I understand crypto and its advantages very well.
Give me some details about the Dash project.
Dash’s mission is to deliver safe and reliable financial solutions to consumers and merchants in a decentralized manner – providing greater economic freedom to its users.
People and businesses use Dash as digital money for everyday financial transactions.
We will build and maintain an innovative decentralized payment network which will act as the core of an ecosystem of consumers, merchants, and service providers. This network will provide users with a fungible currency that provides a high degree of privacy, speed, and reliability for both physical and online transactions. We will foster a robust ecosystem of products and services by developing solutions that service the needs of both consumers and merchants while working closely with service providers (e.g., merchant service providers, exchanges) to enable features and functionality that will delight our users. Finally, we will cultivate adoption of this ecosystem through education, promotion and engagement of potential users on the benefits of crypto-currencies and the functionality our solutions enable.
Dash has a number of key features that differentiate its solution. It is the first privacy-centric coin, delivering a high degree of privacy (at the user’s discretion), while preserving the ability to leverage the blockchain for publicly-viewable transactions. InstantSend is another unique innovation that allows transactions to be locked in a matter of seconds, with the same degree of protection against double-spending that comes with several traditional block-level confirmations. This feature enables new use cases for crypto-currencies, such as instant point-of-sale merchant acceptance. As you will see, these two examples are just the tip of the iceberg of how Dash is pushing the boundaries of crypto-currency capabilities. Dash is not just another clone coin. Dash is delivering real cutting-edge crypto-currency innovation and rethinking every aspect of the technology to deliver valuable capabilities to the crypto-currency markets.
The first step towards creating this vision was creating a crypto-currency with solid fundamentals. One of these “fundamentals” was to create a coin that was inclusive with a low barrier to entry… one where any crypto-currency enthusiast could become involved by mining the coin without special hardware such as ASICs, specially over the first couple of years. We were looking for a growth cycle similar to BTC, where ASIC mining would develop only after allowing for more widespread distribution and decentralization. Over 18 months after its launch, GPU mining is still the most efficient way to mine DASH. Without the need to compete with ASIC mining farms, the coin has remained accessible to mining enthusiasts all around the globe. This distribution was made possible thanks to the innovation of a new mining algorithm – X11. X11 was the mining algorithm that was undoubtedly the most popular in 2014, copied by scores of coins that launched in the following months. The algorithm delivered many benefits. First, it runs much cooler than Scrypt (LTC) and is therefore more environmentally friendly and less destructive to the hardware.
Dash created the difficulty readjusting algorithm Dark Gravity Wave(DGW) that fixed many issues with the popular Kimoto Gravity Wave(KGW), including corrections for some important attack vectors. DGW is now the safest and smoothest difficulty re-targeting system in the market. Also, we implemented a smoothly decreasing reward curve instead of block-halving every few years, DASH reward curve decreases by 7% each year, helping the market slowly absorb the decrease in rewards and thus avoiding sudden market shocks like the ones we experience during BTC’s abrupt block halvings. These halvings make mining equipment investment decisions leading up to these halvings difficult to optimize.
Two-Tier Network: Incentivized Full Node Operation
Perhaps one of the most important innovations of DASH and a key element for the system is its incentivized full node operation. We call it the Masternode network.
Full nodes are a critical component of the network, providing a number of current and planned services that only an always-on server infrastructure can provide. These are nodes on the peer-to-peer network running 24/7, usually on dedicated servers or hosted VPSs around the world in professionally managed data centers. These nodes propagate messages, serve the blockchain, provide security to the network, and provide functionality to enable InstantX and privacy services.
As one of the core developers explains, “For example, in order to validate and relay transactions, a digital currency requires more than a network of miners processing transactions. It must broadcast messages across a network using ‘nodes’. This is the first step in the transaction process that results in a block confirmation.
To function to its full potential, the network must not only provide an avenue for transactions, but also remain secure. By using a number of randomly selected nodes, the network can reduce the problem of double spending – when a user attempts to spend the same digital token twice.
However, the network doesn’t just need nodes, it requires lots of fully functioning nodes – nodes [full nodes, we call them Masternodes] that have the core client on a machine instance with the complete block chain. The more nodes there are, the more secure the network is.”
In other currencies, the lack of incentive for running full nodes has proven to be an issue, resulting in a declining number of full nodes over time. This produces centralization as service providers like exchanges have assumed the responsibility for running full nodes.
Dash Full Node Incentive Program
DASH solved all these issues by embedding an incentive program for Masternode operators into the core protocol. Masternode operators get paid a percentage of the mining block rewards. As the system is designed, miners will get 45% of each block rewards, Masternodes get 45% and a decentralized governance and maintenance fund gets 10%. As a result of these incentives, Dash already counts over 3000 Masternodes in its network.
In order to run a Masternode, an investor needs to post 1000 DASH as collateral. These coins remain in control of the investor, but he needs to put them into one of his addresses and associate that address with the node. The collateral serves an important purpose in securing the network. First, because of the substantial collateral, would-be attackers are unable to control a high share of the network without buying a lot of Dash. Second, as the attacker bought more, the cost of Dash would increase, thus making an attack of this nature unfeasible. Even if an attacker could gain a high share of the network, an attack on the network would then represent an attack on their own collateral, thus disincentivizing the attack in the first place.
The network consistently checks that the node is running, performing services, and that the collateral has not been moved. These checks verify the Masternode and determines whether it is eligible to get paid. With each mined block on the network, one eligible Masternode from the active Masternode list is selected and receives a payment.
Masternode operators must also keep their software versions up-to-date, or they are dropped from the active Masternode list and stop receiving payments until they update. This has proven to be an effective solution. Because operators are incentivized, users can count on the network of Masternodes updating quickly when new features or bug fixes are released. We take advantage of this solid decentralized network of over 3,000 full nodes to deploy features that could only be possible with a robust set of trusted nodes.
Network Protection and Positive Feedback Loop
As an example of how the collateral protects the network, there are currently more than 3,000 full nodes. If a bad actor wanted to control 20% of the network (which poses no risk really) they would need to acquire 600 Masternodes. This would require a collateral of around 600,000 DASH with a current USD value of approximately $1.8M. Any attacker would to invest nearly two million dollars to try to attack the network, an act that – if successful – would destroy the value of his or her investment.
Another side effect of this model is it creates a positive feedback loop, where investors buy and hold more coins to create more Masternodes. End users obtain coins to take advantage of the valuable services and features that the 2nd tier network offers. All of this together, creates excellent support for the coin’s value.
Thus, DASH has created a completely new crypto investment product, while at the same time solving critical issues like speed of confirmation and privacy. There are many other services in the works as well. This strategy has been so successful that DASH, which is only 18 months old, has been able to form a network of 3,000 full nodes and growing. By comparison, BTC has a network of around 6,000 nodes. So DASH has a network about 50% the size of BTC while currently having only a fraction of its market cap, so there is currently huge potential in this project. Additionally, despite its young age, Dash is consistently in the top five marketcap coins, with a much more stable value than many of its competitors.
Decentralized Collaboration and Pro-Bono Work
Another side effect, is that Masternode operators become invested on the future of the project. This has created a network of volunteers that are willing to work pro-bono for the project, some with excellent backgrounds in business, technology, and payments. This has been crucial for the project, because being a fair crypto with no pre-mine and no special funding, it would have been very hard to get the kind of support a project like this needs to grow. This allows DASH to operate professionally even though it is essentially a decentralized autonomous effort. This is a form of social innovation and a glimpse at the future on how a decentralized company could function, where anyone can be an owner and can work.
Decentralized Governance by Blockchain
One of the greatest challenges of building a crypto currency platform is ensuring you create a decentralized system of governance to manage, fund, maintain and expand the project. This key element is absent in every currency to date. The natural response is to create a not-for-profit foundation that is tasked with maintaining the core protocol and promoting the coin, but is not really connected to the coin holders in any meaningful way. This approach has a few issues that have been made evident from the experience of older crypto currency platforms.
Current crypto foundations are not related to the currency itself by any mechanism that is included in the protocol and are not designed to outlive early adopters when they lose interest. The foundation then struggles to get funding until it implodes and core development of the protocol is left scrambling for funding or depending on charity that can’t be counted on and does not allow for proper budgeting and planning. Donations are also unfair to donors because there are always free-riders that benefit from the effort done by others without contributing. Other projects have financed themselves by pre-mining coins or doing pre-launch sales, which is not sustainable because control of the funds is centralized, and it is impossible to quantify the future needs of the project all at the launch date.
Through the network of full nodes and the collateral requirement, Dash already possesses a decentralized network of Masternode operators that are invested in the future of the currency. As a group, these owners can act as stewards of the core protocol development and promotion. We have implemented a decentralized management system based on a Masternode voting mechanism.
A portion of the block rewards (10%) are set aside by the network itself, and Masternode operators act as stewards of those funds. They can be directed toward any need the community of Masternode owners approve. These funds are used for the development and expansion of the ecosystem through community-submitted budget proposals. This is a highly decentralized way of managing the project as there are potentially thousands of operators that can take decisions together in a very practical way. In this way, any community member can submit good ideas, argue for their adoption, and see them funded.
The budgeting system is a 100% decentralized system powered by the Masternodes, and budgets are set and paid directly from the blockchain. In this way, the blockchain can hire core developers and introduces a new concept of paid blockchain contractors, where people work for and are directly compensated by the network, through the decentralized votes of all Masternode operators. One advantage of this model is it can survive early adopters. If early Masternode operators sell their coins, the new owner can set up a Masternode and with it acquire the right to vote on the budgets and projects. Much like the owners of company stock, this guarantees there is a working system of maintenance as people come and go from the project, making the network capable of sustaining itself on its own without depending on donations (and associated influence) from outside entities.
In this system, every Masternode operator establishes a bond of trust and a social contract with the network in which he is bound to contribute to the development and maintenance of the ecosystem from which he benefits. Under this model, a portion of the funds that the operator is bound to receive are given to him in custody, not in ownership, and are held in escrow by the network to be executed by the operators for the benefit of the ecosystem. Everyone contributes equally and proportionately to the costs of developing the network. There are simply no privileges and no loop-holes. This is complemented by the full node voting mechanism that allows for a distributed group to vote on a continuous basis on practical matters without the need to forfeit their right to decide to others, every few years, like with traditional governments or cooperative corporations.
We envision a future in which this model of transparent, unbreakable and verifiable contribution to the common good – in combination with continuous participation of the crowd through active voting – is utilized to manage organizations that are owned and run jointly by its members. Members thus share the benefits and responsibilities of the collective… entities such as governments, collective corporations, unions, DAOs, crypto-currencies, etc. We are calling this model, decentralized governance by blockchain.
Creating Decentralized Services and Applications Over the Masternode Network
Now that we have a decentralized network, where you can count on updates, committed operators and protection from bad actors, all tied to your blockchain, we can really start building features and services over it to provide numerous value-added services to end users. Our approach to this has been identifying key problems in crypto-currency and creating decentralized, trustless solutions for them. Some of the innovative solutions DASH has been able to create so far are ground breaking: Instant Transaction Confirmations DASH successfully deployed its InstantX technology. This new technology allows us to have near-instant transaction confirmations without creating any additional bloat in the blockchain. This technology will allow for crypto-currencies such as DASH to compete with nearly instantaneous transaction systems such as credit cards for point-of-sale situations while not relying on a centralized authority. This feature is potentially revolutionary in crypto-currency, by shortening the delay in confirmation of transactions to as little as 4 seconds. InstantX is a game changer in many ways, but we think one of the most important aspects is it allows DASH to stand on its own from a Point of Sale perspective. The idea of face-to-face crypto transactions is not novel. In the future, users could transport Dash on their phones or laptops without having to deal with customs issues or exchanging money when they reach their destination. But crypto-currency wasn’t practical for small face to face transactions, until InstantX was developed because of the lengthy confirmation times. No one could expect to wait ten minutes or more from transactions to confirm, and many merchants would be unwilling to accept the risk of unconfirmed transactions. Fungibility and Privacy DASH has created a more fungible currency than other existing solutions. By using denominations and pre-emptive mixing, Dash has effectively created digital cash. By fungibility, we mean that any one coin of Dash is indiscernible to any other. In DASH you can divide your money into denominations: 0.1, 1, 10, 100, mix it with other users in the network in a completely trustless and decentralized way, and finally use it to pay for things just like with cash. Better fungibility is a desirable property in crypto. With a fully fungible currency, coins shouldn’t come with a transaction history attached to them. This is important to protect users, as they may end up with coins in their power without knowing the history behind those coins. Users may find themselves in trouble someday for activities to which they were unrelated, or could be banned from transacting with coins gained through perfectly legal enterprise, but which the vendor deems undesirable (such as gambling). To be fully fungible the currency should allow its users to transact knowing that they are only responsible for the transactions they make in the present, so that at the moment a payment is settled there is only a transfer of value from sender to receiver, but the history of previous transactions stays with the sender. This is very important for the security of the users and to facilitate trade in the economy. Also, in the case of BTC, not having a required collateral to run a full node, makes it free for people to Sybil attack the network and snoop on transactions. As services like the following develop, it will make the fungibility issue on Bitcoin more evident..
- X11 hashing algorithm: 11 rounds of scientific hashing functions (blake, bmw, groestl, jh, keccak, skein, luffa, cubehash, shavite, simd, echo)
- Block reward is controlled by: 2222222/(((Difficulty+2600)/9)^2)
- CPU/GPU mining
- Block generation target: 2.5 minutes
- Difficulty Retargets using DGW
- 7.14% decrease in the number of coins generated per year
- Est. ~19M Max Coins
- Decentralized Masternode Network
- Superior Fungibility and privacy
This part is the core of the coin and will definitely not be the focus of the regular user base, but having these basic elements of the coin defined to work properly and better than previous solutions was crucial.
We already have additional features planned for the network that we are not able to disclose at this moment.
In the future it could be possible to create an API or another technology for the Masternode network that could allow for third-parties to create their own applications, over a decentralized, trustless network with an attached blockchain and payment system. End users would have the certainty that when accessing any applications or services that run over the DASH platform, they wouldn’t be running any risks.
All of the innovations outlined above will help us realize our goal of making decentralized crypto-currency technology more friendly, secure and usable for humanity.