chain. Therefore, Duffield decided to create his digital currency.
There is an interesting fact about the project's currency. When the currency was called Xcoin due to a mistake made in the code, literally 1.9 million coins were mined in one day, which is about 10% of the total supply. The developer wanted to relaunch the currency, but the community did not support him.
The project is headed by Dash Core Group, Inc., which includes 34 employees from different countries. The team is constantly working on improving the platform. For this purpose, a certain amount is allocated, which is 10% of all commissions for mining, which goes into a special fund.
Thus, the platform can finance itself and does not depend on investors or third-party users. By voting, the participants decide what the funds will be spent on. In addition, they can also take initiatives for the development of the platform.
How DASH works
We have already touched on the topic of the structure of the Dash blockchain and its own currency, Dash cryptocurrency. Let's talk in more detail about how this network is organized and how it functions.
So, at the heart of the considered chain is a hybrid consensus algorithm, which is called Proof-of-Activity. It contains elements of both PoW, as in the Bitcoin chain, and PoS, which is used in many modern blockchains.
The PoW element in this structure is used to mine new coins. The PoS, which consists of a network of validators (called masternodes), is responsible for verifying transactions. Payment for the work of all participants in the chain is distributed as follows:
- 45% is given to miners;
- 45% is allocated to validators;
- 10% is allocated for the development of the platform, as we have already mentioned above.
As for mining, this process takes place on ASIC devices. The project involves a whole ASIC farm. In the process of mining, the devices solve complex tasks that are set by the X11 algorithm. This algorithm was developed by Evan Duffield to provide additional network security.
However, the more interesting component of this platform is the masternodes. Unlike other platforms that use a similar consensus algorithm, these nodes have a wider range of powers and capabilities in the Dash network.
Before receiving the status of a masternode, its owner must have at least 1,000 Dash coins. Thanks to masternodes in the chain, it is possible to implement InstantSend and PrivateSend functions. We will talk more about these services in the next section.
What makes DASH unique
Several key features make the blockchain in question and its service currency, Dash cryptocurrency, unique. One such feature is that the developers have successfully brought to life the concept of using cryptocurrency as a means of payment.
Dash currency can be used to make household payments or purchases. You can buy it on various cryptocurrency exchanges and then use it for settlements. On the official website of the platform, you can find a list of organizations around the world that accept Dash.
Already now, with the help of this currency in some countries, you can pay for utilities, bills in cafes, airline tickets, and other goods and services. This coin is becoming especially popular in countries where there are problems with the national currency, as happened in 2018 in Venezuela, when Dash replaced its currency.
One more unique feature of this chain is the InstantSend feature, which allows for instant transactions. This is achieved thanks to masternodes, which process transactions without waiting for the formation of a new block in the chain.
When this option is applied, the transaction is checked by ten random masternodes, which takes seconds. Subsequently, the transaction is also added to the block like all others. A separate, albeit small, fee is charged for using this service.
Anonymity is one of the key features of the Dash network. It is achieved through the PrivateSend function. For its realization, the CoinJoin transaction mixing protocol is used.
To make transactions anonymous, the funds sent by one user must be mixed with the coins sent by other users. This process takes place in several rounds (up to 8), and the recipient receives the required amount, but as if with "other bills".
DASH cryptocurrency
We have already mentioned the currency of the chain considered in this article. It is Dash. It performs several important functions in this network. Let's analyze them in more detail:
- Pay commissions for transactions in the Dash chain;
- Pay rewards to miners for generating new blocks in the network;
- Create masternodes: each masternode owner is required to have at least 1,000 Dash in their account;
- Manage the platform: coin holders can participate in the management of the platform through voting and making their suggestions to improve the platform;
- Use for everyday settlements: payment for goods and services (in those states where this currency is recognized as a means of payment).
The main feature of this digital currency is the possibility of its use in everyday life. Creators put this idea in the final version of the name Dash, "digital cash".
The value of this coin has experienced quite strong fluctuations during its existence. So, when the coin first appeared, its price was less than $1. However, demand was gradually rising, thus boosting the currency. By December 2017, the Dash coin reached its peak of $1,540, after which the decline began.
At the time of writing this article, the price of one coin was slightly below $30. Total issuance is limited to 18.9 million units, with more than 60% of the coins in circulation. New coins are mined. However, the difficulty of mining is gradually increasing, while the reward for mining is decreasing by 7.14% every year.
DASH cryptocurrency for dummies
The digital currency considered in this article, right from the moment of its appearance, attracted quite a lot of attention and still has not given up its position. In addition to the fact that Dash cryptocurrency can be used to make payments and purchases, you can also earn on it.
There are two main opportunities to generate income from digital currencies:
- Trading, that is, to make speculative trades and earn thanks to price fluctuations in a fairly short time frame.
- Investing, i.e., long-term investment in the asset with the expectation of increasing its value in the long term.
Users who prefer to wait quickly and want to see their profits in the short term often engage in trading. Digital currencies are perfect assets for trading, as their price can change by tens of percent even within a day.
Moreover, you can earn from trading not only on the growth of value but also on its fall. A trader just needs to open either a long trade to buy an asset in the expectation of further price growth or a short one to sell it in the expectation of a fall in value.
To analyze the market situation and select the right moment to open a position, traders use charts of cryptocurrencies, which are available on exchanges and other websites, as well as other tools of technical analysis. However, the higher the price fluctuations are, the higher the risks will be. This must be taken into account.
Investments are considered a more conservative way to earn money. Nevertheless, when choosing a cryptocurrency to invest in, you need to conduct a thorough analysis. Select such assets that can demonstrate growth in the long term.
Moreover, it is desirable to buy coins at the moment of a decline at a more favorable price. Keep them for several months or years until their value increases to the expected figure. During this time, these coins are "frozen" and cannot be used for other purposes, and the profit can be seen only after the expiration of the investment period.
Advantages and disadvantages
Like any other blockchain, the network in question and its currency, Dash, have both positive and negative sides. Let's analyze them in more detail in this section.
So, the advantages of the considered cryptocurrency include:
- Two-level structure of the blockchain. It makes it possible to distribute responsibilities and make the chain more functional. A unique feature of Dash are the masternodes that ensure the functioning of the platform;
- InstantSend option makes it possible to conduct transactions instantly;
- PrivateSend option allows users to conduct transactions anonymously thanks to a special technology;
- High speed of transactions. Even without using the InstantSend function, the processing of transactions in this chain takes much less time than in the Bitcoin network, for example;
- Low commissions. The cost of commissions is ten times lower than on other, more famous networks. At the same time, users have to pay extra for the use of additional features, such as InstantSend and PrivateSend;
- Management system. All holders of Dash coins can participate in the management of the platform by voting, as well as make their proposals for the further development of the platform
The main disadvantages of this platform are the following:
- Lack of centralization. There is a management company that works on improving the platform. This, in some ways, contradicts the very idea of blockchain technology, decentralization;
- The high cost of creating a node. To become the masternode of this chain, you need to purchase 1,000 Dash coins. This is a rather large amount of money, which can be an obstacle to the emergence of new nodes;
- The anonymity of transactions can play into the hands of criminals. Such platforms attract scammers and other malicious people who want to make illegal transactions. In addition, it is easy to hide such transactions and not pay taxes on them.
Prospects
Given that the concept of this coin is based on integration into people's daily lives, making payments and purchases in the real world, we can talk about the great future of this currency.
With instant transactions and anonymous transfers already successfully implemented online, it allows the platform to count on the fact that this chain and its currency can be used in everyday life for fast and convenient payments.
Dash currency has already repeatedly demonstrated growth of 100%–200% and, in some periods, of several 1,000%. However, these figures could not be maintained for a long period of time. In such a situation, it is possible to consider this coin not for long-term investment, but for trading.
Nevertheless, it is necessary to realize that all digital currencies are related to each other to some extent. A decline in the value of Bitcoin and other key coins is immediately reflected in the price of other cryptocurrencies. Therefore, the value of Dash can show both significant growth and a powerful fall.
It is quite possible that the favorable time, when the currency was rapidly growing, has already passed. In the first years of its existence, the value of this asset increased rapidly thanks to the fact that the developers were offered new options that previously did not exist in this market.
However, a lot of time has passed since the appearance of this coin, and every day there are new, more progressive platforms that offer even more tempting conditions to their potential customers. Therefore, Dash still has to fight for its position.
Conclusion
In this article, we have looked at the key features of the Dash platform and its own currency. Thanks to them, this coin has already become a means of payment in some countries. It can be used by people in their daily lives.
The platform has a unique two-tier structure that consists of miners and masternodes. The first ones mine new coins, while the latter ensures the functioning of the chain and the implementation of instant and anonymous payment functions.
The InstantSend option allows instant transactions that are verified by random masternodes and do not wait for a new block to be added. The PrivateSend option allows transactions to be made anonymously thanks to a special mechanism for mixing transactions from different users.
To become the owner of a masternode, a user needs to purchase and keep 1,000 Dash coins in their wallet, which is quite a large amount and a barrier for some users. At the same time, coin holders can participate in managing the further development of the platform by voting and making their suggestions.
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