The fundamental point of difference between Dash and Bitcoin lies in the algorithm that each technology uses to mine coins. Dash uses a modification of the proof of stake algorithm. It also uses CoinJoin mixing to scramble transactions and make privacy possible on its blockchain. On the other hand, Bitcoin uses a Proof of work (PoW) algorithm.
The two cryptocurrencies have different systems for handling transactions. Transactions on Bitcoin’s blockchain need to be validated by all nodes within a network. The process, which ensures consensus without authority, needs investment infrastructure for full nodes. However, this consensus process is time-consuming and fails to prevent clogging. Slow processing in turn leads to high transaction fees, making Bitcoin unsuitable as a cryptocurrency for daily transactions.
Dash however, uses a different system for handling transactions. It is run by a subset of its users, called “masternodes” Who simplify the verification and validation of transactions. This makes the number of nodes required to successfully approve a transaction reduced to a manageable number thereby solving a scalability problem. Masternodes are responsible for approving transactions from the miner network and providing services, such as payment and privacy, to the Dash network.
The second innovation within Dash’s ecosystem lies in its unique governance model. Bitcoin and Litecoin, two cryptocurrencies with similar aspirations as Dash, grew out of academic institutions. To a large degree, the future development of these cryptocurrencies is dependent on largesse from these institutions.
But unlike Bitcoin and Litecoin, Dash has started a self-funding model by splitting block rewards between three stakeholders—masternodes, miners, and treasury. The first two get a 45% share each. The 10% share accruing to the treasury is used to finance future development projects at Dash. Masternodes play an important role here as well: their votes determine future development directions for the cryptocurrency.
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