Crptocurrency Review Series: Dash Review – Privacy Tokens Part 3

Crptocurrency Review Series: Dash Review – Privacy Tokens Part 3

Cryptocurrency Research
November 5, 2018 Editor's Desk
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Ask the Eden Labs team questions on our Telegram and receive updates, analysis, and research insights. When analyzing a project, the Eden Labs team looks for projects that do something unique or do it much better than its competition. Quality projects should be able to explain complex ideas simplified to their audience. In addition, projects
Dash Review

Ask the Eden Labs team questions on our Telegram and receive updates, analysis, and research insights.

When analyzing a project, the Eden Labs team looks for projects that do something unique or do it much better than its competition. Quality projects should be able to explain complex ideas simplified to their audience. In addition, projects that rely heavily on a broad user base have to have an incentive for the first ten people to join the network before a million users is ever achievable. No project will succeed if it requires a million participants to bring any value to its users.

Summary

Dash is the first privacy-centric cryptocurrency based on the work of Satoshi Nakamoto with various improvements. By implementing a two-tiered incentivized network, the Masternode Network alongside the standard node Network, Dash can introduce advanced features such as InstantSend and PrivateSend which execute instant transactions and optional privacy. The project was launched in January 2014 by Evan Duffield, the lead developer of the protocol and has since been regularly worked on by its team. Dash is among the top 20 most popular cryptocurrencies.

 

Tags: Privacy, Transaction Speed, Masternodes

 

Industry Need

As discussed in the previous articles in this series, privacy and anonymity are not guaranteed properties of current decentralized ledger technologies. DLT solutions are arguably more open and transparent than traditional banking has ever been. Third parties can snoop around the public ledger, view transaction amounts, sender and receiver addresses. This information gives blockchain analysis companies the ability to analyze to determine a user’s identity hidden behind a cryptographic address.

Traditional banking is not much better. Due to their centralized nature, banks can snoop around your account and transaction information as they please. Even though your private banking information is only visible to the bank and not just any third party snooper, banks still use your information to develop insights into your financial habits which they use to make a profit on your behalf.

Solution

The Dash project proposes a solution to the privacy issues facing current DLT solutions through its use of optionally enabled private transactions. Additionally, the project provides quick transactions, a feature which assists with scalability when privacy is not the primary concern. By giving users the ability to opt in and out of private transactions, Dash provides the freedom of choice for its users.

Tech Analysis

The main technical components which enable Dash to provide services such as privacy and security are Masternodes (part of the two-tiered network), the PrivateSend feature, and the InstantSend feature. Additionally, Dash uses a couple of different hashing functions, including X11 for POW (proof-of-work) on the standard node network and a POS (Proof-of-Service) method for its Masternode network. The X11 algorithm uses a sequence of eleven cryptographic hashing algorithms for proof-of-work. Because each hashing algorithm is unique, it’s difficult to engineer an ASIC that will be able to outperform CPU and GPU miners for each one. This fact reduces the chance of a technological arms race for the best equipment available. POS is used to keep Masternodes in check and make sure they are performing the functions needed and temporarily bans Masternodes from the network if they don’t deliver. Additionally it is important to mention that Dash employes a decentralized governance model where the owners of Masternodes vote for or against proposals. This model allows the Dash community to act decisively and fund project development. Other projects can take years to enact change while depending on donations or premined funding to finance the development.

At the heart of the Dash network, are MasterNodes, these are unique nodes that enable the project’s privacy capabilities. Masternodes are computers that run a dash wallet and make decisions, such as locking transactions, coordinate mixing of coins, and voting on budget proposals. Masternodes are required to have 1000 Dash collateral, a dedicated IP address, and be able to run 24 hours a day without a more than a one-hour connection loss. The masternodes create a second tier network, following a Proof of service algorithm, and exists on top of the standard first tier network of miners. This two-tier system creates a synergy between proof of service and proof of work mechanisms in the Dash network. In the Dash network, a Masternode is in charge of a specific set of functions like InstantSend and PrivateSend. They are also in charge of the governance. Since running a Masternode requires money and effort, to incentivize the node operators, they get rewarded for their efforts. The reward is usually 45% of the block reward.

 

PrivateSend (an optional feature) is the utilization of a trustless mixing service provided by the MasterNodes to obfuscate the link between the sender and the recipient of a coin. ‘Coin Mixing’ is a process which mixes the coins of a varying amount of users to confuse the trail back to the funds’ source. In Dash, it’s a process that consists of anywhere from 2 to 8 ‘mixing’ rounds to lose the trace of a particular coin. Dash tokens in line for mixing are split into broken down denominations of 1, 0.1, or 0.001 DASH, and then are sent to the pseudo-randomly chosen Masternode for mixing with other tokens. After the mixing is complete, the Masternode combines the tokens into a ready-to-send transaction and broadcasts them to the network once verification has been achieved. When a transaction undergoes one round of mixing, there’s a 1 in 3 chance that the sender-recipient pair of the transaction written down on the ledger is a match to that of the actual transaction. Those odds decrease to 1 in 9 by the second round, 1 in 27 by the third, and so on. There can be up to 8 rounds of mixing before the transaction is finally broadcasted to the ledger, so when someone looks at it, there is absolutely no way of telling who owns the sender’s address, or whether the coins that that address sent are indeed its coins. PrivateSend effectively provides the main privacy feature available in the Dash network, without this feature, privacy would not be achievable unless another method is used.

InstantSend (another optional feature) uses the second layer of the Dash network (MasterNode layer) to produce a “lock” once a transaction is created, and only two seconds after you click on the “Send” button to deploy it, the funds are double spend-proof. These transactions are designated with the special “lock” command in the code as described above and sent to a set of ten MasterNodes that are selected pseudo-randomly each block. All ten need to agree on the transaction, then they broadcast it to the network and lock the funds. Thereafter, if any sender other than the recipient attempts another transaction with those funds, all nodes reject it. This enables funds to be spent multiple times in one block instead of having to wait for a new block to make a new transaction. InstantSend provides a novel method of solving the double-spending problem quickly, and this increases the overall transaction speed in the network making it attractive for potential users.

 

Verdict

The Dash team has developed the necessary technical elements to provide their users with security and privacy all while maintaining fast transaction speeds in the network. Each technical component in the Dash architecture undoubtedly contributes to its goals in an efficient, safe and secure manner. With the system that Dash has in place today, they can indeed offer a solution to the privacy issues plaguing current standard DLT solutions. One potential weakness the system is exposed to would be if a third-party observer could successfully merge split transactions to identify the source. Multiple coin mixes are introduced to prevent this weakness. Since transaction merging becomes exponentially more difficult as more users are added into the mix, users are generally safe. However, the risk of de-anonymization remains.

 

Roadmap

 

13.0 – Evolution v1 – Mainnet (released on June 2018)

  • Public DashPay, DAPI, DashDrive, DashCore v13.0 release
  • Quorum-based DAPI implementation
  • Governance object support for users, groups, accounts
  • State transitions
  • Encryption of object data
  • Offices in Arizona, Europe (CORE), and Asia (Dash Labs)
  • Age-based quorums
  • IPFS DashDrive implementation / Limited sharding ability
  • Official user-friendly Wallet
  • Masternode blocks
  • Multi-key spork technology

14.0 – Evolution v2 (TBD)

  • Fifth Hiring Wave – Full-time developers
  • Ability to move money between public and private accounts (referring to private one-time accounts used during the coin mixing process)
  • Governance objects for multi-user accounts (multisig)
  • Masternode redundancy planning
  • Automatic form filling for delivery addresses using encrypted blobs
  • Evolution marketplace / Add-ons / Rating system
  • Hardened entropy-based wallet seeding system

15.0 – Evolution v3 (TBD)

  • GPU based block accelerator
  • Masternode shares via governance objects

Verdict

This Dash roadmap (updated on 14/06/18) provides a look into the development timeline of the project. The roadmap is relatively simple and gives us with the main planned development components to roll out with each iteration of the Dash protocol. The roadmap lacks defined development dates, but this is a minor issue since Dash is already a developed network and the roadmap only consists of improvements to a  working system.

Token Economics

Token Acronym: DASH

Circulating Supply: 8,261,847 DASH

Total Supply: 18,900,000 DASH

Marketcap: $1,306,795,146

Distribution: 45% Miners, 45% Masternodes, 10% Development Grants (incl. dev team salaries)
Inflationary or Deflationary factors: 7% reduction in supply per year to reduce inflation

 

Intrinsic Value of the token to the ecosystem:

The DASH token is the fuel for its ecosystem, much like how Bitcoin and Ethereum are essential for the operation of their networks. Transaction fees are paid in DASH as well as funding for projects proposed on the Dash Budget System. This creates a permanent network effect where project development funding causes the network to develop and become more valuable, which in turn appreciates the DASH price and incentivizes more development because more money is available per month.

Verdict

Seeing as Dash is currently one of the top 20 cryptocurrency projects available, the project’s market cap is indeed reasonable. The distribution of the tokens within the ecosystem is simple, sound, and should not be a cause for any concern. Other elements such as the project’s deflationary factor make sense to restrict inflation within the network. As mentioned above, the DASH token is intrinsically valuable to the ecosystem much like Ethereum and Bitcoin are inherently valuable to their respective systems. This fact secures the DASH token’s value within the ecosystem as it is irreplaceable.

 

Team & Leadership

Core:

  • Ryan Taylor
    • CEO
    • Expert in the payments industry with over 15 years of experience
    • Was a hedge fund analyst for the private equity and public market funds of a multi billion investment firm in New York
    • Master of Business Administration degree from Columbia Business School with a concentration in Finance and Economics
  • Andy Freer
    • Chief Architect
    • Board member
  • Holger Schinzel
    • Head of Quality Assurance, Automation, Testing
    • Sc, Informatics from the University of Hanover
    • Board member
  • Philipp Engelhorn
    • PR, Marketing and Communications
    • Press & Multitool
  • Fernando Gutierrez
    • CMO
    • Co-Founder of Jemchicomac
    • Board member
  • Robert Wiecko
    • Head of Project Management
    • COO
    • Previous IT Program Manager for UBS
    • Board member
  • Evan Duffield
    • Strategy Advisor
    • Co-wrote Dash Whitepaper
  • Glenn Austin
    • CFO
    • Strategy business development at UBS
  • Bob Carroll
    • CTO
    • Founder of 808 Partners
    • COO of WebSafety, INC.
    • Co-Founder of Mutual – LDS Dating
  • + 15 others

Dev:

  • UDJINM6
    • Lead Developer
  • Kello Kopp-Schuetz
    • Human Resources Director
  • Bradly Zastrow
    • Head of Business Development
    • Extensive previous experience in managerial position at American Express
  • Nathan Marley
    • Lead Evolution Developer
    • Deputy CTO
    • Consultant, Technologist at Black Carrot Ventures
  • Chae-pil Lim
    • Core Development
  • Chuck Williams
    • Head of UI/UX Development
  • + 18 others

 

Verdict

The Dash team is extensive and full of bright individuals capable of developing and maintaining the network. The team certainly has the right experience to execute and improve on the project’s vision. The team is also full of business-minded individuals with expertise in building and maintaining companies. Just as with the business side of things, the developing team is significant, experienced, and relevant. The developing team will surely be able to execute the desired vision. The only concern here is minor and has to do with the total team size. Such a large team such as Dash’s is both a pro and a con depending on which angle is looked at, but generally speaking, large teams are difficult to manage, and things spiral out of control quickly. However, it seems that Dash has been able to handle their large team easily enough.

Advisors

  • Evan Duffield
    • Dash Founder
    • Strategy Advisor
    • Software Developer / Owner at Hawk Financial Group
  • Perry Woodin
    • Advisor
    • CSO at HashChain Technology Inc.
    • Founder of Node40

Verdict

The Dash project does not have many advisors. Of the two advisors they have, Evan is not very well known to the cryptocurrency community, but he certainly has experience in with technology and blockchain as he is one of the founders of Dash. Perry is an experienced blockchain enthusiast with two projects already under his belt. Both of the advisors are reputable and have relevant experience to assist with the development of Dash.

 

Partners

  • Transform PR
    • A public relations company with extensive experience in the cryptocurrency field.
  • Bitnovo
    • A Spanish based cryptocurrency exchange offering crypto debit cards.
  • Wirex
    • A new and improved hybrid personal banking solution.
  • Shakepay
    • Canadian cryptocurrency exchange.
  • CoinFlip ATM
    • Cryptocurrency ATM solution company.
  • AloGateway
    • A global payment processing service and solutions.
  • com
    • Online shopping platform offering cashback on purchases.
  • Payza
    • Online money transfer service.

 

Verdict

While the project’s partnerships are numerous,   they are not monumental. Dash has partnered with several cryptocurrency related companies as well as traditional payment remittance solutions. These partnerships are good stepping stones for the project to begin incorporating its technology with conventional businesses. However, many more platforms must adopt Dash as a payment solution before it can transcend its application as an investment rool. Although Dash does not necessarily need to rely on good partnerships to succeed, it would undoubtedly be a positive influence on the project to have a couple of outstanding partnerships.

 

Marketing & Social

 

Twitter – 312K Followers

Facebook – 35,562 Likes

YouTube – 271 Videos, 23,556 Subscribers

Reddit – 22,151 Readers

Discord – 5,059 Members

Github – 358 Contributors, 20,609 Forks, 1,051 Stars

 

Verdict

The Dash project is one of the veteran projects in the community. As a result, it has managed to gather a large following on its social media channels. The project maintains a high level of daily engagement on its platforms. The project might want to consider creating a Telegram channel as that is where a majority of the cryptocurrency community communicate.

 

Red Flags

  1. Possible transaction merging
    1. Since Dash uses coin mixing to obfuscate the origins of tokens, third-party onlookers have the possibility of merging split transactions to find the original sender, thereby de-anonymizing them.
  2. Lack of true privacy/anonymity
    1. Unlike other privacy coins, Dash is not inherently private or anonymous. However, Dash does have anonymizing features which achieve its goal of privacy. Dash does not obfuscate the addresses of either sender nor receiver and does not try to hide transaction amounts. Dash only mixes up coins to confuse and try to eliminate the trail back to the original coins.

Conclusion

Dash is one of the top cryptocurrency project available and has retained this title for an impressive amount of time. Although the project is not purely privacy-centric, it provides the necessary features to help mask user identities. The project’s success has largely been due to the novel approaches it developed, such as the use of Masternodes. While this was the first of its kind and set a new standard for how nodes can be used within a blockchain network, many projects have since adopted Masternodes. Dash has succeeded in accomplishing its goals of providing equally optional features for privacy and transaction finality to its users. When viewing the project from the eye of user privacy, Dash is one of the weaker options. However, Dash will likely remain popular as it can provide more privacy and faster finality than Bitcoin or Ethereum.

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Disclaimer: This is not investment advice, merely our opinion and analysis on the project. Do your own research.

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