The bitcoin network suffers from long transaction times to confirm payments. Confirmation can take minutes or hour to be confirmed. This is a problem that still hampers the possibility of mainstream adoption as an everyday medium of exchange. Because Dash aims to be a payment system for day-to-day transactions, it focuses on the ability to confirm payments instantaneously. It also mainly focuses on the ability to send transactions securely & privately in the network.
Dash attempts to solve the privacy and instant pay problem their their masternode system. Masternodes are a secondary network which provide extra services to the network (current services are the instant pay and privacy features). Hosting a masternode requires a bond of collateral of 1,000DASH. The masternode network keeps the DASH network safe and allows participants to earn interest (45% of the proceeds). They also reduce the volatility of the currency as they hold a significant number of coins.
In the Masternode network, a few pseudo-random nodes perform the work (tx verification), without having the whole network to do the same tasks. No single entity can control the outcome of a task performed in the Masternode network. This makes the network trustless.
The masternode system also has a check and balance dynamic built in. The nodes in the network must alert the rest of the network to ensure they are active. The network pseudo-randomly selects two nodes per block to ensure that they are active. Approximately 1% of the network is checked in each block, and the entire network is checked about six times per day. This means an attacker has to be selected six times in a row to trick this system. Moreover, violators are canceled out by the system as the quorum system selects other nodes.
The active number of nodes on the network have a soft and hard limit. The hard limit is the total number of DASH in circulation divided by 1000 DASH (there can only ever be so much DASH). The soft limit is imposed by the price it costs to acquire a node and the limited liquidity on exchanges.
Dash’s privacy option, “PrivateSend”, is a system that merges transactions to obfuscate the original transactions. It takes several inputs and merges them such that they cannot be uncoupled after that. The merging requires at least three participants. The denominations in operation must be either 0.1DASH, 1DASH, 10DASH, and 100DASH. This is a potential limitation of the privacy system.
Dash’s instant transaction feature, “InstantSend”, allows users to send and receive instant irreversible transactions through the masternode network. The network sets a transaction lock, which enforces the inputs of the transactions to be spendable only in those specific transactions. It takes around four seconds for the quorum to form and to set the transaction lock. This makes sure users can’t do two transactions for the cost of one.
Dash is a promising coin. Thus far, the network’s privacy has not been an issue. There was a bug found in Instantsend, but the team promptly addressed the issue. Like all of these early projects, there will undoubtedly be flaws found. The team has been proactive about this issue. They’ve hired white hat hackers to test their system for any flaws. It is a project worth monitoring going forward.