An in-depth analysis of Dash Cryptocurrency

This post is going to be a full review and analysis of the dash cryptocurrency, its strengths and weaknesses.

Disclaimer

Before I begin I would like to state that this post is not intended to be biased however I do own a small amount of Dash (3.26 dash to be more precise). I invested as a result of my research.

Introduction to Dash

Dash is a Cryptocurrency that is aiming for mass market adoption as a digital replacement for cash used in day to day transactions. They want to replace the fiat we spend.

Dash could also become a strong player in the remittances market as the currency used for sending payments abroad will be the one with the greatest accessibility, ease of use and mindshare. These are the same features needed for a cash replacement so without any extra effort they are working towards both.

Dash is not a privacy focussed coin, although it began life that way, it has evolved in its goals and vision. You can see balances of any wallet and by default transactions are not anonymous as this is not the core goal of Dash (a common misconception).

To understand dash you must move beyond what it was originally for to what it is currently trying to achieve as the project has changed and grown considerably.

How it functions

Dash is a two tier proof of work based blockchain which uses the x11 protocol and has a 1mb block size. The block time is 150 seconds which makes for very quick confirmations on transactions. The max coin supply is 17.6 million and it will take aprroximately 100 years for all coins to be in circulation, at the time of writing this 7.5 million are in circulation. The block reward is split three different ways, 45% to the miner, 45% to the masternodes and 10% to the treasury.

On top of the blockchain there is network of ‘masternodes’ which provide additional services called instant send and private send. These nodes require 1000 dash to set up and in return you get voting rights, 45% of the block reward and transaction fees from the instant send and private send services you facilitate. Governance is done through the masternodes and this enables very fast decisions to be made, unlike with other blockchains which require consensus between minors and developers who sometimes have opposing goals.

Dash is ASIC friendly, in fact they are working with companies to refine the hardware and make it more efficient on the dash network. This is a deliberate decision because the better the mining hardware and software is the more reliable, cheap and fast the transactions. ASIC optimisation is a key part of their strategy. Miners receive 45% of the block reward.

The final 10% of the block reward goes to ‘the treasury’. This is a pot of money which can be spent on marketing, development or anything else that would further the project. the masternode owners can vote on proposals and allocate funds accordingly. This enables Dash to be one of the few currencies with an actual marketing budget. It also pays the developers without the need for a company relying on venture capital.

‘Instant Send’ is a service offered by masternodes which enable them to confirm transactions off chain for a fee so you don’t need to wait for blocks to be mined. Instant send transactions will be added to the blockchain when the next block is mined. This is literally instant.

‘Private send’ is a service which enables some degree of fungibility by acting as a mixing service. Private send is based on coinjoin with numerous modifications. Masternodes take all private send transactions and mix them such that you don’t know who paid who. This is done multiple times to offer privacy up 8 rounds.

What is on their roadmap

Dash are working on a large number of things which you can see on their roadmap. Some highlights include:

• CoPay online wallet, (forerunner to Evolution)
• 2mb block size increase
• Documentation
• Evolution wallet that you can use on multiple devices (think paypal equivalent)
• A lot of hiring and opening offices across the world
• Marketplace built into the evolution
• An internal distributed file system for network objects
• A ton of back end restructuring work to enable scale and reliability

The Team

The Dash team is paid for from the treasury and at the time of writing has 30 paid employees. The funding model ensures that Dash should always be able to recruit people who can build a world class product. The lead developer is Evan Duffield who has good engineering credentials. You can see full details of the current team on their website. They are looking to recruit more full time developers in waves over the coming year as well as opening offices in other countries.

Controversies

Dash is often accused of having a premine because 1.9 million coins were mined during the first two days due to an error in the code which lead to the difficulty being far too low. The lead developer at the time offered to relaunch the blockchain or do an airdrop of coins to broaden the distribution but the community rejected both ideas. As of now however the distribution of dash is larger than that of Bitcoin so whilst this was a bad start it doesn’t seem to have much relevance today.

Dash is sometimes criticised because some services are seen as ‘centralised’ because they are performed by masternodes. The counter argument is that anyone can set up a masternode so it is not an issue however as there is a large fee associated with setting one up there are fewer masternodes than some people would like. Masternodes are vital to the vision of dash but how you feel about them will largely depend on ideology.

Dash is also criticised for its marketing by fans of other more privacy focussed coins. Dash private send transactions can in theory be unmasked with enough analysis however in practices this is yet to happen. The obvious accusation is that dash gives people a false sense of security and people should use other more anonymous cryptocurrencies. Dash addresses are anonymous, like all such tech and private send transactions are pseudonomous and hard to track without a lot of processing resources.

Wallets, POS and Card

Dash has mobile wallets for Android and IOS which act as lite wallets. They allow you to send and receive by scanning QR codes. They work well and are pretty intuitive to use.

Dash also has desktop wallets for Windows, Mac and Linux which work pretty well and allow you to use the instant send and private send from within them. They synced with the blockchain reasonably quickly compared to other cryptocurrency wallets.

Dash keys can also be stored with Jaxx, Coinomi, Keepkey, Ledger, trezor and paper wallets.

Dash has a top up debit card coming out, probably this month, which will enable you to use it on the high street. This is quite a big step towards real usage.

Dash integrates with the AnyPay point of sale system which, if adopted makes it very easy for businesses to accept Dash

adoption

Dash is traded on almost all exchanges now but in terms of real world usage as a cash alternative adoption is very low. Only Bitcoin has really made any headway in being accepted as a payment method both on and off the internet. Dash is also playing catch up with Bitcoin in terms of mindshare and market consciousness. The number of places that accept Dash is growing however and having a marketing budget build in should enable Dash to compete long term. We are possibly in the final stages before Dash can be considered smooth enough for everyday use, once the new wallets, top up debit card and paypal like user experience are completed we could see a sharp rise in everyday use. You can see a list of websites that accept Dash on Dash’s website.

Competition

The primary competition in the cryptocurrency space is probably a Bitcoin/Litecoin/Vertcoin combination. Bitcoin on its own is not able to transact quickly or cheaply enough for cash replacement but Litecoin and Vertcoin could improve to be sufficient. With the adoption of atomic swaps and the lightning network people could store their currency as Bitcoin and spend it as Litecoin or Vertcoin fairly easily. Bitcoin has name recognition that Dash does not currently have.

TenX have a card which works right now and converts your cryptocurrency of choice to Fiat on the fly. It also has its own token which is used for reward points. TenX cards can be used to spend Dash so it remains to be seen whether TenX is a strict competitor

Other currencies which are aiming for mass adoption with a similar masternode setup include Pivx and Nav. Both of these are smaller market cap and have a few small differences compared to Dash (namely proof of stake and different mixing algorithms. but Dash has a big lead in terms of how soon they will be ready for mass adoption. Dash has a much more polished product, greater liquid and a stronger brand.

The biggest competition overall is Paypal or Visa. Paypal has name recognition for online payments, a massve userbase and is accepted all over the internet. They are also already able to scale and integrate with traditional banking systems. The market advantage Dash has over Paypal is that it will definitely be cheaper than the 3% fee they charge. Visa (mastercard, amex maestro etc) do the same job for high street payments. Card payments are ubiquitous and integrate with the current infrastructure. The fees with Visa are hidden from the consumer as the business pays for them, which may prevent consumers seeing an advantage. Dash can compete in price which should encourage businesses to accept Dash in the future. In theory businesses could offer products at a lower cost for Dash payments however given that there is no price variation between card and cash despite the fees of cards makes this unlikely.

Investment potential

Dash masternodes are incentivised to hold as they receive revenue by maintining the node. This should provide a small amount of protection against huge drops in price if the number of nodes increases, currently it didn’t seem to have much impact.

Over the last year Dash has grown faster than the market average and is a solid top 10 currency.

Requirements for a cash alternative and how dash performs

Stable value: A cash alternative is no good if you set out to buy something but by the time you reach the checkout the value has decreased so much that you can no longer afford it.

Dash has proven itself to be more stable than a lot of cryptocurrency (which is not saying much). The price fluctuates a lot but will, if it achieves its goal of mass adoption rather than being bought and sold by speculators become less volatile. The masternode system encourages people not to sell which should act as a small anchor to the price. All Cryptocurrencies face this issue to greater or lesser degrees and I’m not sure it can be solved unless we buy and sell things in Dash prices rather than Fiat prices.

Ease of Use: People are used to cash payments and card payments but not so much sending crypto to addresses. This needs to be optimized so that it is fast and easy for your grandparents to use.

Dash is very easy to use once you have some. Sending and receiving payments will only get smoother with the new evolution wallet and they are actively working to improve this.

Very high speed of transactions: nobody wants to be waiting in a shop for 10 minutes for their payment to confirm before they get their coffee and can leave.

Dash can confirm fast (150 seconds max) with regular payments and instantaneously with instant send. Regular transactions don’t take much longer than using a card with pin but noticeably longer than using contactless payment cards (NFC). Initially I expect people will use the Dash card which is ask quick as a regular credit card.

Very low cost of transactions: Customers do not see transaction costs because currently businesses pay them. Customers need to be able to pay for items at either the same rate or less than current methods.

It should be cheaper for businesses to accept Dash than other card payments but this is unlikely to translate to cheaper products. The transaction fees of Dash are (and should continue to be with their plan) smaller than traditional systems.

High number of transactions per second: Scalability is the elephant in the room for most cryptocurrencies. We need to compete with the likes of Visa which can do 6500 transactions per second.

Dash has a plan which they estimate will enable them to scale to 4000 transactions a second. This should be sufficient for the next 2-3 years and hopefully they will be able to improve further that in that timeframe.

High level of adoption or compatibility with existing systems: Either we need companies to accept crypto payments or we need a way to bootstrap them onto top up debit cards.

The Dash top up card is due shortly and Dash are available on some POS systems. They are actively working on this. Because businesses can pay less fees adoption could happen organically.

Marketable and marketed advantages over existing systems: the average consumer is reluctant to change to using something they don’t fully know unless there is a clear and communicated benefit to doing so. It needs to be easier/faster/cheaper to use crypto and people need to be told about it, a lot.

Dash has a marketing budget, which was used to sponsor tv programmes and vloggers/bloggers in the past. They will continue this but will need to be effective. It remains to be seen how good the marketing message will be and how much impact it can have.

Availability of internet: In many places the internet is not yet ubiquitously accessible. Blockchain based transactions need the internet to work and in blackspots there can be no adoption.

Thankfully this problem will likely solve itself and is not one we need to worry about.

Easy accounting: If you have to pay taxes on purchases made with cryptocurrency because of capital gains, corporation tax, etc then there will be a burden on crypto spending that doesn’t exist with fiat spending. We either needed to fight off such taxation or find an incredibly simple way for accounting to be in-built into the system.

This is unsolved and currently taxation and regulation is up in the air. In theory Dash could have a system of accountancy built in which makes it well placed to adapt to legal constraints.

Summary

Dash has very lofty goals for mass adoption, it has a lot of advantages and some disadvantages over other cryptocurrency but its greatest challenge is usurping the established players. If it wins, it will win big and the next eighteen months will be key in deciding how it plays out.

Tips

If you found this helpful at all you can give me a tip with the following addresses

Dash: XhHoTqKEbL2HMu12UhknWbFWQMCVavgjNf

Bitcoin: 16SQUJexVjT3qJozaTVgZWMbtDd1ZrFVac