In part 1 of this beginner’s guide we’re going to take a cursory glance at two popular, and very different, cryptocurrencies. Despite the explosion in different assets and blockchain offerings, the top 15 coins by market cap has barely changed. Let’s take a look at each one, and examine their similarities and differences.
Dash is what’s known as a ‘fork’ of Bitcoin. This means that it initially inherited ‘common rules’ from the Bitcoin blockchain, but added new features. These features can include how a blockchain and cryptocurrency is governed (how choices are made), as well as speed, fees and so on. Originally created in 2014 as ‘Xcoin’, Dash was later rebranded in March 2015.
Governance and Consensus
As a result of no one being in charge of Bitcoin’s development (it’s run by a group of volunteers around the world), the team behind Dash decided to create something called a decentralized autonomous organization.
Decisions are made on the blockchain by a ‘masternode’ – a node which not only helps maintain the blockchain but also can vote on proposals that improve Dash’s ecosystem. The Dash DAO uses the 10% that it receives from mining to invest as the total organization sees fit.
Consensus is reached by using a proof of work algorithm with a hash function called ‘X11”, with the average time to mine a coin taking two and a half minutes.
Dash’s masternodes can facilitate two extra kinds of transactions: ‘Instasend’ – which bypasses mining altogether and requires a consensus of masternodes to validate transactions, or ‘ PrivateSend’ – intended to make transactions completely untraceable.
Whilst Dash is known as a fork of Bitcoin, Ethereum is known as Bitcoin’s main rival. Proposed as a concept in late 2013 by the now famous (and extraordinarily wealthy) Vitalik Buterin – a cryptocurrency researcher and programmer – the Ethereum blockchain went live on 30th July 2015 with 72 million ‘premined’ coins.
Governance and Consensus
As opposed to Bitcoin’s proof of work, Ethereum provides a decentralized virtual machine (EVM) which can execute smart contracts and scripts using an international network of public nodes. The programming language used is known as being ‘Turing-complete’.
A significant setback for the blockchain came as a result of this programming language, and plans to continue developing Ethereum’s own DAO came to an end in 2016, when exploitation of a flaw in the DAO’s smart contract software resulting in the theft of $50 million worth of Ether
As as result the blockchain was forked by Buterin and split into two separate chains – those that chose to reverse the theft (Ethereum) and those that chose the way of the DAO (Ethereum Classic).
The Ethereum blockchain still uses a form of proof of work in order to validate transactions and is attempting to upgrade to proof of stake sometime in 2019. Gas prices (the currency used to power transactions) as well as network congestion (partly the fault of something called CryptoKitties) caused the price of individual transactions to skyrocket in 2018. Scaling efforts are underway in order to alleviate this.
All transactions on the network are currently public.
In part 2 of our individual cryptocurrency beginner’s guide we’ll be taking a look at Ripple and Litecoin. Don’t miss it!