Dash, the anonymous evolution of Bitcoin

The introduction of Bitcoin sparked a revolution of finance and economics. Bitcoin set money’s value free from government constraint, value can now be determined solely by the market.

Instead of depending on centralized third parties for every financial transaction, people can exchange value around the world cheaply, and in a completely decentralized manner. Bitcoin ushered in the age of truly digital cash.

But Bitcoin isn’t the whole story. By creating an open-source money, Satoshi Nakomoto, the inventor of Bitcoin, unlocked vast vistas for others to explore. Many developers have taken up the challenge over the years, building upon the foundation that is Bitcoin to solve many real-world problems. One such person is Evan Duffield.

With a background in both software development and finance, Duffield was captivated by Bitcoin from its earliest days. Most particularly, he was intrigued by the idea of digital cash: a technology that could replicate the features of physical cash but without the drawbacks inherent in conventional currency.

“I started tinkering with Bitcoin in 2011, really early in it’s development. I decided I wanted to dive into cryptographic currency and like all things, the best way to learn something new is to sink or swim.”
— – Evan Duffield

As he studied Bitcoin more deeply, however, he discovered a weakness in its design: a lack of true anonymity. Some might argue that anonymity is only essential for those who wish to engage in illegal activities. But this is not the case, anonymity is necessary for two reasons.

First, it gives each transaction privacy, so that no one can pry into the financial transactions of others. Imagine giving public access to everyone’s credit card transactions. Such information, aside from violating individuals’ privacy, could be used to manipulate people in many ways.

Second, anonymity makes the currency “fungible,” meaning every unit of the currency is worth the same as any other unit. If people could track coins to specific people and transactions, efforts could be made to “taint” coins. For example, if they were previously involved in illegal activities they would be worth less than others.

Unfortunately, Bitcoin does not supply true anonymity; each transaction is broadcast on a public blockchain for anyone to study. While those transactions are not publicly linked to specific individuals, connections between transactions and individuals can be made, with enough forensic research.

“Bitcoin was a remarkable invention. The concept of proof­of­work allowed, for the first time, decentralized consensus on a large scale network with no central authority. However, due to the very nature of decentralization, the blockchain is inherently not private. This has obvious implications for users’ personal privacy, as all transactions are traceable in the block chain.”
— – Duffield

Duffield wanted to improve anonymity in Bitcoin itself, but struggled to make his voice heard. In the grand tradition of open source technology, he decided to fork Bitcoin, and create his own digital coin. He called it “Darkcoin,” reflecting the anonymity of the currency, and released it on January 18, 2014.

The initial reception was nothing short of remarkable. People quickly realized that Darkcoin solved a real-world digital currency problem, and the price reflected that realization. Users flocked to the coin, and soon its market capitalization was one of the highest of any digital currency.

Darkcoin overcame a number of technical hurdles in its first year – inventing a whole new way of doing money isn’t for the faint of heart – and became one of the top digital currencies on the market.

From these humble origins grew something greater, perhaps even greater than Duffield himself realized. The technical solution for implementing an anonymous currency held the seeds to much more.

“I first discovered a way to make a decentralized anonymity engine, something that had never been done before, then I continued to find other new concepts such as decentralized funding, decentralized governance and a decentralized storage engine.”
— – Duffield

Duffield created an incentivized second tier of nodes, called “Masternodes,” which would be the foundation for a whole host of future features, many of which weren’t even considered when Darkcoin was first created.

Unlike Bitcoin nodes, Masternodes receive payments for their service to the network. Because they are incentivized, more can be demanded of them.  Anyone who has worked in software development knows how important the initial foundation of a project is. Without a robust infrastructure, there are limitations to what can be accomplished as the project matures.

As the project began to include more features, however, the Darkcoin name became a liability instead of a strength. It emphasized only the one aspect of the project – anonymity – and not everything it had the potential to become.

Public perception was that the Darkcoin name referred to its use in illegal activities, which was never the intention of the project. So the name was changed from Darkcoin to “Dash.” A shortened form of “digital cash.”

“It became apparent that the Darkcoin branding was getting in our way, so in order to accomplish our greater mission, we decided rebranding was necessary.”
— – Duffield

Since its creation, the Dash Masternode network has shown itself capable of handling new features. Over the past two years, new Dash features have continued to be added. For example:

• InstantX: To solve the problem of lag time in transactions, Masternodes are able to instantly lock transactions.
• Self-Budgeting: To solve the problem of lack of funding for development, Masternodes can direct funds right from the blockchain to support development.
• Self-Governance: To solve the problem of making governance decisions on the future of the currency, Masternodes can vote on what development occurs.

This is just the beginning. Dash’s Masternode network allows for features in the protocol level that other digital currencies must push off to centralized third parties. Almost any feature can be decentralized and included in the Dash protocol.

The next phase of the Dash project, called Evolution, will introduce a new level of user-friendliness, to a space which is not known for it. “[Dash Evolution] is a next-generation platform for purely decentralized e-commerce.” Duffield explains. “This system when deployed will allow low-risk reputation-based e-commerce and a completely decentralized arbitration system that can replaced centralized escrow services.”