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Dash: Its Threat to Bitcoin

 4 min read / 

Referred to as the more secretive version of bitcoin, Dash was created by Evan Duffield and Kyle Hagan. The key concept of Dash is its Darksend system; it makes transactions untraceable through Masternodes, which collect and execute several transactions at once as well as provide the opportunity for users to opt for multiple rounds of mixing through PrivateSend, hence making it uncertain where the coins are going.

The cryptocurrency bubble has led to a peak of $408.74 per Dash, with a steep escalation in price from $12.58 at the start of 2017, which could be due to the culmination of years of development and expansion. Melt-ups are generally proceeded by melt-downs, which is starting to be displayed through the decline in price per coin to just over $291.77 at present. Some investors, due to the fear of missing out, may choose to invest in unregulated cryptocurrencies because of their high returns in the past, given the current risk-averse market conditions.

Dash’s co-founder, Duffield reinforced this idea by saying: “[They] don’t consider the Dash project to be a competitor to bitcoin and believe we can co-exist in harmony.”

Dash vs Bitcoin

Whilst Dash does not see bitcoin as a competitor, it is worth noting the differences between these two popular cryptocurrencies.

Bitcoin is seen as a cryptocurrency leader in terms of market capitalisation, user base and popularity- it is referred to the US Dollar, a world reserve currency by Duffield for cryptocurrencies. Dash, in contrast, is ‘a fork of bitcoin’ with a focus on instant transactions.

The main divide between Dash and bitcoin is that the length of time to process a bitcoin transaction is considerably longer than for Dash, hence the need to introduce hard forks. Dash is more scalable – it has doubled its block size to 2MB and has a two-tier network, thereby permitting instantaneous transactions. However, bitcoin is more accessible with more exchanges, merchants and software that support it; the cryptocurrency has the some of the most talented entrepreneurs creating start-ups around it, making it more useful.

Adding to this, the funding for bitcoin development comes from multiple sources, including Blockstream, MIT Media Lab’s Digital Currency Initiative and the Chinese Exchange, BTCC. In contrast Dash’s development funding model comes from setting aside 10% of the block reward to various projects; Dash does not have any guaranteed funds like bitcoin but would have no conflicts of interest.

The projects Dash works on primarily focus on user-friendliness- they aim to ensure their platform is accessible to anyone, unlike bitcoin exchanges which are fairly difficult to use. This would allow Dash to be implemented on a large scale in comparison to bitcoin. Dash also has a more formal governance model; as mentioned earlier, there is no reason to create forks because Dash has a voting system in place, which would be more effective in the long term. However, if problems arise with bitcoin, the coin would ideally adapt itself- implement features that differentiate altcoins, including Dash.

Investors, in general, are becoming convinced by the viability of digital assets: mass adoption is unlikely to occur with bitcoin as its network is overly congested. Dash in contrast with its Evolution update is aiming for scalability as well as user-friendliness, which would be more likely to survive in the long term.

Final Thoughts

Investment in cryptocurrencies bears a lot of risk because they are unregulated, illiquid and as yet have no direct, tangible use. The Securities and Exchange Commission recently refused the approval of a US Bitcoin ETF due to the lack of regulation in Bitcoin trading markets compared with traditional, regulated markets.

Dash is currently falling in price – this has occurred in other cryptocurrencies too as the introduction of new cryptocurrencies through ICOs has consequently led to smaller volumes of trade as investor confidence lowers in the popularity of Dash- this has contributed to Dash’s higher volatility. bitcoin, however, has escalated to $6,000 from $1,000 at the beginning of the year as it gains further popularity.

Once the bubble bursts or regulation tightens, bitcoin would have far worse consequences than Dash due to its larger market capitalisation and volumes of trade. Dash would be a more worthwhile investment in comparison to bitcoin despite its higher volatility because it has privacy features, formal governance and scalability.

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