Digital currency - like Bitcoin, is soaring in popularity as of late. One of the biggest drawbacks of Bitcoin is its inability to provide truly anonymous transactions to it’s users, giving rise to a new breed of altcoins called Anonymous Cryptocurrencies.
Many people assume BTC is anonymous, protecting the identities of the people transacting on the network. This is the main reason why Bitcoin was the payment method of choice on the now shut down Silk Road.
What people failed to understand however, is Bitcoin is actually pseudonymous. This means while the transactions and funds are not tied directly to any individual entity (eg. person or company), all the information itself is made public on the blockchain.
Dash is one of the many altcoins that makes this claim, offering private and anonymous transactions at a lower cost and a faster transaction processing time than BTC can offer.
But there are some questions about this virtual currency’s ability to truly remain anonymous vs. other anonymous alt coins. Let’s find out a bit more about what this digital cash does, how it works, and if it’s the right coin for you to invest in.
This virtual currency was created by Evan Duffield and has been around in various forms since January 2014. Originally released as XCoin (XCO), then a month later renamed to Darkcoin, it’s finally been rebranded to Dash on March 2015 — a play on words for “Digital Cash”.
Evan created this altcoin because when he first came across Bitcoin in 2010. While impressed by the blockchain technology and algorithms behind it, he was disappointed with its slow transaction speed and lack of real privacy.
Evan had a bunch of ideas on how to make Bitcoin anonymous but they all required changes to its core code.
Knowing this would be a hard ask, he decided to use the Bitcoin core code and build his own version of the cryptocurrency, using his ideas to speed up the transaction time and give users the anonymity they wanted. This is what we now know about this altcoin today.
With such attractive features, you may be wondering how this altcoin works. Here’s more information.
Dash has a unique two-tiered structure that differentiates it from how Bitcoin works. One of the issues with BTC is the lack of incentives to run a full node on the network, with 100% of the transaction rewards going to miners.
This virtual currency differs because it provides a 3-way split between what they call Masternodes, Miners and Development Grants.
Let’s break this down so you can see how Dash's blockchain and algorithm works in reality.
Tier One - Regular Nodes and Miners
The first tier of the network is made up of nodes - computers that talk to each other on the network. Nodes are used by Miners to verify transactions and to mint new coins.
Tier Two - Masternodes
The second tier of the network is made up of Masternodes. Masternodes are referred to as “full nodes”, computers that enforce the rules of the network and contain a copy of the full blockchain.
These Masternodes perform two key functions:
Let’s take a quick look at how running a Masternode works and what kind of incentives are offered.
In order to run a Masternode, you need to have 1,000 coins available as collateral. The coins are still freely available to you for spending or using, but if your collateral balance drops below 1,000, then your masternode goes offline and stops receiving rewards.
This collateral requirement is to protect the network as Masternodes have the potential to be manipulated.
By forcing Masternode holders to invest their own coins, it makes no sense for them to attack the network as it becomes expensive to do so.
In other words, they would be destroying their own investment. This investment in the network means Masternode operators are further incentivized to protect the network.
It prompts operators to carefully consider voting on further development and initiatives that can affect the operation of the network.
The system implements a way to incentivize not just the miners (as Bitcoin does), but also Masternode operators to help improve services and transactions speeds.
Currently the rewards for transaction are split as follows:
The 10% Maintenance Fund is a big advantage over other cryptocurrencies (you can find the ones that we have reviewed here) as it removes the dependence on donations for development.
This means the development team can keep innovating and not be held up by lack of funds or held ransom by big miners who are only focused on their profits over improving the network. So you like the look of this altcoin and are interested in investing? Here’s a look at how you can store your cryptocurrency, where to buy, and how to mine it.
You will need a Cryptocurrency Wallet in order to receive, store and make payments with Dash. Here are several options for storing your Dash cryptocurrency coins.
There is an official desktop wallet offered by Dash that includes the Instant Send and Private Send functions. There are third party options available too, like Exodus and Jaxx.
Using your smartphone to store your Dash coins is another popular choice. Some options to consider are Dash Core (iOS only), Coinomi (Android only), and Jaxx (a multi-platform option).
Many enthusiasts use specialized hardware wallets for an extra level of security. Some hardware wallets that support this altcoin include, TREZOR, Ledger Nano S and KeepKey.
Paper wallets (also referred to as cold storage) are a way for you to store your Dash cryptocurrency offline. It takes a little fiddling to setup but if you are super paranoid about being hacked, this could the option for you.
Once you’re comfortable with this digital currency, you’ll probably want to know more about mining it. Here’s more information.
There are two ways to earn Dash - you can either Mine it or you can create a Masternode and use the advanced functions on the network.
Setting up a Masternode requires 1,000 units put up as collateral, which at current exchanges is in excess of $12,000 USD.
The other option is to invest in a mining rig and start mining the virtual currency. But the hardware itself (while potentially less expensive than a Bitcoin mining rig) can be just as expensive as the collateral, depending on how far you want to take it.
If you are just getting started and are budget-conscious, there are several mining cooperatives called pools, which you can join to earn a small percentage to start with.
When you’re ready to take the leap, here’s how you can purchase this virtual currency.
You can buy these altcoins from any of the following exchanges using another crypto like Bitcoin to trade for it or using Fiat Currency like USD.
Just remember, don’t store your cryptocurrency on any exchange for long periods of time. It leaves you open to risk of an exchange failing or possible hacking attempts.
Only keep your coins on an exchange while you are trading and then move them off as soon as possible to your own wallet. Let’s take a closer look at some things to consider before investing.
The future looks promising for Dash. There was some controversy surrounding the coin in how it implemented privacy and instamining when it was first released.
But the currency has grown fairly consistently with a number of improvements on the horizon. Some of the upcoming improvements include:
The push by the development team to make an API that is easy for anyone to start accepting Dash is a step in the right direction. For cryptocurrencies to start getting mainstream acceptance, they need to be user-friendly for the average Joe.
If this altcoin can manage to pull this off, we could very well be seeing “Dash accepted here” signs all over the place in the near future. The final question is, should you invest or not? Here’s what we think.
The upcoming changes slated for early 2018 aim to make it easy for the mainstream user to accept Dash as a form of payment.
If these changes work and increase market adoption rates, Dash could increase in value very quickly.
This altcoin is already one of the most popular and highly traded cryptos on the market, ranked at #8 on CoinMarketCap and beating out competitors like Monero and PIVX.
But be aware of some of the criticism out there regarding Dash and formulate your own decision based on solid research. Just like any investment, don’t put all your eggs in one basket. Make sure you diversify your investment and don’t bet 100% on a single cryptocurrency.
The content of this post is for educational purposes only. Please do your own research and consult a financial professional before making any investment decisions.