In 2012, the developer Evan Duffield, who spent several years studying Bitcoin, offered 10 ways to increase anonymity of Bitcoin transactions, but the cryptocurrency team rejected his ideas to avoid breaking the principle of immutability of the protocol code. After that, Duffield began to develop his own cryptocurrency – so began the history of the cryptocurrency DASH. Compared to Bitcoin, it has faster confirmation of transactions, no problems with scalability, and DASH has no problems integrating into the Bitcoin ecosystem (the code of both cryptocurrencies is similar).
In the past, this cryptocurrency was known as DarkCoin and XCoin. Although it was launched in 2014, the name DASH did not appear until 2015.
The popularity of the coin is evidenced by statistics from the official website (as of Q4 2021):
- payment volume – more than $4.48 billion;
- the network processes more than 8.220 transactions per day;
- more than 54.000 users are active per day.
Its capitalization is not bad either – as of February 2022, it is over $1.0 billion. In the coinmarketcap.com rating, the cryptocurrency DASH takes 79th place.
The peculiarity of DASH is that in addition to the standard mining for token mining, the second level, consisting of several thousand nodes (nodes), is also implemented. The second layer is needed to increase privacy, and it also provides instant transactions and distributed network management. Part of the funds mined on the second level goes to the reserve, and the cryptocurrency DASH refers to self-financing. The formation of the reserve is one of the ways to raise funds for the development of the project.
What are Dash masternodes
A masternode is a server operating in a P2P network. It is thanks to masternodes in Dash that high transaction confirmation rates, anonymity and decentralized management are ensured. Also the 2-tier structure provides network security and budget system operation.
Every node owning at least 1,000 Dash cryptocurrency tokens can become a Masternode. In addition to the reward from the network, its owner receives the right to vote. Each Masternode = 1 vote, votes are arranged for vital issues. As for profits, master-node owners receive 45% of the blockchain reward.
At the time of this review, there are 4,390 nodes in the world. Approximately a quarter of the total is in the United States.
The security of the system is achieved by a high entry threshold, since not every node can become a master node, for example:
- If attackers were able to seize control of 1,000 masternodes out of 4,400, the chance of success would be less than 0.5%.
- At the current token cost of $100, an attempt to “buy” the right number of nodes is doomed to fail. In this example, more than $100 million would be needed and that would give a less than half a percent chance of success. That said, the coins would have skyrocketed in price in the event of a mass purchase, so the amount could have exceeded a billion dollars. At such a cost, the point of the attack is lost.
As for the profit from owning a master node, at the current rate, you can earn about $12,000 per year. The annual income is affected by the annual planned 7% profit reduction and the DASH cryptocurrency exchange rate.
When a new Masternode starts, a message is sent to the network containing balance information (1,000 DASH cryptocurrency tokens), IP, a set of keys and a number of other data. Once added to the network, the master node sends messages every 15 minutes confirming that it is up and running.
In this case, 1,000 DASH are not blocked or frozen. The owner of the node can withdraw funds at any time, but it ceases to be a masternode, and thus loses 45% of the block reward.
This technology is a modified version of the CoinJoin methodology. Any DASH cryptocurrency user can turn on the mixing function in his wallet, the source of funds will be impossible to determine after that.
To better understand the principle of PrivateSend, let’s understand what processes take place:
- First, the transaction is broken down into denominations. The accepted denominations here are 0.001, 0.01, 0.1, 1.0 and 10 DASH. Full analogy with fiat currency.
- Next, the wallet sends a request to the masternodes, telling them that you are interested in mixing a certain amount. Neither your IP nor any identifying data is sent to the node.
- Then it takes 2 users to appear to mix the same amount. The master node then instructs the wallets of the 3 users so that they pay the specified denomination to another address, but to themselves. As a result, the cryptocurrency does not leave your wallet, but an outside observer will see an incomprehensible chain of transactions.
- This sequence is repeated with each denomination, the mixing cycle is called a round, their number can be from 1 to 16. The number of mixing cycles is set by the user in the crypto wallet settings.
- Mixing process can take more than one hour. So if you plan to use this function, use it beforehand.
- Keep in mind that if you don’t specify that you want to use anonymous funds (mixed), then the wallet will send both regular DASH and those that went through mixing to the specified address.
You will have to pay a fee for using this feature:
- A commission equal to that of a regular transaction is paid when the amount is split into denominations.
- Mixing – a commission of 0.001 DASH will be charged for interrupting the transaction. Statistically, on average, the same fee is paid for every 10th mixing.
- At the stage of spending mixed funds is written off the usual commission and the missing amount for rounding to the minimum denomination.
Overall, the feature is useful. What is convenient is that you are not forced to use it and pay higher commissions. If you need anonymity you activate the appropriate option in account settings, if not – use DASH as usual crypto.
This name means instant payments service, that’s what makes DASH different from most of the other cryptocurrencies. If the crypto doesn’t use InstantSend, there are two options:
- Wait for the network to accumulate the right number of confirmations. At times of high network load, the waiting time can be up to 10-15 minutes or even more. At the peak of crypto’s popularity, people waited hours for their transfers to be confirmed, just like in Bitcoin.
- Work with zero confirmation. This scheme is acceptable only in cases where the network is not the only guarantee of payment. It speeds up the transaction, but it cannot be a way out of the situation, as it works only in particular cases.
InstantSend in DASH cryptocurrency is made possible by having a second layer with several thousand masternodes. When using this feature:
- A quorum of 10 random master nodes is selected.
- The quorum analyzes the transaction’s inputs. In order for it to be considered valid, a majority of nodes must decide that the inputs have more than 6 confirmations. In this case, the transaction inputs are blocked by the nodes until the crypto transfer is confirmed.
- The transaction is validated in the next 6 blocks, after which the inputs are unblocked and can be used for other transactions. If the number of inputs exceeds 4, a higher fee is charged.
For such transactions, InstantSend must be checked in the wallet and the receiving wallet must also know that this type of transfer is being used. Otherwise the transaction will be passed as usual.
InstantSend-transfers are almost 100% protected against double spending. To write off funds twice it is necessary to rewrite at least 24 closest blocks. Given the scale of the network, this is extremely problematic. If intruders try to do something like that, it will immediately become clear that a 51% attack is in progress.
In conclusion, let’s compare DASH with Bitcoin and Ethereum:
|Author||Satoshi Nakamoto||Vitalik Buterin||Evan Duffield|
|Block mining time, min.||10||0.23||2.62|
|Transaction speed, min.||Few minutes||Less than a minute||Instant|
|Privacy||Under a nickname||Under a nickname||PrivateSend provides a high level of anonymity|
|Innovation||First successful cryptocurrency||Successful platform for smart contracts||Implementation of Masternodes, PrivateSend, InstantSend|