One of the most significant challenges that Bitcoin has faced since its inception is the lack of an intrinsic governance system that will ensure 4 necessary survival actions:
- Managing the network
- Upkeeping and maintenance
- Expansion of projects
- Generating funds for the above.
These issues compound the scalability and privacy concerns which are preventing its wide-scale adoption as a payment protocol.
There is no denying that decentralised finance is the need of the hour, especially given the prevalent economic instability worldwide. So, to solve the pain points of Bitcoin, Dash and other alternative cryptocurrencies (altcoins) were introduced in the market.
With so much information and multiple options to choose from, you must be wondering how Dash mining is different from Bitcoin mining. To make it easier for you to understand, we have compiled a technical comparison between them.
An Overview of Dash as a Payment-Based Cryptocurrency
Cryptocurrencies have been around for some time now; it was in 2008 following the financial crash when Bitcoin was launched for public use. This was mainly done to provide people with a method to control their money without relying on third-party intermediaries, like banks and stockbrokers.
What happened in the financial crash was that people lost faith over such mediators. If banks could go ‘bankrupt’, it’s like saying oceans could go dry!
So, a new form of currency based on an immutable public distributed ledger technology was launched as an attempt to decentralise finance in its current state.
Similar to any other software available in the market, users soon found that the flaws in Bitcoin could be solved as well. Further, since crypto tokens are supposed to be permission-less (decentralised), anyone could improve upon the existing code available open-source for the users.
Altcoins (alternative cryptocurrencies) were launched primarily to tackle the said shortcomings. As you might already know, Bitcoin transactions can take a significant time to be validated, which may lead to higher transaction fees as well.
Such projects claim better privacy, faster transaction speeds, “more” decentralisation, or offer a benefit that Bitcoin cannot provide at all.
Launched in 2014, Dash is a forked cryptocurrency based on the original designs of Bitcoin with specific improvements.
Trivia: ‘Forked’ means independent development of a software’s public code, away from the original developers.
In its original whitepaper available on GitHub, Dash claimed to be a strongly anonymous cryptocurrency with immutable instant transactions and a two-tier P2P incentivised network.
It does so by using X11 hash function instead of SHA256, making Dash mining easier than various other cryptocurrencies available for public use. Further, it reduces the average block time to 2.6 minutes, compared to Bitcoin’s average 10 minutes per block.
In fact, Dash revolutionised the crypto market by incorporating a decentralised governance protocol into its Blockchain. This is one of the most prominent ways Dash differs from Bitcoin, as 55% of new coins are rewarded to non-miners.
To understand how this works, we will need to take a step back and understand how new Dash coins are mined into existence. So, let us start by answering the following question as thoroughly as we can.
What Is Dash Mining, and How Does It Work?
In terms of cryptocurrency, mining refers to the process of validating new transactions on the Blockchain, which adds new coins into circulation.
Like every other cryptocurrency based on Bitcoin, ‘Dash mining’ secures the Blockchain and generates new coins where complex mathematical algorithms decide who receives said coins. In Bitcoin, however, all block rewards go to the miners (i.e. people who set up a mining rig to solve the said computations).
Dash is different; a two-tier governance mechanism is built into its protocol. Feeling overwhelmed? Let’s make it easier for you.
In Dash, block rewards (newly mined coins) are distributed proportionately among three entities.
One, miners get 45% of the block reward.
Two, Masternode owners get the next 45%.
Three, Dash Budget System (a treasury to upkeep the network) gets the final 10%.
As you can see, a major chunk (55%) of block rewards goes towards the maintenance of a governance structure. While we will discuss Masternodes later here, for preliminary information, these are computers that store and relay information within the cryptocurrency network.
Incentivising masternodes (45% block rewards) means an increased propensity for nodes to achieve even more complex tasks and introduce new privacy features, along with maintaining the health of the network.
Dash Mining Requirements
Similar to every other cryptocurrency, Dash mining also requires a dedicated Dash mining rig to ensure maximum profitability.
- Dash mining hardware
As declared on the forum itself, Dash mining using CPU or GPU is not profitable anymore. The energy required to compute mining mathematical operations is no longer feasible for proprietary processing units available in the market.
What you will need is a dedicated Dash mining ASIC, which is designed to get the best results with maximum efficiency. Some of the most popular ones available include Dragonmint 16T and the Antminer S9, both with hashing power equal to and above 14 TH/s.
However, note that these units can also cost above INR 180,000 ($2500).
- Dash mining software
As a privacy-oriented cryptocurrency, finding the perfect Dash mining app can be a difficult task in itself. There are various CPU and GPU specific applications available in the market for you to choose from; so make sure that you use the authentic ones for maximum safety.
Now that we have a preliminary idea surrounding Dash mining requirements, let’s address the elephant in the room. How is Dash mining different from Bitcoin mining?
How Is Dash Mining Different from Bitcoin Mining? A Detailed Comparison
Several points of difference exist between Dash mining and Bitcoin, ranging from governance to transaction speed optimisation. As you will come to observe, most of these differences stem from existing issues with Bitcoin’s deployment of Blockchain, such as scalability, lack of incentive to run a node, anonymity, and governance.
Let’s address these differences one by one, establishing a comparison between Dash and Bitcoin mining.
- Masternode Network (two-tier incentivised network)
Nodes are the essence of a Blockchain. These nodes are not only responsible for storing a copy of Blockchain and validating transactions, but also for synchronising and propagating messages throughout the network.
Bitcoin nodes do not have an incentive to exist; this is one reason why such nodes are on the decline as more tokens are mined. Dash introduces a second tier called Dash Masternode Network as a solution to Bitcoin’s issue.
By incentivising nodes, Dash network users are heavily invested in the future of the cryptocurrency. Anyone can set up a Masternode but will have to lock in 1000 Dash tokens as a collateral. Masternode operators are also the most stable ones, as they cannot repurpose their computational assets for other tokens.
- InstantSend and PrivacyProtect
One of the most significant benefits of this 100% decentralised governance system is introducing advanced features like instantaneous transactions (InstantSend) and private transactions (PrivacyProtect), two shortcomings of Bitcoin.
InstantSend works by barring the spent amount immediately from the network without waiting for a block to be confirmed. This results in quicker transactions with the added benefits of prevention against double-spending.
PrivacyProtect is a coinjoin technique, in which transactions among several entities is mixed into a single one instead of separating them. This ensures transaction anonymity as it is difficult to isolate a user in a joined block.
- Self-funding through Blockchain
Open-source or decentralised projects have always struggled with funding. These projects are either funded by volunteers or through venture investors. With volunteers, there is a risk of their bank accounts and dedication drying up, while with investors, there’s a risk of clashing interests.
Dash solves this uniquely and interestingly. 10% of block rewards are saved in a treasury dedicated to the upkeep of the network. When approved, a set number of Dash tokens is used to pay the core developers, marketing team, and propose other projects for further improvement.
When you think about it, the users are essentially employees of the Dash Protocol.
- Hash algorithm
Moving on to the technical part, Dash mining utilises X11 algorithm to secure the Blockchain, compared to Bitcoin’s 256. X11 makes use of 11 scientific hashing algorithms, making the processing distribution fair among users.
X11 is much more complicated than SHA256, meaning that Dash mining ASICs are much more challenging to create. Initially, this was done to give the currency some time to develop before ASICs made mining centralisation a threat to the network.
The original intent has worked, as even though Dash mining ASICs do exist, the network is not yet centralised. By that, we are talking about the fact that new Bitcoin rewards are primarily concentrated within a few monopolies.
As of January 2021, a Dash token price is equivalent to approximately INR 6,509 ($88.88) or 0.00277146 BTC.
Its market cap is $882,733,914, while fully diluted market cap stands at $1,684,311,268.
As of June 2020, Dash mining reward stands at 2.88+0.00179 DASH (equivalent to $257.33).
This block reward decreases by a set percentage (7.14%) every 210,240 blocks (383.25 days). On the contrary, Bitcoin halving reduces the block reward by half every 210,000 mined blocks, and the current reward stands at 6.25 BTC.
- Transaction speed and Fees
The most common issue you will come across with Bitcoin is scalability. As of writing, the Bitcoin network can handle 4.6 transactions per second (TpS). On average, Visa can handle approximately 1700 TpS.
With features like InstantSend, Dash has a reduced transaction time allowing the network to handle more TpS. As the average block size is only 2 MB, the network can process up to 56 transactions per second with an average transaction speed of 2 min 39 secs.
Is Dash Mining Still Profitable in 2021?
Based on its market capitalisation, Dash has undoubtedly earned its position among the top 30 cryptocurrencies to mine in the coming decade.
As you might have seen up until now, Dash is a revolutionary cryptocurrency with a potential to explore the doors to new business policies. Its security highpoints bolster its position as an encouraging prospect for international trade at a relatively cheaper cost than traditional payment protocols like Visa and other wire exchanges.
Experts believe that early adopters may still see their Dash property turn into an incentive somewhere down the line despite the risks of value changes.
There is still time before Dash becomes the champion of instant cryptocurrency transactions and anonymous financial exchanges; but the future definitely looks promising.
However, it is advised that users interested in Dash mining do thorough research of the cryptocurrency market before making any purchase or investment decisions.
[su_note] KuberVerse is an educational initiative. Anything expressed here directly or indirectly is not investment advice. And we ask you to do your own research before investing. [/su_note]
Disclaimer : Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. The information provided in this post is not to be considered as investment/financial advice from CoinSwitch. Any action taken upon the information shall be at user's own risk.
Table of content
Subscribe to Our Newsletter with exclusive content.