Exchange demises, e-wallet hacks, the influence of mavericks and anarchists. We cover them all as Dash’s technology is revealed in a candid and incisive interview with Ryan Taylor

Virtual currency Dash experienced a massive surge last week, with its total market capitalization soaring from $80 million USD, to $110 million USD.

Whilst Dash had been steadily rising in December, its spike overnight on January 4 could have been attributed to the impending release of a significant software upgrade, called 12.1, which will set the project up for its revolutionary decentralized payments system, Dash Evolution. Dash is now experiencing trading volumes upwards of 4 million USD per day; a 700% increase from October, and is about to overtake Ethereum Classic as the 6th most valuable cryptocurrency in the world.

There is much noise about virtual currency, especially Bitcoin and its vast venture capital investments in order to develop automated distributed ledger technology from its blockchain database functionality, however, what is the cause of the popularity of other such virtual currencies?

Today, FinanceFeeds spoke to Ryan Taylor, Director of Finance at Dash, in order to provide an insight into the ethos of the digital currency.

I believe Bitcoin would have gone a long time ago due to the litany of exchange demises and wallet hacks, as well as money laundering scandals including US government seizures of illicit trade sites like Silk Road, and the maverick/anarchistic nature of its ethos in its original form, but because of the blockchain database that is intrinsically linked to it, huge VC investments in technology development startups have ensued as well as large institutions like Goldman Sachs and Price Waterhouse Coopers have been investing in its development which has made by default bitcoin into a subject for commercial investment due to the distributed ledger automation capabilities of Blockchain.

How does Dash counteract the ‘maverick’ aspect of Bitcoin yet still offer longevity to large institutions and the existing market infrastructure in terms of its own technological prowess? What attracts anyone to use it to the level that it rose in value so much and what is its most common application (Bitcoin’s is the distributed ledger tech for example).

Bitcoin has seen its share of well-deserved success for delivering a novel solution to the market. But as we’ve seen, Bitcoin struggles with governance issues that inhibit nimble development or a cohesive strategy. For example, Bitcoin has struggled immensely to make even the most basic changes to its protocol which would increase transaction capacity.

More capacity is greatly desired by users, but the network is ultimately controlled by miners – operators of large computing operations that secure transactions. Miners seem to prefer keeping transaction capacity low, which generates more fees from users competing for that capacity. Meanwhile, the Bitcoin Foundation is dependent on donations from outside influencers to fund its development. In my opinion, that model is flawed, and the inherent conflicts of interests are detrimental to its continued growth and innovation.

Dash is fundamentally different. It has an explicit governance structure through which decisions are made. We operate much more like a company, with a clear strategy for our product. We have the equivalent of “shareholders” in our model, and a management team fully incentivized to grow the network. In addition, the network is completely self-funding, which means no donations are needed from other entities. All of this comes together to create a much more effective model for delivering a cohesive strategy aimed as serving the needs of the market.

End-users are attracted to Dash because it consistently delivers innovative features not available with other digital currencies. Our most popular feature is InstantSend, which enables instant transaction confirmations. Bitcoin transactions can sometimes take hours to confirm, which makes them infeasible for many situations that Dash can address, such as paying for a meal, paying at a register, or topping up a pre-paid debit card right before using it. Dash also offers an optional feature that helps keep sensitive information like balances and transactions private.

Lastly, Dash is laser focused on providing a user-friendly experience, and our Evolution software release later this year will deliver a completely new digital currency experience. The user experience will be very familiar to consumers, who will be able to use a login and password to access their account from any device, and paying for products and services will be as simple as pressing on their phone’s fingerprint reader.

The decentralized payment system offered by Dash is interesting. Will this be a replacement for Liberty Reserve, and if so, how does it avoid any citations for money laundering due to the ability to transfer funds without a central processing entity, and how does it differ from PayPal?

Dash – like Bitcoin – isn’t a centralized entity. It is a decentralized open-source software that anyone on the planet is free to operate. However, many categories of centralized businesses that interface with the Dash network, such as currency exchanges and money transmitters, are subject to Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations.

Dash has partnered with Coinfirm – a KYC / AML compliance services provider – to ensure these services are available to companies that require them to operate on our network. In contrast, Liberty Reserve was a centralized money transmitting business that attempted to operate without a license and without meeting regulatory requirements, which is why it was seized by law enforcement in 2013.

We think that PayPal provides a great user experience for online purchases in particular, but it is notoriously unfriendly to merchants due to high transaction fees and liberal (sometimes fraudulent) merchant chargebacks. Dash aims to deliver the ease-of-use and speed consumers have come to expect from a centralized company like PayPal, except without the high transaction fees.

Will, for example, people in unbanked regions of the world that are growth areas for the FX and retail electronic trading industry like Indonesia, Malaysia, and Thailand be able to use this to fund retail FX accounts with Western brokerages?

Our initial aim is to deliver a much more user-friendly form of digital currency than first-generation currencies like Bitcoin. However, we are diligently building out integrations with digital currency exchanges and other services that reduce the friction associated with moving money between countries quickly. Once that infrastructure is built, we will continue expanding services.

Enabling instant user deposits to Western brokerages from literally anywhere would add a lot of value to consumers and FX exchanges alike, and we would be interested in identifying retail FX brokerages willing to partner with us on such a solution.

Volumes of 4 million per day are cited. Even FX brokerages that offer trading services in sovereign currencies cannot verify their volumes, which is why we do not publish them. How can it be substantiated that the volumes are $4 million per day representing a 700% increase from October, and how is this measured?

Digital currency exchanges publish trading volumes, prices, and order book information through their platforms. Cryptocurrency aggregation sites like coinmarketcap.com link to this information real-time and publish the information publicly.

What will allow Dash exchanges to be more secure in terms of e-wallet hack-proofing and demises usually associated with unbacked peer to peer currencies – as in MtGox?

At Dash, we feel that more needs to be done to help exchanges store funds securely, and too little attention has been focused on solutions for the digital currency industry. While the industry has matured its security measures substantially, hacks do still occur, so we feel that changes at the protocol level would help.

Our Evolution release later this year will include “vault accounts” – special accounts that will lock away specified balances more securely. Moving currency from these special accounts will initiate a waiting period.

Should a perpetrator ever attempt to steal funds from these accounts, the real owner will receive an email warning of the unauthorized transfer and may cancel the transaction during the waiting period, making theft exponentially more difficult. Such a solution would limit the severity of losses and greatly reduce the incentives for hackers to attempt a robbery in the first place.

We are constantly evaluating proposed solutions that will make using the Dash network more secure. For example, we recently integrated Dash with several leading hardware wallets, devices that help keep digital currency secure. How does the infrastructure and network connectivity work that underpins the Dash marketplace? Is it similar to an exchange with a hosted / colocated server (Equinix LD4 for example) or does it use standard internet? how can this compete with market infrastructure used in the institutional sector which has points of presence and direct connectivity between venues, brokerages and Tier 1 banks for liquidity and immediate pricing with no latency? The Dash network is not an exchange and is not meant to compete with one. Instead, Dash aims to facilitate transactions between consumers and merchants, so transaction times are similar to a credit card authorization.

Unlike a credit card, though, funds are settled within minutes rather than several business days. Dash transactions can propagate our network quickly because it is the first digital currency network that explicitly incentivizes the operators of servers that run Dash’s network.

This means operators are compensated to provide high-quality infrastructure. Consequently, most of the network’s servers are hosted in professionally managed datacenters around the globe with high bandwidth connectivity. Anyone with 1,000 Dash collateral may operate a network server, so the network remains completely decentralized, but is capable of delivering a great user experience to consumers and merchants accustomed to the speed and reliability of credit card networks. When it comes to trading, every exchange’s technology setup is different, but digital currency generally must be deposited and controlled by an exchange before traders are allowed to begin trading. With Bitcoin and most other digital currencies, transferring funds to an exchange takes about 30 minutes.

However, exchanges that accept Dash InstantSend deposits can safely allow trading within a few seconds. In contrast, the traditional financial industry relies on brokerages, counterparties, banks, clearing houses, and many other intermediaries to guarantee and settle transactions, which works great until it doesn’t. They even rely on colocation of infrastructure and dedicated network connectivity to squeeze fractions of a millisecond off trading times. But all of that infrastructure costs a lot of money.

Digital currency is designed to work without all of those intermediaries in a purely peer-to-peer fashion, which is why transactions can be performed at incredibly low expense. There’s actually nothing stopping traditional financial institutions from trading digital currencies through existing trust-dependent low latency platforms, and the trade settlement process would be much faster than with other asset classes.