Dash vs Bitcoin: Has Dash Successfully Overcome Bitcoin’s Shortcomings
Bitcoin’s shortcomings led to the development of the cryptocurrency Dash, but do Dash’s results live up to its lofty ambitions?
Bitcoin entered the scene in two thousand nine and developed a sizable network effect in a field of little competition. However, as the Bitcoin network grew and development standardized, improvements became difficult to implement. Such switches require an terrific consensus from all network participants, thus creating numerous contentious debates, as has been witnessed recently in the Bitcoin scaling debate. As a result, a lot of Bitcoin’s shortcomings are now solidified into the protocol, meaning that it can only maintain certain specific use cases.
(Formerlly known as XCoin & DarkCoin)
What Bitcoin blockchain weaknesses does Dash seek to overcome?
Bitcoin’s weaknesses include a block size limit that slows transaction processing time and a 10-minute block creation period that constricts Bitcoin’s real world transaction usage by users.
As an open source project, Bitcoin lacks a developer funding model, which leaves the development to be managed by volunteers or powerful interest groups. Bitcoin also lacks a coherent governance mechanism that would permit for protocol switches to be lightly agreed on and implemented. The blockchain data validation is managed by low end-nodes on a voluntary basis, and there’s no financial incentive to upgrade to the latest hardware and software.
Bitcoin transactions also lack privacy. Data mining companies are becoming awkwardly good at identifying the source of Bitcoin transactions.
As a result of these and other weaknesses, Bitcoin faces enlargening barriers to market adoption and the fantasy of a true P2P electronic cash has been mired by endless debate and slow upgrades.
So what does Dash do better than Bitcoin?
The developers of Dash wished to whip out a fresh blockchain, free of these ‘baked in’ weaknesses. Dash developers baked their fresh blockchain to be the world’s very first self-funding and self-governed blockchain protocol, with instant payments running on a network of incentivized Masternodes. Here are some of the key ingredients Dash introduced that Bitcoin doesn’t have:
- Masternodes. Unlike Bitcoin, Dash introduced Masternodes to incentivize users with payments to secure the network and add cool transactional features like InstantSend. Masternode operators invest 1,000 dash to host a Masternode. Masternode operators get 45% of the prize for every Dash block that’s mined. Each operator receives their prize of around seven dash each month.
- InstantSend. Instasend uses the instantX Masternode feature to send and confirm transactions in seconds. Bitcoin’s block propagation takes an average of ten minutes, and six typical conformations for large purchases could even take an hour.
- X11 Mining Algorithm. Bitcoin uses SHA 256, which is utterly energy intensive and susceptible to ASIC mining chips. This means only a few big players that can afford hashing power monopolize. The X11 mining algorithm is more energy efficient and resistant to ASIC chips, so Dash miners can use CPUs and GPUs for hashing power.
- PrivateSend. While Bitcoin transactions are pseudonymous and can be traced to their users, Dash introduced PrivateSend transactions that permit Dash users to opt for total privacy in their transactions.
- Self-Sustainable Decentralized Governance. While Masternodes are incentivized and can govern the blockchain with one vote per Masternode, the Dash blockchain is also self-funded. A portion of each block—currently 10%–is allocated to the Network Development and Promotion Budget. This means Dash developers and promoters receive payments for their contributions, unlike on Bitcoin where contributions are voluntary and unincentivized.
So what does the market think of Dash?
Despite its features, Dash is still catching up to reigning champ Bitcoin’s 5-year headstart. Dash ranks behind Bitcoin as the 6th thickest currency in terms of total market capitalization.
A coin’s market cap is one way of measuring the size of a cryptocurrency. The volatility of a crypto’s price influences the market cap of cryptos. Daily trade volume—calculated in USD—is argubly a more useful measure. Trading volume reflects how much a particular cryptocurrency is actually used. Bitcoin still reigns king here: Today Dash trade volume ranks 11th with $61.27 million behind Bitcoin’s $1.9 billion very first place value.
Even daily trade volume does not give the utter picture tho’, as much of it consists of trading activity on exchanges rather than real world purchases. This is an significant distinction. Many exchanges use Bitcoin to trade so you so you would have to primarily buy bitcoin to then trade for other cryptocurrencies. This may skew the figures, but it also shows the strength of Bitcoin’s very first mover advantage.
With Bitcoin’s very first mover advantage, Bitcoin has become a clear market leader. This makes for a skewed and unfair comparison with all other cryptocurrencies. Yet, while looking at market caps and trade volumes, it is significant to note that other cryptocurrencies that share similar features to Dash are sometimes higher up in the pecking order. Litecoin also generates fresh blocks every Two.5-minutes and has long held a higher market cap than Dash. Monero, another privacy focused coin, released in the same year as Dash, has a higher daily trade volume. Ripple also has quick transaction confirmations and is rigidly placed in the top Five.
All this seems to suggest that simply introducing features that are an improvement on Bitcoin’s deficiencies is presently not enough for the market. While Dash’s self-funded blockchain provides slew of money to spend on development and marketing, Dash still seems to be fighting to attract 2nd tier developers to build out the blockchain aftermarket infrastructure, like Point of Sale apps and an array of innovative wallets for users. Bitcoin and the leading cryptocurrencies such as Ethereum, Monero and Litecoin among others, have built more connections with secondary industry players that connect merchants and users.
It may be unfair to compare a cryptocurrency that is three years old with one that has been around for eight years. It could be argued that at a similar stage of its development, Bitcoin was still an obscure computer science project, or ‘nerd money’. What is certain is that Dash has shown resilience and has infrequently been outside the top ten currencies since hitting the scene. Having developers and Masternode operators paid for their efforts directly by the blockchain, along with improved governance mechanisms, certainly has positive implications for Dash’s long term expansion and agility in adding fresh features. As cryptocurrencies mature, there is slew of space for many to establish their own markets. Instead of attempting to pick an outright winner, it is very likely more significant to see which cryptocurrencies have the right fundamentals to sustain and thrive. In those terms, Dash is well placed to proceed growing and innovating.