Cryptocurrency can sometimes be confusing to beginners because there are so many different cryptocurrency types with different purposes. Some cryptocurrencies are designed to act as fast digital cash, others as private digital cash, some as interest-bearing assets, others as cross-currency exchanges, and more. (Beginners can check out our comprehensive crypto guide for more details.)
Bitcoin is widely known as the premier cryptocurrency in large part because it was the first, yet altcoins such as Dash take existing intuitive technology and make other improvements upon it separately. Some of Bitcoin’s biggest flaws are precisely Dash’s strengths—including transaction speeds, fees, and privacy.
What is Dash?
Bitcoin fork, a split in the Bitcoin blockchain initiated by a group of Bitcoin miners with different views on certain network rules. Darkcoin was originally designed to uncompromisingly ensure user privacy and anonymity, as described in its 2014 whitepaper .
However, the next year the project was redesigned with other features in mind and rebranded as “Dash,” a mash-up of the phrase “digital cash.” As the name implies, the Dash coin is intended as a medium of exchange and has since shifted its primary focus to faster and less expensive transactions while maintaining its strong encryption properties. Since the 2015 rebranding, Dash has grown to become a popular altcoin for investors buying crypto and consistently ranks among the top 25 cryptocurrencies by market cap.
How Does Dash Work?
Similar to Ethereum’s ambitions, Dash uses a modification of the Proof of Stake algorithm known as X11. Proof of Stake is an alternative consensus mechanism to Bitcoin’s Proof of Work that replaces energy-intensive cryptocurrency miners with validators that verify transactions based on how many tokens they hold and stake on the network. In addition to confirming blocks, they also provide payment and privacy services on the network.
This model is viewed as less risky because it makes a potential network attack less rewarding than compensation for validating transactions which secure the network. Dash validators, or “Masternodes,” are full nodes that hold a minimum stake (or bond of collateral) of 1,000 DASH coins that perform network services and earn a return on their staked investment. Masternode services include private transactions (PrivateSend), Instant transactions (InstantSend), and the network’s governance and treasury systems. Dash’s model also addresses transaction scalability issues by reducing the amount of nodes required to approve a transaction to a manageable number.
Dash maintains a harmonious self-funding governance model by splitting block rewards between three critical stakeholders: Masternodes (45%), Miners (45%), and Treasury (10%). The first two are rewarded the bulk of block rewards for providing essential services and voting on development directions for the network, while the remaining 10% accrues to the Treasury to actually finance the voted-on future project developments.
What is Dash Used For?
Dash is intended to be used for daily transactions between peers. While Dash’s use is scattered, it is more concentrated in a few economically-distressed countries that are experimenting with cryptocurrencies.
Following the hyperinflation of the Venezuelan Bolivar, the South American country’s government passed an order instructing state-run agencies to accept any cryptocurrency for services. Dash has gained early momentum in the country after a series of popular conferences and educational efforts were made introducing crypto to the community as a replacement for devalued and unreliable local currency. Since then, acceptance of Dash in Venezuela has grown as thousands of merchants in the country, including Burger King, have enabled payments using Dash among other cryptos.
Dash adoption and use has spread in Latin America, also spurring bouts of growth in Brazil and interest from nearby Cabimas and Mexico, other countries with distressed economies and weak currencies. This comes as a result of local advocacy programs and merchant point-of-sale terminals integrating with Dash.
Is Dash Better than Bitcoin?
Some people prefer Dash for its fast speed, lower fees, and increased privacy. These properties give Dash technical advantages over Bitcoin’s current abilities as a medium of exchange.
One of the drawbacks to using a layer-one cryptocurrency network is that some network efficiency is sacrificed for decentralization. Many cryptocurrencies, like Bitcoin, still operate on the project’s original iteration which is designed for functionality now and scalability later. This affects the network’s speed, particularly the rate at which funds are transferred, confirmed, and received in recipients’ accounts. Bitcoin is the model for slow transaction times, sometimes taking hours for a transaction to be confirmed, especially during market congestion.
With Dash, most transactions are confirmed in seconds. As the name implies, Dash coins are meant to be used as a medium of exchange. Dash’s average block time is roughly two and a half minutes per transaction; nearly four times faster transactions than Bitcoin’s 10-minute block time. Dash users are free to send and receive transactions normally for a miniscule fee. Alternatively, Dash also instituted the InstantSend feature which allows masternodes to confirm transactions nearly instantly for an extra fee. With nearly instant transaction confirmations, Dash is among the fastest and most private cryptocurrency mediums of exchange, surpassing that of Bitcoin, Ethereum, Litecoin, and XRP.
There are other cryptocurrencies that also provide fast transaction confirmations like Dash, however only some of them lock down transactions after they are completed, thus disabling the same funds from being spent on two separate transactions. Networks that do not lock down confirmed transactions are technically vulnerable to a compromising phenomenon known as double spending. Double spending is a potential technical flaw in a digital currency network where the same single asset is spent more than once. InstantSend also solves the double spending issue by holding the amount of funds sent without having to wait for a block confirmation to officially confirm the transaction.
In addition to faster block times, Dash transactions typically cost less than $0.01. Dash’s faster speeds and lower fees make it a far more efficient medium of exchange than cryptocurrencies like Bitcoin.
One of the concerns with Bitcoin, according to privacy advocates, is its public ledger. All transactions and details on the Bitcoin blockchain such as sender, recipient, date, amount, and even previous Bitcoin addresses and transactions associated with each Bitcoin are publicly viewable by anyone and cannot be censored, modified, or deleted. While this creates a system of pseudo-honesty and transparency, users seeking privacy must look elsewhere.
Dash offers users a service known as “PrivateSend,” a layer of privacy and anonymity provided by Masternodes through a process known as automatic coinjoin mixing. Coinjoin mixing is a trustless privacy method that repackages multiple payments from multiple senders into a single transaction to obfuscate transaction details from outside parties.
Anonymizing Dash cryptocurrency transactions prevents them from being traced and users’ identities from being revealed, thus potentially providing an opportunity for users seeking to avoid paying taxes on crypto. Dash’s anonymizing privacy features are revered by users but scrutinized by regulators and centralized exchanges who must abide by strict cryptocurrency regulations.
Dash Crypto: Pros and Cons
When it comes to crypto, pros and cons can vary depending on what a user intends to do with the currency—whether interest-bearing assets or fast digital cash, for example.
Beyond the specific advantages Dash has over Bitcoin (outlined above), this cryptocurrency has pros and cons any potential user should be aware of.
• Widely Accessible: Dash is available to buy or sell on most crypto exchanges in most countries with few exceptions. Being that Dash is a relatively larger-cap token, it is fairly ubiquitous—except for exchanges unfriendly to privacy-centric cryptocurrencies.
• Efficient medium of exchange: Faster transaction speeds and cheaper fees make Dash a top-performing medium of exchange, especially when compared to wait times and fees experienced by users of marquee tokens like Bitcoin and Ethereum.
• Private and anonymous: Darkcoin’s original privacy properties were maintained in Dash, autonomously obscuring transactions’ origins, senders, and other details by grouping transactions together to morph into a single new transaction with no similarities to the original senders.
• Validators can stake DASH coins to earn passive block rewards: Validators, or nodes, attribute personally-owned DASH as part of the consensus mechanism to receive monetary compensation for providing crucial services to process transactions and secure the network.
• Not as ubiquitous as mega-cap cryptos (e.g. Bitcoin, Ethereum): Whereas crypto is synonymous with Bitcoin and sometimes Ethereum, Dash doesn’t have the same caliber network effect and is not widely known by the average investor.
• Masternodes are slightly more centralized than other cryptos: Owning and running a masternode requires staking 1,000 DASH, and there are currently more than 5,000 masternodes. However, it’s difficult to determine whether some people have multiple masternodes and thus centrally control a larger percentage of the network.
• No academic or institution backing: Dash is entirely self-funded through its technical design and does not rely on nor receive support from prominent academics or institutions for advisement, technical support, or funding.
• Strong competition (Bitcoin Cash, Litecoin, Monero, etc.): Currencies have been battling for the title of reserve currency for hundreds of years. The medium of exchange use case is saturated to say the least, and of the thousands of cryptocurrencies (and growing), Dash has to compete with other functional and efficient use cases with similar properties such as Bitcoin Cash, Litecoin, and others.
How Do You Invest in Dash?
6 things to know before investing in crypto.
As cryptocurrency evolves, new projects are conceived and even spawn off of other projects in what’s known as a “fork.” One such fork is Dash, a 2015 offshoot of Bitcoin with many similarities but distinct improvements in critical areas that define money’s essence. Bitcoin historically dominates the crypto market share despite technical limitations, whereas projects like Dash have a smaller network effect and thus market cap despite superior real-world utility.
Regardless of your crypto project of choice, the vast number of cryptocurrency projects and tokens are showing a rapidly growing and maturing space that has already caused ripples in the investing world. As cryptocurrencies like Dash continue to become more mainstream, investors may look to capitalize on this new industry’s growth and adoption.
For investors looking to dip their toes in cryptocurrency investing without the responsibility of self-custodying their funds, SoFi Invest® helps beginners get started and learn along the way. Members can invest in Bitcoin, Ethereum, Litecoin, Bitcoin Cash, and Ethereum Classic.
Find out how to invest in cryptocurrency with SoFi Invest.
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