Our Dash Digital Asset Report and Evaluation analyzes the Litecoin fork and its position and potential within the cryptocurrency world. As a coin focused directly on private payments, the platform has looked to mass adoption in emerging markets and is considered by many to be a ‘true’ digital currency – a replacement for money.
Introduction to Dash
A digital currency engineered specifically for payment transactions.
Dash is a fork of Litecoin and is one of the earliest offshoots of the Bitcoin protocol. The cryptocurrency was introduced in 2014 and went through several rebranding exercises before solidifying as Dash in 2015. The project is focused on creating a practical instrument for payment transaction by addressing notable bitcoin shortcomings such as the lack of anonymity, low transaction speeds and governance.
Dash has also put in considerable effort to increase general consumer-service adoption through development of user-friendly features and UI. Despite a number of controversies that have haunted the project, we consider Dash to be one of the more promising cryptocurrencies in the market today.
Dash Market Opportunity
In 2017, the top 6 credit card brands saw nearly 300 billion transactions worldwide. This is only a fraction of the total electronic transaction market. PayPal alone processed $139.4 billion over 2.3 billion transactions in Q2 2018.
There is also a growing trend in contactless payments, with Transparency Market Research estimating that the value of such payments will grow from $14.1 billion in 2017 to $801.4 billion in 2025. Dash targets the broad electronic transactions market with its range of consumer and merchant features, which present a multi-trillion-dollar opportunity.
However, it is important to note, while Dash is one of the first projects to work on improving speed and privacy features of cryptocurrencies, it is certainly not alone. Monero and Zcash are two of the more notable projects appearing in the coinmarketcap top 20, but there are many others outside of it. Also, the big credit card players, Visa and MasterCard, have been seriously experimenting with blockchain technology and have filed a number of patents relating to payment transaction processing.
This can be viewed as a confirmation that blockchain technology represents a significant commercial opportunity in the electronic payments segment. Dash has gained an early mover advantage, but given the interest from incumbents, it needs to move quickly in order to capitalize on this opportunity.
Dash is a fork of Litecoin and as such is a descendant of the Bitcoin codebase. It utilizes a PoW consensus protocol and the X11 hash algorithm as part of its core. Dash also employs a Dark Gravity Wave algorithm to dynamically adjust mining difficulty with every block. This makes Dash a nimbler currency platform than its predecessors.
However, what makes Dash truly different is its two-tier system. Dash uses masternodes to facilitate advanced features such as PrivateSend and InstantSend. PrivateSend is an evolution of CoinJoin that uses transaction mixing to achieve anonymization. It requires a minimum of three participants and use of common denominations of the Dash coins. Dash runs PrivateSend in passive mode and sends funds through multiple masternodes to ensure sufficient security and anonymity.
In the case of InstantSend, Dash utilizes pseudo randomly selected masternodes, or quorums, to act as oracles and approve transactions at dramatically improved rates compared to its predecessors.
The utility of the unique features of Dash is reliant on correctly operating masternodes. So, Dash uses as a Proof-of-Service (PoS) protocol to regularly ping masternodes and confirm that they are operational.
The fact that the Dash network is based on the Bitcoin source code inspires confidence in its solidity. However, there are significant risks involved with the surrounding special features and supporting protocols, as the code for them has not yet passed the test of time that the older protocols have.
Unfortunately, the Dash project has been hampered by a number of development delays. The 2017 roadmap had the DashCore 12.3 release scheduled for December 2017 and the Evolution v1 launch targeted for February 2018. In reality, DashCore 12.3 was not released until July 2018, with the Evolution v1 tentatively rescheduled for Q4 2018. Evolution represents a major catalyst for the Dash ecosystem as it is expected to include a wide range of user-friendly adoption tools to simplify the customer-merchant relationship. While there have been a number of demos released, and a patent was applied for, further product launch delays will bring into question the long-term viability of the project.
The Dash Ecosystem Structure
Unlike some of the classical blockchain projects, the Dash ecosystem revolves around a two-tier public network.
The first tier is comprised of the miners, consumers, traders and merchants. The first-tier operates much like the Bitcoin protocol that it is based on, with PoW consensus being the key mechanism behind mining and transaction approval.
The second-tier involves masternodes. These servers enable Dash to offer specialty features such as PrivateSend and InstantSend for anonymization of transactions and increased processing speed.
Dash aims to become a “user-friendly and scalable digital currency platform suitable for mass adoption”. To this end, Dash has made steady progress to grow and develop partnerships and infrastructure necessary to grow and support its ecosystem. It is now accepted by over 3000 merchants across the globe, and the number is growing. The partnership with Alt36 has been used as a poster child for propagating Dash as a payment solution for businesses. Alt36 has formed a partnership WebJoint expanding the Dash footprint in the legal cannabis space.
In addition, problems with hyperinflation in Venezuela have showcased the mass adoption potential of Dash, as the currency experiences a spike in interest both in terms of wallet downloads and merchant acceptance.
Dash is also working on setting up supporting infrastructure, including ATMs, debit cards and POS partnerships. Besides, the core Dash Wallet, the cryptocurrency is supported by a number of hardware, desktop and mobile wallets. Dash is also supported by a number of debit cards, although given the unstable situation surrounding card licensing, the exact number varies. Moreover, it is accepted by a growing number of ATMs across the globe.
A key part of the effort will be the Dash Evolution platform. The system will ease the use of Dash as a payment tool by simplifying the UI/UX, set up, and integration experience, for both merchants and consumers.
Dash also differs from many competitors in that it is self-governing. New development projects have to be proposed to the community as governance objects and then masternodes vote on them. A proposal must be voted on by more than 10% of the operating nodes in order to be accepted. The DAO treasury is then used to fund the projects.
From the ability to vote on the 2mb increase of the block size to funding of projects, the community has shown an ability to self-regulate in a decentralized manner. This is especially impressive at a time when many projects have chosen to compromise and sacrifice decentralization and market it as a necessary measure for efficient governance.
The core network is also growing. The number of active addresses is increasing in a step-like fashion. The current plateau is indicative of the need for a new growth catalyst. In this regard, the success or failure of Evolution will likely play a key role in determining the long-term prospects of Dash.
Number of Active Addresses
The number of active masternodes has also been steadily growing, which increases confidence in the health of the network.
Overall, the Dash ecosystem is showing consistent growth. However, it might prove difficult to maintain this pace without significant new technological development.
The Dash Token Economy
Dash is the native coin of the Dash blockchain and has several use cases within the ecosystem. Unlike many of the other cryptocurrencies, Dash offers more than just mining incentives in an effort to build and maintain the global infrastructure.
Reward – There are three primary entities supporting the Dash ecosystem: miners, masternodes and the DAO. Dash utilizes a PoW consensus protocol, providing a reward for signing new blocks. However, Dash mining rewards are split between the three entities, with 45% going to the miners, 45% going to the masternodes and 10% going to the DAO.
Staking – Similar to a PoS approach, Dash requires masternode owners to stake 1,000 Dash to operate a masternode. This helps to insure the network against malicious actors and also creates a cap on the number of nodes that operate at a given time.
Fees – Dash offers a number of second-layer services that utilize the masternodes. In order to take advantage of features like InstantSend, users must pay a small fee to the masternode operators.
Currency – Dash coins are being accepted by a growing number of retail merchants, enabling users to utilize it for purchasing and P2P transactions. The currency is also widely traded on exchanges for speculative purposes.
The Dash mining supply is scheduled to shrink 7% each year until it is finally exhausted in 2150. The mining reward per block is also tied to the number of miners in the network. This should allow Dash to avoid major liquidity driven price events related to supply cliffs.
Much like the rest of crypto market, Dash has been hit heavily by the correction in prices. However, Dash has arguably been hit heavier then some of its competitors such Monero and Zcash. At its peak Dash had a market cap bigger than both of them, but as the bear market has ensued Monera has passed Dash in the top 20 rankings.
Over the last three months three cryptocurrencies have largely moved together with Monero suffering the lowest drop in price. This has been a yearlong issue for Dash, as the network is self-funded, so a significant drop in the price of its native asset, dramatically reduces the value of its treasury. This creates long-term risk of project sustainability.
3-Months Price Comparison
However, when it comes to volume, Dash is the clear-cut winner. All three of the cryptocurrencies can be considered liquid by the crypto market standards, however, Dash, by far, sees more trading activity.
3-Months Volume Comparison
This could explain the comparatively higher volatility of Dash relative to its competitors. This represents increased short-term risk that is not being compensated by the returns.
3-Months Volatility Comparison
It is encouraging to see healthy volume for Dash as it suggests that if and when positive catalysts are realized there will be demand and a price recovery will be possible.
Evan Duffield, Founder/Advisor – Evan has 15+ years in the technology industry. He spent his early years working as a software developer for Warped AI, iAcquire, Wells Fargo, and Verizon Wireless. Evan also has experience in social media, AI and fintech and has a Series 65 certification.
Ryan Taylor, CEO – Ryan has 15+ years in the financial services and technology space. He has worked as a hedge fund analyst covering the payments industry and was also an Associate Partner at McKinsey & Company’s Business Technology Office.
Bob Carroll, CTO – Bob has 30+ years of experience in both technology and entrepreneurship roles. He has held senior technology positions at a number of companies including, Informix Software and Everspring. He has also co-founded several companies including Mutual and 808 Partners.
Fernando Gutierrez Mosquera – Fernando has over 18 years of experience in various sales and marketing roles, including stints at Hewlett Packard, Telefonica Publicidad e Informacion and Telefonica Moviles. He has also co-founded a number of companies, including A Mano Fisios and Jemchicomac.
The Dash management team is 12 people strong and supported by 30 developers as well as other staff. Besides the core team, the ecosystem relies on community members and contractors to further its cause. The team has grown and expanded since the inception of the project in 2014 and has been tackling not just the development goals, but also commercial expansion, adoption and popularization of the cryptocurrency.
The last couple of years saw a transitioning of number of its key members to new roles. Ryan Taylor became the CEO, as Evan Duffield became a Senior Advisor and Fernando Gutierrez Mosquera was named CMO, to name a few changes.
However, the decentralized governance structure of Dash limits the power of the board and the management teams and calls for greater accountability. Some within the community have become unhappy with current price level and pace of development, blaming it on the direction and decision-making of the management staff. This has led to a proposal for the demotion of CEO Ryan Taylor. While the proposal is unlikely to garner enough votes, it is an indicator of concern within the community.
The management team is starting to find itself on the hot seat and needs to deliver on roadmap milestones, specifically the Evolution platform to stabilize the situation.
The Dash roadmap is a fluid and changing task list. Due to the self-governing nature of the network that allows it to vote on new projects and production delays, the timeline is often shifting. The currently published roadmap does not include specific milestone dates. Notable recent milestones include:
September 15, 2017: DashPay Wallet Alpha Testing
November 8, 2017: DashCore 12.3 Release
July 3, 2018: DashCore 12.3 Release
Q4 2018: Evolution v1* – Mainnet
*Evolution release was expected at the end of 2017, but has been continuously delayed, bringing into question the current estimate.
Final Thoughts and Verdict
The Dash project is initiated with a B grade. This is a solid project with a concrete application. Given the extended track record of the development effort there is significant confidence in the team’s ability to eventually deliver on the project milestones.
Furthermore, the clear cut uses cases make it more likely for broad market adoption to take place. However, delays in development, especially when it comes to the Evolution platform have stoked negative sentiment and increased risks.
Dash has been one of the more promising cryptocurrency projects because of its focus on building out a comprehensive ecosystem beyond the blockchain software. However, it is in dire need of positive catalysts in order to regain momentum lost over the past year.
Still, while Dash is susceptible to both systemic and individual risks, it is one of the more stable projects and could have a bright future.