Dash is a top ranking currency. It consistently ranks in the top 5 (by market cap) among currencies (versus securities, utility tokens, and other non-currency assets). It is also one of the most widely available via exchange. In the USA you can exchange it on Poloniex, Kraken, and Uphold. Oddly though, you can’t exchange Dash on Gemini, nor can you on Coinbase which is by far the largest of US exchanges.
Coinbase and Gemini have taken a decidedly more deliberate and cautious stance when it comes to adding crypto-currencies to their trading portfolios. This is partially due to the nature of their founders (originally Bitcoin maximalists) and the focus of their businesses (trade only a few; Bitcoin first and foremost). Whereas Coinbase has added four cryptocurrencies thus far (Bitcoin, Ethereum, Bitcoin Cash, and Litecoin), Gemini supports merely two, Bitcoin and Ethereum.
It doesn’t look like Gemini will be adding more currencies or other assets any time soon. Or at least, if they will, they have been fairly quiet about it. Coinbase, on the other hand, has announced an intention to slowly add other currencies. But given that the rollout of Bitcoin Cash was a complete fiasco and rather controversial, to say the least, Coinbase now seems to be taking an even more tentative approach and has enacted a more formal process for the evaluation of future currencies. The cornerstone of that process is publicly accessible. They call it the GDAX Digital Asset Framework.
Coinbase is the largest, most important, exchange in the United States. Including Dash would be beneficial to both Dash and Coinbase’s customer base. Since Coinbase has come out with a more empirical process, I decided to examine Dash in the context of their standard of acceptance. As you will see below, Dash more than meets their requirements, and considering Dash’s role in the world of cryptocurrencies, I contend it is the most obvious “next coin” to add.
TL;DR – The summary
It makes sense for Coinbase to offer Dash as one of its premier tradable currencies.
Coinbase effectively evaluates based on…
- Tradability and popularity
- The maturity of technology, leadership, community, documentation, and governance
- Confidence in longevity: technically, future tradability, decentralization, etc.
- Future roadmap and innovation
- Lack of legal entanglement and more currency than security
- Little to no conflicts of interest associated with funding
- 3rd party assessment and analysis of design, governance, and process
- 3rd party demand: merchants, developers, partnerships, etc.
When viewed through this lens, Dash is a prime candidate for Coinbase to add as a supported tradable asset. Just to touch on a sampling of how Dash addresses these criteria, let me respond in the order given above.
In summary, Dash…
- Is consistently one of the top traded currencies and has spent the majority of her four years of life among the top 5 money assets, or the top 10 to 20 of all total assets.
- At just over 4 years in production,
- Dash’s many innovations have matured and hardened. In fact, a number of projects have adopted many of Dash’s innovations.
- Dash’s development team and community are professionally managed, including attracting executive-level leadership from the traditional financial sector.
- Dash’s documentation is outstanding (undergoing a reorg, mind you). It can be found here, here, and here.
- And finally, Dash’s governance and funding model is an industry first (the first DAO) and is well respected, even by Dash’s biggest critics.
- Has outlined a future roadmap that is aggressive, innovative, and extremely ambitious.
- Is a currency and a platform for decentralized application development. It is not a security and passes the Howey sniff Test.
- Is entirely self-funding. It was the first to develop the concept of splitting off a portion of its block reward (10%) in order to fund its treasury.
- Has been evaluated in depth by a number of security analysts (see detail within this article). Its production code is open source with its foundation forked from the well-established Bitcoin codebase.
- Has seen increasing adoption by merchants, service providers, and the scientific/educational sector. Dash is also gaining interest from the developer community, especially after the latest demonstration of Dash’s decentralized application interfaces and dash-drive and Dash’s strong partnership with BlockCypher.
Getting into the weeds a bit, I have transcribed nearly the entire Coinbase evaluation framework. I will respond inline using a more narrative discussion format…
GDAX Digital Asset Framework
Coinbase. November 2017.
1.0 GDAX MISSION & VALUES
Does the asset align with our mission and values?
1.1 Open Financial System – Open financial system is defined as being available to everyone and not controlled by a single entity.
- Innovation or Efficiency Gains – New or improved technology which helps solve a problem, creates a new market, addresses an unmet market need, or creates value for network participants.
- Economic Freedom – A measure of how easy it is for members of a society to participate in the economy. The technology enables individuals to have more control over their own wealth and property, or the freedom to consume, produce, invest, or work as they choose.
- Equality of Opportunity – This technology is accessible to use by anyone with a smartphone or access to the internet. It contributes to the broader mission of building the on-ramps to Finance 2.0.
- Decentralization – The network is public, decentralized, and enables trustless consensus.
Dash is particularly innovative, accessible, available, and decentralized.
Dash has established so many firsts in the crypto-space that it is challenging to list them all, but here is a sampling of them: on-chain fungibility improvements, instant payment execution, decentralized governance, self-funding (treasury) …all empowered by a crypto-first: the layer-two Masternode network. Dark Gravity Wave improved and smoothed out difficulty adjustments. Dash established the first, and perhaps only lastingly successful DAO (Decentralized Autonomous Organization). A thorough overview of the breadth of Dash’s past innovations and current feature set can be found here.
Additionally, the development team is hard at work adding significant and first-of-its-kind ease-of-use features, a decentralized API, and a model for the development of decentralized applications (DAPPs). Not only is this technology accessible to use by anyone with a smartphone or access to the internet, it aims to be the easiest cryptocurrency technology to use by anyone. Full stop. And all these features? Utterly decentralized, permissionless, trustless with nothing dependent on a centralized service or single entity.
Assessment of the asset and network.
2.1 Security & Code – Assessment of engineering and product quality.
- Source Code – Open-source code, well-documented peer-review, and testing by contributors separate from the initial development team on GitHub, etc.
- Prototype – There is a working alpha or beta product on a testnet or mainnet.
- Security – Demonstrable record of responding to and improving the code after a disclosure of vulnerability, and a robust bug bounty program or third party security audit.
2.2 Team – Assessment of short-term operating expectations and decision making.
- Founders and Leadership – Able to articulate vision, strategy, use cases or drive developmental progress. Has a track record of demonstrable success or experience. If information is available, GDAX will apply “know your client” standards to publically [sic] visible founders or leaders.
- Engineering – Assessment of the engineering team and their track record of setting and achieving deadlines.
- Business & Operations – History of interacting with the community, setting a reasonable budget and managing funds, and achieving project milestones. Thoughtful cash management is a key driver of the project’s long term viability.
- Specialized Knowledge and Key People – The project leadership is not highly centralized or dependent on a small number of key persons. Specialized knowledge in this field is not limited to a small group of people.
The Dash Project is driven, after Bitcoin and Ethereum, with arguably the most robust and active community. Part of that success can be credited to Dash’s openness and transparency. Dash has committed to keeping all code open source. Dash’s zealous dedication to openness has been recently demonstrated when the Dash DAO filed its first defensive patent. Dash is committed to ensuring its patents are used to drive a positive trend in the entire crypto-space and not be a restriction.
As for peer-review, the very nature of Dash being a four-year-old leading open source project has had the beneficial effect of ensuring that Dash’s codebase receives constant exercise and review.
The network has also partnered with Arizona State University for ongoing research into protocol improvements in efficiency and scaling. There have also been a number of explicit investigations into Dash’s design and execution. The author, at this time, does not have a broad list of examples, but here are a couple: (1) Charles Hoskinson’s IOHK team investigated Dash’s Treasury/Governance model, results, response, and (2) PrivateSend analysis was performed by Kristov Atlas, brief results, full analysis, response.
Other 3rd party entities, like Arizona State University, are actively analyzing the code and looking for deficiencies and optimizations. In fact, I think the partnership with Arizona State University is not talked about often enough. Dash is sponsoring a scholarship program that seeks to seed both knowledge and research surrounding blockchain technologies with an emphasis on Dash.
The founder of Dash (Evan Duffield) has handed off leadership of ongoing Dash code development to the Dash Core Group (a legal entity governed and funded by the Dash DAO and blockchain). This transition has been smooth, has distributed power throughout the community, and has lead to skyrocketing development momentum. The breadth of innovations listed above and the most recent demo by the Dash Evolution effort, many of which are industry firsts, gives a hint of what is yet to come. There are really few other teams comparable.
Business and Operations: The aforementioned Dash DAO may be the only one of its kind in the crypto-space. The Dash Project is entirely self-funded. Dash Core Group, which receives the single greatest allocation, operates judiciously and manages its funds transparently as demonstrated by per-quarter reports and live QnA with the Dash community. They manage their funds in an escrow and budget accordingly… especially considering the volatility of the market.
2.3 Governance – Assessment of long-term operating expectations and decision making.
- Consensus Process – There is a structured process to propose and implement major updates to the code, or there is a system or voting process for conflict resolution.
- Future Development Funding – There is a plan or built-in mechanism for raising, rewarding, or allocating funds to future development, beyond the funds raised from the ICO or traditional investors.
- White Paper – Justifies the use case for a decentralized network and outlines project goals from a business and technology perspective. While a white paper is important for understanding the project, it is not a requirement.
I almost skipped over this section in Coinbase’s assessment because when folks in the crypto-space trot out an example of a model project that does governance right, Dash is almost always the example used. But sometimes I forget that readers may be new to Dash and the crypto-world in general.
It could be argued that Dash’s governance model is seen as its most significant differentiator in the crypto-space. What do I mean? Evan Duffield, the founder of Dash, wanted the network to ultimately be able to govern itself. This is enabled by the layer-two Masternode network. It has three functions: (1) enable on-chain additional functionality like InstantSend, PrivateSend, DAPI/DAPP etc., (2) fund projects and development, (3) vote on future direction and nearly anything that might improve the product or community. A great place to see current and historical proposals is the Dash Watch and DashVoteTracker websites. A fuller description of Dash’s governance model can be found here.
White papers. Even though Coinbase suggests a white paper is not required, please browse to this page for a set of white papers outlining various aspects of the project. Additional detail can be found on that site and https://dash-docs.github.io/.
2.4 Scalability – Assessment of a network’s potential barriers to scaling and ability to grow and handle user adoption.
- Roadmap – Clear timeline with stages of development, reasonable project milestones, or built-in development incentives.
- Network Operating Costs
- The barriers to scaling the network have been identified, or solutions have been proposed or discussed.
- The resource consumption costs for validators and miners are not the main deterrents to participation.
- Practical Applications – There are examples of real-world implementation or future practical applications.
- Type of Blockchain – The asset is a separate blockchain with a new architecture system and network, or it leverages an existing blockchain for synergies and network effects.
The current Dash roadmap is in communicative flux, but will soon be updated. It can be found here. An ambitious scaling plan has also been proposed. In the meantime, in anticipation of the inevitable, a pre-emptive block increase to 2MB was decided by the network —decided within 24 hours because… Dash Governance works.
Applications? Lots and lots of real-world applications leverage Dash. In particular, just off the top of my head: Bitcart, Payza, PayBear, RocketPay, GoCoin, WooCommerce, QuikWallet, Piiko & BitRefill, CoinCypher, and many more. More future-oriented: Alt36 and the US National Renewable Energy Laboratory.
3.0 LEGAL & COMPLIANCE
Application of laws, regulations, and compliance best practices.
3.1 Regulation – Can GDAX legally offer this asset?
- US Securities Law – The asset is not classified as a security using Coinbase’s Securities Law Framework.
- Compliance Obligations – The asset would not affect Coinbase or GDAX’s ability to meet compliance obligations, which include Anti-Money Laundering AML program and obligations under government licenses in any jurisdiction (e.g. Money Transmitter Licenses).
Dash is not a security. Plain and simple. The driving objective is for Dash to function as a payments network with a robust toolchain to enable development of decentralized applications. Though people fling around words like “investment” fairly casually, Dash is optimizing to be a well-functioning, performant money. A currency. And its ability to self-fund without resorting to venture capital, a central organization, or even other “invest in us and see what happens!” statements, all attest to Dash’s commitment as a currency and payments platform. Dash Force News’ writer Eric Sammons wrote a nice article on this topic back in September of 2017.
3.2 Integrity & Reputational Risk – Would listing the asset be inconsistent with GDAX policy?
- User Agreement – The asset, network, application or fundamental nature of the project does not constitute a Prohibited Business under Appendix 1 of the User Agreement.
I am not a lawyer, but Dash, like Bitcoin, does not claim to be legal tender. It is a currency, but a digital, non-state currency with no “owner”. And with that comes no guarantees of price stability, return on investment, not central manipulative management.
4.0 MARKET SUPPLY
Which metrics are important to consider to limit the risk of price manipulation?
4.1 Liquidity Standards – How liquid is this asset?
- Global Market Capitalization – How does the market capitalization compare to the total market capitalizations of other assets?
- Asset Velocity – Trade velocity, or turnover, is a significant part of market capitalization. This is a measure of how easily the asset can be converted to another asset.
- Circulation – For service or work tokens, new supply is created through consensus protocols. If the supply is capped, then a material amount of the total tokens should be available to the public.
Dash was originally built upon the Bitcoin codebase and thus shares many of its features, operational mechanics, etc. The differences include a 2.5 minute (average) block heartbeat and up to a 2MB block size. Block reward emission rates are smoother than Bitcoin’s due to an annual (versus every 4 year) reduction, and that reduction is not in half but by 7.14%. Also, the amount of Dash being issued per block is variable based on harsh rate difficulty, which is calculated every block based on the previous 24-hour moving averages (a more sensible reward calculation that avoids miner retargeting abuse).
More importantly, Dash is readily available from many exchanges leading to Dash being listed as a top 10 to 20 crypto-asset (by market cap and by volume) for most of its 4+ year tenure and if only considering those assets generally considered “currencies”, Dash is consistently ranked within the top 5 to 10.
4.2 Global Distribution – Where is this asset available to trade?
- Total # of Exchanges – The number of exchanges that support the asset.
- Geographic Distribution – The asset is not limited to a single geographic region and is available to trade on decentralized exchanges.
- Fiat and Crypto Pairs – Fiat and crypto trading pairs exist.
- Exchange Volume Distribution – If secondary markets exist, then volume should be relatively distributed across exchanges.
At the time of writing, CoinMarketCap lists 149 currency pairs for Dash on 70 different exchanges available across the globe. For comparison, CoinMarketCap lists 400 currency pairs from 101 unique exchanges in support of Bitcoin.
5.0 MARKET DEMAND
Which metrics are important for monitoring adoption or network effects?
5.1 Demand – What is driving demand for this asset and does it lead to stronger network effects?
- Customer Demand – Customer demand is carefully considered, however, any asset which is created from a fork, airdrop, or automated token distribution is subject to a separate set of criteria.
- Developers and Contributors – Growing developer base and measured progress as defined by the number of repositories, commits, and contributors.
- Community Activity – Dedicated forums are available where developers, supporters, users, and founders can interact and build a community and offer transparency into the project. The team provides regular updates or is responsive to feedback.
- External Stakeholders – There are investments from venture firms or hedge funds which have experience working with crypto companies or projects. The project has corporate partnerships, joint ventures, or dedicated consortiums.
5.2 Network Standards – Rudimentary assessment of a growing network effect.
- Change in Market Capitalization – The market capitalization has grown after the network has activated, demonstrating increased demand for the asset after the project’s launch.
- Nodes – Growing of nodes on the underlying blockchain. The project has a globally distributed node network, meaning operating nodes are not contained in a single country or geographic region.
- Transactions, Fees & Addresses – Growing # of transactions and fees paid over time. Growing # of asset or token holders, which is an indicator of asset distribution.
Demand for Dash is consistently strong and readily available in many markets. The consistent market cap and volume performance have also already been discussed. The node count is variable, of course, but the current Masternode count is well over 4500 at this point. Since they are incentivized with 45% of the block reward, node longevity and uptime are particularly sticky compared to other blockchains. Wallet metrics also indicate a rather healthy distribution.
6.0 CRYPTO ECONOMICS
Assessment of how the ecosystem’s participants are incentivized to behave.
6.1 Economic Incentives – Are the economic structures designed to incentivize all parties to act in the best interest of the network?
- Type of Token – It is a service, work, or hybrid token. Tokens backed by fiat or other physical assets are categorized as US securities and will not be considered at this time.
- Token Utility – There is utility from obtaining, holding, participating, or spending the token. The team identifies a clear and compelling reason for the native digital asset to exist (i.e. the main purpose is not fundraising).
- Inflation (Money Supply) – There is an algorithmically programmed inflation rate which incentivizes security and network effects. Or, if the total supply is capped, then a majority of the tokens should be available for trade when the network launches.
- Rewards and Penalties – There are mechanisms such as transaction fees which incentivize miners, validators, and other participants to exhibit good behavior. Conversely, there are mechanisms which deter bad behavior.
Dash is a leader in incentive innovation. Miners, Masternodes, and the Treasury (45%, 45%, 10% incentivize stakeholders to act in the interests of the blockchain. Additionally, since there are no 3rd party venture capitalists at play, development is not beholden to conflicts of interests from outside of the network.
The inflation rate, as was mentioned previously, is exceptionally smooth and eventually caps (at an estimated 17 million to 18.5 million Dash). Dark Gravity Wave, the algorithm governing difficulty per block greatly reduces any negative incentives that disrupt other blockchains associated with miner retargeting.
6.2 Token Sale Structure – A small subset of what we believe are best practices for ICOs and indicators of the token’s future ability. If the token did not have a sale, this section is not applicable.
- Security – There is a focus on stringent security protocols and best practices to limit scams, hacks, and theft of funds.
- Participation Equality – Best efforts by the team to allow a fair distribution of tokens (i.e. setting initial individual purchase caps to limit the risk of small number of investors from taking a majority of the supply).
- Team Ownership – The ownership stake retained by the team is a minority stake. There should be a lock-up period and reasonable vesting schedule to ensure the team is economically incentivized to improve the network into the future.
- Transparency – The team should be available and responsive to questions or feedback about the product, token sale, or use of funds across multiple forums.
- Total Supply – The team should sell a fixed percentage of the total supply, and participants should know the percentage of total supply that their purchase represents, or have a clear understanding of the inflation rate.
- Ethics or Code of Conduct – White paper or project website should have an ethical or professional code of conduct.
Section 6.2 does not apply to Dash and is only listed here for completeness.
Dash is poised to become a major factor in the success and adoption of cryptocurrencies in general and is paving the way for the inevitable wave of massive adoption. This author looks forward to the day that Dash and Coinbase clasp hands in partnership and help blaze a trail leading to a brighter future for everyone.