Dash, an open source, peer-to-peer cryptocurrency that launched in early 2014 as a fork of the Bitcoin software, is aiming to shift its image from being known initially as ‘the privacy coin’, by redefining its benefits as a payments-oriented network with a new release on the way. CEO of Dash Core Group, Ryan Taylor, talks to P&L about what’s coming up for the altcoin in 2018.
Profit & Loss: With something like 2,000 cryptocurrencies currently available, how does dash differentiate itself?
Ryan Taylor: Dash has a long history of being one of the more innovative coins. One of the main innovations that has shaped the industry is the masternodes. We were also the first with instant transactions, and the first to market with a privacy feature. Additionally, we introduced as part of the protocol governance, explicit governance on the basis of voting - not on the basis of someone's hash rate - from people who are staked in the coin. We also introduced self-funding, making us the first cryptocurrency that's wasn’t funded through an ICO. I believe we're also going to be the first to market with a truly, username-based system that can be logged into from anywhere.
We're also the first to be bringing payments industry best practices to the crypto scene, which is dominated by cryptographers and mathematicians and really smart computer science people, but there's very few people from the payments industry. People may think that they're in the blockchain industry, but they're actually in some other industry - whether it is the logistics industry or the contracts industry - blockchain is just a tool. So we're really focused on being a great payment network and all of our decisions are made through that lens. We bring a very different and professional angle to this that I think is lacking broadly in the industry. At a very high level, what Dash is - it's obviously a cryptocurrency - but it's also a payments-oriented network. We pride ourselves on being fast and cheap and global.
P&L: When you talk about being a payments network, why is digital currency better than fiat?
RT: What digital currencies bring to the market is a much better currency in a lot of different ways. Digital currency can do things that no other currency and no other payment method can do, and that is where they derive their value. One of the attributes of digital currency, is that it is infinitely divisible. Right now, bitcoin goes out to eight decimal places - that can be changed through a software tweak – it’s infinitely portable, it can be put on a thumb drive and you can actually memorise a seed phrase of 12 words and carry it with you in your brain. It can be sent anywhere in the world instantly and cheaply. The transactions are not reversible, which has important implications for where it does well and where it will fail. It cannot be counterfeited. That can't be said of any other currency type. You can actually audit the blockchain and ensure the authenticity of your bitcoin or your dash or any other crypto. The last component that makes it really strong is that it's capped.
P&L: Looking at the payments space, what do digital currencies do well?
RT: They do well in high inflation environments. We've seen Venezuela become our number two market very, very rapidly over the course of the last year through community efforts there, and just a natural attraction to what digital currency has to offer versus the bolivar. The second is high chargeback environments. There are a lot of merchant categories that accept credit cards, but the charge back rates can be so high that the fees they incur are incredibly high. There are some industries where there's a lot of money on the table that can be passed along to consumers as an incentive. Even within a great environment like the United States, where we have a lot of financial freedom, we have a lot of stability in our currency and we have good payment networks, there is nonetheless a great use case there.
P&L: Let’s talk about governance. Can you explain the importance of the masternodes to your network?
RT: Most digital currencies are determined by the miners. It's on the basis of hash rate that you get to vote, you needn't hold any bitcoin, you could cash it out as you receive it. Nonetheless, they are the decision makers on the Bitcoin network. On Dash, it's different. We do have miners and we need miners to support the current version, but that is tempered with the voting mechanisms that are in place through the masternodes. Masternodes have a lot of different roles on the network besides voting, but at a very basic level, anyone is free to download a full version of the software and run a full node just like with Bitcoin, but in order to upgrade your node to a masternode, there is a prerequisite that you must prove ownership over 1,000 dash by signing a special message out to the network from the address that contains that 1,000 dash, which upgrades your node on the network to a masternode. Having the 1,000 dash is not sufficient to receive masternode rewards though, you have to actually run a masternode, and there's a lot of roles that masternodes play on the network. First of all, before you get your first payment, you have to run your node for eight consecutive days. If at any point your node drops off the network, it's kicked to the back of the payment queue.
P&L: Dash has a pinging function to check the active status of masternodes, right?
RT: Right, they're checked to make sure that they are connected and replying to requests - the masternodes actually check each other and will kick one out if it's not responsive. The result is that our infrastructure is not hosted from people's home computers – the masternode operator is running in high speed, high availability data centres and that makes our network about twice as fast at relaying messages around as the Bitcoin network does. So it improves our performance. They also facilitate InstantSend and PrivateSend transactions. The fact that they are all diversely owned, no one person can buy up half of the dash in existence and control these things. It would be billions of dollars, at which point you would have no incentive to attack the network anyway, so it's an additional layer of security beyond what proof of work can provide.
P&L: What else do masternodes do?
RT: They have the right to vote on proposals. Anyone is free to put a proposal out to the Dash network for funding, and the masternodes then vote on that. Then, through a monthly super cycle or super block, the highest-ranking proposals are paid out first until that treasury budget is gone every month. So they play a key role in terms of steering the direction of where the network's resources are going. A lot of those resources do go to Dash Core Group, but we do not have a monopoly on that money and we have to compete with other teams in order to receive it.
So the network is not dependent on Dash Core Group in order to be successful, which is a unique governance model. It allows anyone that can offer value to the Dash network to put forward a proposal - that could be an exchange looking to integrate or it could be the Core team that's going to maintain the software that know there are other developers that have come forward and developed alternative wallets that work on the network. So really, anything of value that you can come forward with, you can make a proposal to the Dash network and receive funding. But what that also allows us to do is then have a strategy that we can put forward. We've seen the lack of cohesiveness of some of these other networks and the implications that can have. There's a great deal of confusion right now with some of these coins that have split, like Bitcoin and Ethereum. In our network, we simply vote and the outcome of the vote determines the direction the coin is going to go. We vote on funding as well as key strategic decisions, like whether or not to increase our block size - that vote took place in less than 24 hours.
P&L: How many masternodes are there at the moment?
RT: There’s around 10,000 full nodes, and about 4,700 masternodes.
P&L: So only the masternodes can vote?
RT: Yes, they're a bit like shareholders - the more of a stake in the coin that you have, the more voting power you have. It's very much modeled on the shareholder model, without truly being a shareholder. Masternodes don't own Dash Core Group or any other entity, but they do get a say in how resources are allocated.
PL: What are you working on now?
RT: Our next major release is called Evolution. It's going to be a landmark change from the Bitcoin code base. We're introducing a lot of new technologies and features that will enable anyone to store data within the Dash network, not on the blockchain, but on several of the masternodes at any one time for redundancy and an ability to recall that data at any time through an API. So now you will be able to use the network in a fully secured way for a decentralised API that actually connects to multiple points on the network and has the ability to store data. What this does is it allows anyone to create an app on top of the Dash network, store the app’s data or user data within the network itself, and access that from multiple devices, and do so in a very inexpensive way.
Unlike a transaction on the blockchain that is stored thousands of times, this is stored in a few places and just a small hash representing that data is stored on the blockchain to prove that it hasn't been altered in any way. What that allows you to do is build really interesting things - it's kind of a hybrid - we call them data contracts. But unlike Ethereum, the computation of that data doesn't need to take place within the network itself thousands of times over.
The very first application that we're rolling out on the network, we're calling Dashpay. This is an app that you can load onto multiple devices. You can see the same data on each of your devices and it's like logging into a service, something that you're familiar with today, like Venmo, but you will not see cryptographic addresses. Instead, you'll see usernames. I will be able to send you a friend request and you will be able to accept it. We will then be friends and I can send a payment request or you can send a payment to me and all you will see is a payment from or to your friend. You can also store metadata associated with that - for a merchant, that could be a bill of lading, it could be geographic data on the location of goods or delivery of a service. It could be the user’s shipping information that can be exchanged, all at the push of a button. Basically, it allows anyone to create whatever they want associated with these payments. They can define the data schemas, the relationship between different data elements, whether they are a subset of some other element or whatever, and they'll be able to create their apps on the Dash blockchain and do so in a very cost-effective way.
P&L: Who do you see being disrupted by that, is it the Venmos and Paypals?
RT: Paypal and Venmo are restricted from transacting in certain countries or across certain country borders, so this would provide that financial freedom to people that are looking to transact in places where there are heavy restrictions.
P&L: Aren’t there KYC/AML requirements?
RT: This is peer-to-peer technology, so it is not a requirement, although there are KYC/AML requirements at the exit and entry points. So, much like cash, if I were to go to my bank and request to withdraw $10,000, that might trigger something on my account, but once I have the cash, no one knows what it is that I'm doing with it. Unlike cash though, there is a record of these transactions and they can be analysed. When I make a deposit with an exchange, they can analyse my transaction history and they can attempt to determine whether or not that came from illicit sources. So it has some advantages over cash in that regard.
P&L: With PrivateSend, which allows fungibility because you can swap coins, does that make regulators nervous? Because that kind of breaks the pseudo anonymity of the record of the chain, right?
RT: Yes, but the transactions can nonetheless be analysed and risk scored though. There are legitimate use cases for privacy. The question is, how far will regulators allow that to exist before things have gone too far. We think that we've reached a good balance there. In fact, these transactions can be created with Bitcoin, just at much higher expense and much less conveniently, so we can actually put it side-by-side, with the same types of mixing transactions on the Dash and Bitcoin networks, and there's really no difference there. It's just a convenient way to provide that type of privacy for the user.
P&L: There's such a difference in ideology between people that came from wholesale markets moving into this space and the originators of the concept of cryptocurrencies. How do you see these coming together, if at all?
RT: I think what you're seeing now as it starts to enter the mainstream, are more practical viewpoints coming into the space and shaping it. In a way, that is going to allow it to blossom, but I think that it has taken quite a bit of time for the maturity to get there. I think the government recognises that this technology is going to be here, the question is how will it be regulated and how will they manage the risks, etc. They will get there, but I think they're having a difficult time keeping up with the technology.
PL: How volatile is Dash?
RT: On average, it’s about 20% lower volatility than bitcoin. I attribute that to a couple of things. One is that our network focuses a lot on actual economy, and the more actual economy you have going across your network, the less likely the price can go to zero, because people are actually using it. So the more that flows through the network, the higher that floor becomes. My focus has always been on raising the floor as opposed to trying to spike the spikes.
Secondly, I attribute it to the masternode model. When the prices are crashing, you don't see large holders of Dash rushing for the exit. They're in it for the long haul. They have an income stream associated with their masternodes. I think it does away with the momentum mentality and it focuses more on the real value. The fact that we're a fraction of the size of Bitcoin yet have a more stable price is pretty miraculous. But I'm not going to pretend that volatility isn't an issue with Dash, it is - it's an issue for the entire industry.
P&L: How do merchants accept Dash when it can be volatile?
RT: InstantSend. If you can receive the funds instantly, you don't have to accept currency fluctuation risks for the next hour or two like you do with Bitcoin, so you can cash it in right away. In fact, there are services like GoCoin and Uphold that will allow merchants to accept an instant transaction and they will honour it instantly.
P&L: When are Evolution and Dashpay due to launch?
RT: Second half of this year. We've been working on it for almost two years, so it's been a considerable undertaking.
P&L: Do you think the ‘privacy coin’ label hurts broader uptake of Dash?
RT: We have a privacy feature, but fewer than 1% of people on Dash use it.
P&L: What do you think the future holds for digital currencies?
RT: What can cross literally any border and service every last mile? Digital currency. I think that there will be tremendous use for digital currency in international payments and once it is commonly used internationally, the advantages it has over other payment methods in terms of cost, speed, transparency and trackability means that it will take a substantial share of the market. Right now, the incumbents are very dismissive, but people are using this as a remittance tool.
P&L: You talked about being divisible, do you see potential for micropayments there?
RT: Absolutely, and we're pursuing this use case in the same way that digitising information made it very cheap and easy to consume and in much smaller bites. Digitising money is going to do the exact same thing. What you saw with the Internet is that you no longer subscribed to the Sunday newspaper with a six-month subscription. We've already moved to a monthly model online where you pay for your subscriptions that way, but what if you could pay per article? If you can open up new business models, there's tremendous value there. Take this to the extreme. You could pay for your electricity as you consume it. You could pay for one minute of air time with a cellular carrier and pay for it in the data stream that is carrying your voice, and then negotiate a contract the very next minute with a different carrier. In the extreme, you could pay for an article as you read it - the further down the article you scroll, the more you pay for it. You can have an appliance that you buy that has digital currency in it that will pay for and offset your electric bill for the first year by paying tiny micro payments to the electric company as the appliance is on.
We don't know yet what this will lead to, but we know that it will definitely lead to flows of money instead of large chunks of money like we see today. We don't yet know what is going to evolve from the ability to pay in a flow, but it will be transformative for society in a lot of different ways.
The way people are viewing digital currency today is, how much cost savings there is versus a credit card, but that's not the right lens to look at this. Yes, there are cost savings, but I think the far more exciting opportunity is what it unlocks in terms of new business models, in terms of monetising things today that become monetisable in terms of the way that we move in our life.