Built upon the Bitcoin infrastructure, Dash is a decentralised cryptocurrency platform which specialises in scalability: it prides itself on being able to process transactions faster than other cryptocurrencies. Additionally, it offers a specific PrivateSend function for users who are concerned about matters of privacy.
Dash (DASH) Chart
Scalability and masternodes
Scalability is one of the key challenges facing cryptocurrencies; it essentially means the ability to handle a very large number of transactions at once. While banks and traditional financial tools such as PayPal can process a very large number of transactions simultaneously, cryptocurrencies tend to be slowed down by their use of blockchain technology and by the state of current hardware. Dash, however, has developed a system to overcome these restrictions, by relying on the so-called “masternodes”.
Whereas cryptocurrencies such as Bitcoin operate a single-tier system, whereby transactions on the blockchain are all verified by miners, Dash includes a second tier. Miners carry out some functions of the platform, such as creating new blocks, but certain other functions are carried out by a second, more advanced group of users, who control so-called masternodes.
There are over 4000 masternodes, which can only be controlled by users owning a collateral of 1000 DASH coins, and the block reward is split between miners and masternodes, with each receiving 45% of the profits.
The remaining 10% go into a so-called treasury, which can be used to fund projects to improve the working of Dash. Dash is therefore also different from many other cryptocurrency systems in that it does not solely rely on volunteers, but can pay people for their labour in improving the system, even beyond mining ability. Whether particular projects are funded and carried out depends on a vote among the masternodes, which thus carry out a role within the governance of the platform.
The additional functions carried out by masternodes, rather than by ordinary miners, include InstantSend and PrivateSend. InstantSend tackles the scalability issue by offering users the option to carry out extra-fast transactions for a small fee. To do this, they simply check the InstantSend box when making a transaction, which will then be fully carried out and irreversible within four seconds. (Nevertheless, this can take up to 10-15 minutes if the destination does not recognise instant payment.)
PrivateSend addresses a different concern, connected to privacy; in this way, Dash seeks to improve the anonymised transactions touted by older cryptocurrencies like Bitcoin even further. It does this by obscuring the origin of users’ funds. All the Dash in a user’s wallet consist of different “inputs” or coins; PrivateSend, then, uses an innovative process to mix each user’s inputs with the inputs of two other people in the system.
No coins ever leave the user’s wallet and the user’s funds remain secure, but no outside viewer can verify which coins belong to which user. A maximum of 1000 DASH can be moved in a single PrivateSend transaction, but users are encouraged to use several transactions for large payments, since this will involve multiple levels of mixing and will obscure the origin of the funds even more.