1. What Is Dash?
Dash is a digital currency that was created by Evan Duffield, and shares similar characteristics to Bitcoin. Like Bitcoin, the cryptocurrency can be used as a medium to facilitate the purchase of various goods and services. However, Dash’s PrivateSend and InstantSend functions are innovations on the Bitcoin model that are meant to augment the transaction process when using the Dash coin.
The PrivateSend function is intended to make transactions on its blockchain more private than is currently being provided by Bitcoin. Input transactions by multiple users are collected to form one single transaction, which in turn then have numerous output transactions that are executed at once. This process makes it considerably harder to identify coin owners, as the flow of money between users is masked. The InstantSend function is also meant to make the flow of money between users an instantaneous process.
The Dash network can be viewed as a two-tiered network. At the first level, network functions such as the creation of new blocks are handled by miners, similarly to Bitcoin. However, unlike Bitcoin, there is also a second tier that exists on the network. The second tier houses masternodes, which perform PrivateSend, InstantSend, and governance functions.
A collateral of a 1000 Dash coins is required for the operation of a masternode, this is intended to prevent the occurrence of sybil attacks on the network. To incentive their operation, 45% of block rewards are allocated to masternodes.
The use of masternodes makes it the first decentralized autonomous organisation (DAO); network changes and funding for the development of Dash are all driven by masternode operators, through means of consensus voting. These operators are effectively responsible for encouraging the growth of the currency.
The PrivateSend function is a CoinJoin based coin-mixing service designed to increase user anonymity by use of denominations, passive ahead of time mixing, and a chaining process.
Denominations: For a user wishing to mix 10 Dash coins, this number would be further broken down into common denominations of, for example, 1, 0.1 or even 0.01 Dash. Each denomination is also assigned their own distinct address and will each be subjected to a mixing session. This approach is intended to strengthen the privacy of money flow in the network.
Mixing: For denominations ear-marked to be mixed, the Dash wallet will send a mixing request to a masternode, to further anonymise the movement of funds. The masternode creates a ‘session ID’ which contains information such as the denomination of Dash that the user wishes to mix. This information will sit in a ‘mixing queue’ until there is a match with another user that also wants to mix a similar denomination of Dash. Currently, PrivateSend is limited to 1000 Dash coins per mixing session, with each mixing session requiring at least three participants.
Chaining process: To further increase the level of user anonymity, Dash also utilises a chaining process. This means that funds are sent through multiple masternodes to undergo further mixing sessions, thereby ensuring privacy on the network.
The InsantSend function in the network allows for instantaneous transactions between parties. While it is not uncommon for other cryptocurrencies to offer instantaneous transactions, The InstantSend function is unique in that it also prevents the occurrence of ‘double-spending’. Double spending arises when a user makes two purchases using the same funds that should have been restricted to the first purchase. The InstantSend overcomes this problem by locking down funds intended for a transaction, so that they cannot be used again in a subsequent transaction.