Mariela is a former investment banking analyst and has been a cryptocurrency writer with LeapRate and Asktraders for the past two years
Dash is currently the 18th largest cryptocurrency by market cap ($650mn). It was founded in 2014 as a result of a software fork of the Bitcoin code.
The network rewards miners as well as master node operators. Transactions can be optionally made private and instantly for an extra fee. Dash is also one of the most widely accepted cryptocurrencies.
Privacy and cryptocurrencies go hand in hand. Many of the developers and investors in the cryptocurrency community value freedom and privacy. Therefore, the evolution of privacy coins was a natural next step after Bitcoin.
When choosing the best crypto broker for your needs, you will want to check that they offer the privacy coins you’re keen to invest in, as privacy coins are an important part of the cryptocurrency market. Whenever concerns about privacy come up, privacy coins will be back in the spotlight, and are likely to outperform other types of coins.
Despite the fact that blockchains have so far proved themselves to be secure, exchanges have not. As the value of cryptocurrencies has increased, increasing numbers of hackers have attacked crypto exchanges. When this happens, the transaction history of account holders can potentially be made public.
There are only two ways to protect against these types of privacy breaches. The one is to use a decentralised exchange, where the exchange itself is on a blockchain, and the other is to use privacy coins.
In 2017, a large number of new privacy coins were launched, which attracted speculators away from established privacy coins, due the higher potential returns of low bases.
The blockchain of Dash is similar to that of Bitcoin, with same major differences.
While the blockchain is operated by miners who act as nodes on the network, it also has master nodes, which are nodes owned by entities holding a minimum quantity of Dash. Master nodes facilitate private and instant transactions. When a user decides to use the private send function for a transaction, a message is sent to the master node, which then looks for other similar transactions to mix that transaction with. The master nodes then combine several private transactions into one, before splitting them into the original amounts. In this way, it’s impossible to see which transaction came from which address originally.
When users choose to send DASH using Instasend, the master nodes facilitate the transaction in less than a second. Users pay a higher fee for these transactions, and these fees are earned by the master node. This makes DASH a better option for frequent, fast payments than Bitcoin.
The master nodes protect the Dash network from attacks. Anyone wanting to attack the network would need to accumulate more Dash than half the master nodes combined hold.
Dash is one of the two most successful privacy coins on the cryptocurrency market. However, there are some critics of the privacy characteristics of Dash. Firstly, some believe that because not all transactions are private, the sender of a private transaction could theoretically be traced back via master node.
Another concern is that private transactions can be quite slow. Because private transactions are combined to mask their senders, the master nodes have to wait for enough transactions of similar values to be made before they can be processed. In order to combine similar transactions together, private payments have to be in specific denominations too. That means a sender cannot send a specific dollar amount to pay for a purchase.
Critics also believe that Monero, the other leading privacy coin, has better privacy characteristics. While they also believe that many other smaller coins may be superior, the fact that Dash is already the market leader makes these coins less relevant.
Monero is a legitimate challenger as all transactions are private, and transactions are faster. Monero’s weakness is that the voting system makes it more difficult to make improvements to the network.
Dash offers the ability to transmit value instantly if required. This makes it a good choice for frequent purchases. However, the cost of private transactions can be quite high which is a weakness that has to be considered.
Dash is already one of the most widely accepted cryptocurrencies by vendors and can be accessed via ATMs too. That means that regardless of the technology it already has a head start. Dash is compatible with most popular multi-currency wallets as well as its own wallet.
It also has a large group of supporters, which means other currencies will struggle to displace it. The developer community is talented and committed, which means it is possible that transaction costs can be reduced.
When it comes to making payments, Dash is already superior to Bitcoin, with lower fees for standard transactions and faster processing times. Dash fees are as low as 3 percent of Bitcoin’s fees and transaction times are as low as 5 percent of Bitcoin transaction times.
Because Dash incentivizes not just miners but those that run master nodes and a development fund, governance on the network is strong. This is a major factor when looking at the long-term potential for a cryptocurrency.
More and more privacy coins have emerged since 2012. ZCash is another “big” privacy coin. Zcash was developed as an alternative to Bitcoin, just like Dash, and has enhanced privacy and security. Unlike Monero, private transactions are not required when transacting with Zcash. Instead, users have can use the enhanced privacy feature to blur transaction details and use either a transparent wallet address or a “shielded address” to keep all transactions 100% private. In order to do that, Zcash uses the “Zero-Knowledge Succinct Non-Interactive Argument of Knowledge” and the zero-knowledge security layer (ZSL).
Other privacy coins include: Verge, Bytecoin, Komodo, Zcoin, Grin, Loki and many others.
The major concern with privacy coins is that whenever there is a breach on an exchange, everyone looks at privacy coins to take the responsibility. When considering crypto trading strategies, privacy coins are a topic that will often come up.
Monero is likely to take the first place in the “privacy coin” race, just because of its improved features.
The biggest risks are probably related to the Dash coin itself and the crypto market in general. If the broader market does not make new highs, Dash will be unlikely to generate substantial returns.
As far as the coin itself is concerned, if the network is compromised, or if master node operators lose faith in the potential, Dash will underperform. And, if private transactions are ever traced, its privacy characteristics will be discounted.
As it stands, Dash is probably best held as a part of a portfolio rather than as a standalone investment. If on the other hand there are positive developments that make it stand out, it may emerge as a standalone investment.
Dash is a major privacy coin. Its blockchain rewards miners, master node operators and a development fund which goes toward improving the network. Mater node operators hold a minimum number of coins which makes the network resilient against attacks.
Users can make standard transactions which are relatively fast and cheap. They can also pay a fee to make instant transactions, or make private transactions though these take a bit longer.
Besides being popular amongst investors Dash is one of the most widely accepted cryptocurrencies and is available on most major exchanges.