Why does Dash have a bad reputation?

By May 26, 2017Bitcoin Business
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*This article is meant to present an unbiased review of Dash (formerly darkcoin) and the facts surrounding it. I do not hold any of the coins mentioned (including Monero) in this article in any quantity.*

So you may have seen announcements recently about Monero being introduced in addition to Bitcoin on several darknet markets such as Alphabay. Monero is a currency offering anonymous transactions through ring signatures. However, if you have been following altcoins recently, you may have noticed that Dash’s market cap is significantly larger than Monero as seen in the picture below.

So why is Dash not on any darknet market?

Evan Duffield’s Instamine?

There has been a lot of speculation on this matter, but the simple fact is that within the first 8 hours 1.5 million coins had been mined. People were made to believe by Evan (the creator of DASH) that the launch was occurring in a couple of days, when in fact it happened hours later (to find out more click here).

This meant that Evan fraudulently or maybe accidentally (less likely) managed to mine about $140 million dollars worth of Dash (at today’s price), since he was the only one who knew about the launch and therefore the only one mining the coin.

The reason that DASH gave for this was that there were problems in code, but the reason for the supposed delay of launch was to fix bugs in the code. Why would the coin be launched suddenly without warning with a serious error?

The instamine is a big problem because a key point of cryptocurrencies is being decentralised and trustworthy. An instamine means there is little reason to trust Dash and its developers with your money.

Another defence given for the instamine is that the coins mined by Duffield were redistributed through exchanges, but there is little proof for this. For example, a Dashforum member links to two users offering to sell DASH, but this proves little.

There is no proof to suggest Evan Duffield has sold any DASH at all.

But why does this matter?

Problems with anonymity

Dash’s privacy depends on masternodes, which anyone can set up for a price of 1,000 DASH. They act as a sort of mixer for each transaction, meaning transactions cannot be traced in the same way as Bitcoin.

With Bitcoin, governments can use ChainAnalysis to link people’s different addresses to one identity. With both Dash and Monero, this is impossible.

However, because of the premine, Duffield could have easily bought a very large number of masternodes. This is a problem because masternode owners with malicious intentions could try to deanonymise users.

If someone owns several of them, the problem further escalates, since Dash users have to trust masternodes to a certain extent.

It also has been noticed by members of the bitcointalk forum that a large number of the masternodes are run using AWS servers, meaning one entity could own many of them anonymously.

Concerns with price fluctuations

Since Evan could possibly hold a very significant number of Dash, naturally he would have a very large influence of the price.

This means that he would be able to manipulate the price to make the coin overvalued, by selling Dash to himself at higher prices.

Other people would see the price increase and would buy it themselves, hoping to make the profit. It would be in Duffield’s interests to increase Dash’s value, since that would make him richer.

Of course, there is no proof that he is or has done this, but it is very reasonable to suspect he may or could.

Evan Duffield presenting at Bitcoin Wednesday

Evan Duffield, founder of DASH.

Is Dash’s anonymity better/worse than Monero?

There is no easy answer to this question.

While Dash uses masternodes for anonymity, Monero uses a completely different method known as ring signatures.

Essentially, ring signatures mean your transactions are obscured by being mixed with other people’s ones randomly with “inputs” and “outputs,” meaning even with a blockchain, no one can know how much Monero you sent or to who.

Both methods have disadvantages however. With Dash, the weakness is the trust needed in masternodes. In Monero, if ring signatures have a weakness, all Monero transactions could potentially be deanonymised.

“Smooth,” a Monero team core member, wisely says that no technology can be or should be trusted completely, for example shown by Tor vulnerabilities that have been exploited by law enforcement recently (which they have then refused to reveal).

Dash’s technology has no serious problems, but the controversy surrounding the instamine means that it will likely not be added to any darknet markets anytime in the future.

This article was not meant as FUD; if you still want to invest in Dash, go ahead and do so. But make sure you do your own research before you invest in any coin, including Monero of course.

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