Dash

Dash Offers An Additional Level Of Privacy To Digital Currency Transactions

Dash is one of the most popular cryptocurrencies these days, getting its start back in early 2014, when it was known as Darkcoin. The Dark part of the name likely originated from its seeking to focus on an additional level of anonymity over other digital currencies, a feature it still employs.

DashAnonymity is already well built in to cryptocurrencies, or digital currencies, due to the very nature of these transactions. All transactions are tracked using a ledger that is maintained and updated by all users, which involves public keys being assigned, and therefore all transactions are verified by the crowd so to speak.

The identity of the participants are kept secret though, as one would use different public keys for each transaction, or at least that’s what’s recommended, and one should do so for security reasons. Since the private keys that one uses to access their funds held in digitial currency are indeed completely private, this makes it difficult to track the movement of funds where digital currency is exchanged between users, or the identity of users when they transact with merchants, which is a feature that many users enjoy.

Dash takes this one step further though, with their PrivateSend service, rebranded from its original DarkSend. Users who desire the ultimate in privacy can select PrivateSend, which takes orders from different clients and uses the CoinJoin platform to mix payments together and make joint payments, effectively mixing the source of the funds in order to further conceal it.

This feature not only adds additional privacy to the transactions, it also affords a higher level of security and protection against hacking. It features both multiple inputs and outputs and mixes the coins in such a way that adds an additional level of obscurity over what digital currency transactions already employ.

One of the benefits of cash transactions is that it has what is called token fungibility, meaning that one unit of a token cannot be differentiated with another. So if you are holding two bank notes, they are identical as far as their history, it doesn’t tell a story in other words.

Using digital means to transfer hard currency does tell a clear story though, which can be easily traced. Cryptocurrency transactions can be traced as well, although the ultimate identity of the parties are kept hidden. Dash makes their currency fungible like cash by mixing the sources and outputs like cash would be, and the name Dash comes from the term digital cash. This offers an extra level of comfort to those concerned about such things.

Dash Is Also Quicker

Dash seeks a better way to process transactions with InstantSend. At the heart of this is Dash’s innovative Masternodes system, where the overwhelming majority of transactions can be confirmed by the network of Masternodes.

Normally, cryptocurrencies rely on miners to not only mine for new currency but to help with transaction confirmation, but Dash separates the mining function from the confirmation function, and both parties share in the new currency created by mining. Since Masternodes are dedicated to confirmation, this allows a much quicker confirmation process.

Calling a feature InstantSend definitely promises a lot compared to some cryptocurrencies, where parties may wait several hours at times for transactions to be confirmed and processed, but they have been able to live up to this promise quite well thus far.

It remains to be seen if they can keep this up as the currency gets more and more popular, but the concept here is an innovative one and addresses one of the key concerns that many users have with using cryptocurrency as a payment method, especially with the backlog that can occur with far more popular Bitcoin.

The Birth of Dash and its Journey

Within the first two days of Dash’s existence, 1.9 million coins were mined, a situation called an instamine. This was said to be due to an error in the code that was taken advantage of, and while this could have been undone, users decided that the concept of not interfering with transactons was more important to them then seeing some minors get a windfall due to this error.

So the instamine was left to stand, and this gives you an idea of just how committed cryptocurrency users are to just let the decentralized automation process govern things. One of the big reasons why many users find digital currency so appealing is that it foregoes this sort of central management, seen as some as tampering, in the way that hard currency is manipulated.

For the first three years of its life, Dash’s progression was fairly unremarkable. Sure, you could have bought and held this during this time, and it could be had for under a dollar during the first few months, and you could have seen this rise by ten fold on average in 2016, but selling it then would have been a mistake.

For whatever reason, cryptocurrencies have really seen a bull market hit it in 2017, and Dash has been one of the currencies that have really taken off, hitting a high of over $109 during the first quarter, about 10 times higher than where it started the year off.

Volatility With Cryptocurrencies Is Not Always A Bad Thing

One of the biggest criticisms of cryptocurrency like Dash is its high degree of volatility relative to hard currency. Hard currency is not only very stable, but since it functions as legal tender, users will only even notice this overtly if they convert to another currency.

With crytocurrencies, their much more limited use has users converting it back to hard currency fairly frequently, and therefore changes become very evident, especially in cases where you sold and end up buying it back later at a much higher price. The nature of cryptocurrencies as speculative financial instruments become more obvious, and Dash and other digital currencies are definitely speculative in nature.

There are some people who look to trade the currency market, called the forex market, and this is considered a fairly risky method of investment. Trading in digital currency like Dash can be like the forex market on steroids, and anyone trading in digital currency will be exposed to these risks, whether they like it or not.

This is not always a bad thing, although currency trading does benefit from a degree of skill, and most of the players here have no idea about the workings of speculative currency markets, in other words, strategies of buy, hold, and sell that serve to increase your opportunity for gains in these markets.

People not familiar with the workings of all this don’t mind though if they make a good profit from it, and we’re seeing a lot of that lately. Those who understand the workings of the way Dash and other cryptocurrencies are set up will realize that over time these are indeed designed to rise in value provided the demand is there to drive it.

Simple supply and demand economics tell us that if increases in supply do not keep pace with increases in demand, then the price will go up. Not only does digital currencies employ the principle of diminishing new supply, but as demand increases, and the number of transactions goes up, the amount held in the system as a percentage of the overall supply also increases, putting further pressure for the price to increase.

Dash is a perfect example to illustrate this, with their Masternode setup, and you need to hold at least 1000 coins to function as a Masternode. So as demand increases, the number of Masternodes increase, and both exert upward pressure on the currency.

The Usefulness Of Dash

Aside from a means of transferring funds from party to party, Dash has started to be accepted by a very small and select number of merchants. However, given the potential for capital appreciation of this currency, one may simply hold on to it as a store of value, and we are seeing now that those who have chosen to so so have made a very wise decision indeed, so far anyway.

Even in such a bullish market, the timing of Dash trades can be very significant indeed, and currencies like this can lose a big chunk of their value very quickly, in a matter of a few days in some cases. For instance, after its peak in March 2017, a lot of people took their profits so to speak and it lost almost half its value in just three weeks.

So this introduces people to the concept of market timing, and those with these skills will stand to benefit more.. This all has attracted a lot of speculators though and regular folks want to be sure that they are at least seeking to see this as financial trading and do their best to at least not do things that are foolish, such as buying near the top and either holding it for too long or not enough.

It’s the nature of many folks to chase their losses, holding when they should be selling, taking a beating, and then selling when they now should be holding, and these are things that can indeed happen with the volatility of Dash and other cryptocurrencies that we have seen.

If one is simply using Dash as a means to send someone money, where it is bought and then sent quickly, this takes the risk out of it, and it’s only those who are holding these currencies that are exposed to the risk, like a hot potato. With these risks come some big opportunities as well though, should one choose.

Andrew Liu

Editor, MarketReview.com

Andrew is passionate about anything related to finance, and provides readers with his keen insights into how the numbers add up and what they mean.

Contact Andrew: [email protected]

Areas of interest: News & updates from the Consumer Financial Protection Bureau, Trading, Cryptocurrency, Portfolio Management & more.