Dash is receiving more positive press recently with major news publisher The EconoTimes releasing an article by Brandon Kostinuk. In this article, Brandon quotes the head of finance at Dash, Ryan Taylor, as he states his opinion on the structure of the rewards system in the Bitcoin network.
“[Bitcoin is] facing centralization on a couple of different fronts,” says Taylor, “[but] the bigger issue is why on Earth is it optimal to devote 100 percent of the network’s resources to a single task out of many that are needed? It’s ridiculously wasteful.”
Here at Dashpaymagazine.com, we regularly post articles about the strengths that Dash has over the original cryptocurrency Bitcoin, from which it was forked. As Ryan points out, it is wasteful to allocate 100% of the rewards for mining to miners, while leaving the other needs of the network to be funded and supported by outside altruism. As a reminder, 45% of Dash’s rewards goes to miners, while the other 45% goes to operators of Masternodes. These operators are responsible for acting as a second-tier to the network, providing anonymizing functions by mixing the coins. They also provide the backbone for Dash’s DGBB–decentralized governance blockchain budget–by utilizing their 1-a-piece vote in order to allocate funds from the remaining 10% of the mined coins.
This results in a system much more efficient than the one present in Bitcoin. Which allows, for example, the Dash network to speedily vote to increase the blocksize from 1MB to 2MB earlier this year within 24-hours of the proposal being put to a vote. This is contrasted with the over 2 years of discussion and back-and-forth between what can only be described as charged political camps in the Bitcoin network. As more and more time passes without a resolution to this issue, it may become harder for Bitcoin to maintain its position as the top cryptocurrency as users lose confidence in its ability to govern itself.
As Ryan points out, Bitcoin is facing centralization pressures on multiple fronts. Including from a mining perspective and also from a development perspective. Both are problematic because they may cause speed-bumps on the way to realizing Satoshi’s vision of a decentralized, distributed currency. According to a recent bloomberg article, China is home to 90% of Bitcoin trades and 70% of all mining.
Having this much control over trading and mining gives Chinese mining interests undue political power to sway the direction of development. By maintaining smaller block sizes, they can charge higher transaction fees and increase their profits. However, given the fact that the 1MB limit was basically a programmatic afterthought added by Satoshi to prevent spam during the network’s infancy, and the fact that a transaction-fee economy was not supposed to appear for many decades still, China’s undue control over the network does not bode well for Bitcoin’s future.
The point cannot be overstated; having this much control over mining and trading is not beneficial for the network or its users. This may be a main reason why the issue with the blocksize has simmered for so long. Which shows that it is in the best interest of the network to distribute mining and users more widely. However, if this is even possible at this stage is hard to tell. This provides the perfect opportunity for Dash to swoop in and save the day, so to speak.
By incentivizing masternodes and providing them with a vote on how to use the 10% of newly mined funds for development and other network needs, Dash provides a needed bulwark against mining interests. This is similar to the checks and balances we’ve all become used to in democratic governments. It behooves the miners to be more flexible in such a situation. The price of Dash has steadily risen throughout 2016, settling at around 8.42 USD/.0127 BTC at the time of writing. No doubt this increase is due to both the increasing press over the blocksize debate, and the fruits of Dash’s advertising efforts from its development fund.
But the centralization of mining and transactions are not the only issue that Bitcoin is facing. The fact is that development on the network is also centralized in one place: The Bitcoin Foundation. This is the organization, founded in 2012 by Gavin Andresen, that is de-facto responsible for maintaining and updating Bitcoin software that all miners and nodes agree to run. However, they are entirely funded by grants from companies that use the blockchain similar to the Linux Foundation model. This is contrasted to the previously-mentioned funding for the Dash network. Due to this funding, lead developer Evan Duffield has detailed in a white paper, plans for the development and expansion of the network. This development plan would extend into 2017 and further build on the Masternode network, eventually allowing for DAPIs and even a decentralized storage system. A breakdown of these upcoming changes will be presented in a future article. For now, suffice to say that Dash is evolving at a rapid pace while Bitcoin seems to have become stuck on what was originally an afterthought.