Over the last month, the altcoins market has surged with Dash in the lead: in March, the altcoin has grown four times as high having eventually become the third most capitalized cryptocurrency. Then a correction followed, which is still on.
Dash Yesterday, or Magic Was Real
After a meteoric rise, Dash has lost more than a half of its achievements and gave way to Ripple as the world’s third most capitalized cryptocurrency. Now we could consider the situation calmly to understand what drove such an upsurge and subsequent fall.
It would be only logical to assume that Dash’s rise originates in PR campaigns, promotion activity, new payments cards and terminals and other things aimed at expanding the user base. This activity was discussed by Dash fans so extensively that the entire background turns out to be jammed, so one has hard time assessing the cryptocurrency objectively and reasonably.
It’s easy to understand the exalted newbies and seasoned Dash holders: they’re happy about upsurge of an asset they have invested in. The other thing is to find out what’s behind such growth, and what has caused it. Do we see the entire picture, and is Dash’s future really that optimistically exuberant? Will it be capable of replacing Bitcoin, as the former’s fans usually claim?
Let’s take a detour from the common opinion highway to walk along the Descarte path by bringing the glossy picture into question.
Dash has a few interesting things under the hood, yet the general public doesn’t know about them for some reason. Stats, for example, is a more than objective source of data, and it doesn’t look that great.
Prior to the leapfrog on February 22nd, daily number of Dash transactions didn’t get higher than 2,000, with this number decreasing. The peak amount was registered in March at 9,000. Bitcoin, for instance, has 250,000 transactions a day, while Ethereum has over 40,000.
What’s more interesting is correlating those figures with market cap: bitcoin and other altcoins have a linear correlation between transactions number and price (i.e., the higher the price, the more transactions there are), while Dash doesn’t manifest such behavior. By early April, the number if Dash transactions dropped to 3,000 a day, and still falling.
What could it mean? It might as well mean the lack of real application of Dash and its minor usefulness for end users. Other data just confirm this assumption.
Number of Active Addresses
The same goes for active addresses: there were 10 thousand at most before the pump, and the number tended to decrease. For comparison, the number of active addresses in Bitcoin grows continuously.
Average transaction rarely went higher than $500 before the pump, yet the parameter grew dramatically afterwards (the same happened to Ethereum that had been pumped as well). At some days it even exceeded that of Bitcoin. This reflects campiness of the entire process as this much demand was nowhere to come from.
Concentration in the Hands of a Handful of Holders
Over 70 per cent of coins are located in just 2 per cent of wallets, with 20 per cent more in 1 per cent of wallets. This actually means that just 3 per cent of Dash owners control more than 90 per cent of coins. This distribution is way to uniform and unnatural, and opens a highway for price manipulations.
Turn Off Your Masternode
At the time of writing, there is around 4,250 masternodes in Dash network, which means that 4,250 million Dash out of 7 million are suspended. Only 2,5 million Dash are in the turnover.
Keeping a Dash masternode is way more profitable as it receives Dash payments with the same interest. While back in February a masternode owner received nearly $5 a day, in March the daily payout amounts reached $20 due to price growth.
When the pump kicked off, there were around 4,500 active masternodes, but all of a sudden the number dropped to 3,900 in just a day: almost 6000 masternodes were switched off, which unfroze 600,000 Dash. The cost of the coins comprised nearly $14 million, and they brought the required pressure on the market.
In March, the number of active masternodes dropped to 3,600 and then rapidly restored itself. Their overall number was gradually growing, and nearly reached its peak by the end of the month.
So, we’ve got a coin that isn’t very popular with users notwithstanding its extensive promotion and hype, and that is controlled by a handful of major holders.
According to the data above, the miners and masternode owners are the most active here. It’s them who are interested in price growth the most: aside from obvious financial gain, price growth is a great PR occurence drawing attention and new fans to the coin. Everything one needs here is to start the great movement, which requires money and favorable conditions.
Well, you may have the money if you switch off some masternodes, but what about the environment? Let’s recall early March: Bitcoin was stalled near its maximum waiting for the SEC to approve or disapprove the first Bitcoin ETF, and the probability of a favorable outcome was as high as 25 per cent. Bitcoin network experienced troubles with transactions and fees growth. The issue of hard fork was again on the table, while Bitcoin Unlimited and new ASIC’s for it entered the scene.
Bitcoin was vulnerable, and so were its investors. All one has to do is offer them a new safe harbor, and there’s no better way to draw their attention than to drive the price to the sky. It is a great drive that will eventually become self-sustaining.
After that, you may buy your coins back when the price goes down, and launch the masternodes again. Check mate, as they say.
Other Problems with Dash
It’s hard to hear criticism against Dash in the raging choir of praising voices. Just try googling ‘Dash problems’ or find real analytics: even a feature titled Objective Assessment of Dash is likely to be a straightforward propaganda depicting the coin’s advantages over bitcoin, with no word of criticism to be found. There are about 99 per cent of such publications whose bias is seen from a mile away, especially when it comes to the Russian-speaking community. In fairness, Dash feels quite good there. Such activities are paid for, and nobody’s making a secret out of it as it’s Dash’s official policy.
However, Dash’s official blog can help one see the invisible. That’s where we may find all entries answering the criticism that still finds its way into the reality. In the blog, Dash ideologists answer cunning questions regarding instamine, masternodes, and the problems with payments privacy, which is an important legend underlying the entire ecosystem.
Privacy and anonymity are cornerstones of Dash’s positioning that put it alongside with Monero and ZCash. A good half of Dash’s promotion materials are built around this statement. The developers even promise greater privacy in the future. Still, the anonymity is not alright according to expert research. There are some people unwilling to take the Dash’s PR managers’ word, and there are some others who are ready to put the statements to the test.
Thanks to masternodes, the probability of tracing a payment is very high. As a result, Dash mixing doesn’t properly work. Everybody just pretends it’s a private decentralized network, but in fact it is not.
Due to little transactions volume, involved coins and active users, the problems with mixing liquidity become common which doesn’t benefit anonymity as well. Denominations and passive mixing are potentially against user privacy, too.
Those facts question both developers’ professional integrity and marketing experts’ truthfulness. If you just believe in anonymity, will it actually work?
There’s a small problem with the fact that 2 million of coins (out of 7 million overall) have been mined over the first few days after the network’s launch. Users are not too happy about such happenstances and are not likely to forget about it that easy. This is considered an unfair distribution with a prime goal of making the developers a bit wealthier.
Dash reacts to the instamining accusations in a regular way: it was a mistake, we got rid of it, the coins were quite cheap back then, and they all are owned by someone else now. They even asked the community whether it wants to reboot the network and start all over again. The community said nay, at least that’s what the official statement reads.
Masternodes are an add-in on top of Dash network enabling some options like InstantSend, PrivateSend and Dash Budget System. They bring about accusations of centralization and the fact that only a few people actually own masternodes as it’s quite hard to join their ranks considering the current price of Dash (one has to have 1,000 Dash in order to launch a masternode).
There are other issues, however, those interested may find everything they need on Dash’s official forum, among other places.
All PR objectives, including price growth and attracting new users, have been successfully covered, so we may be quite sure of Dash’s further expansion.
Still, one should keep in mind the correlation between statements and reality. If Dash proves to have problems with that, nobody will be able to be sure about the coin’s continuing price growth and its future altogether. Right now, the price charts reflect the market’s disappointment in the asset.
Dash experiences difficulties completely different from those of Bitcoin, and doesn’t look really great behind its brilliant facade. The main question here is actually whether Dash developers will tackle those issues, or they only keep on pretending that believing their users is more than enough.