Behind Dash's crazy rise: Investors say the bubble is very serious

Some call it a scam, others consider it a top digital currency.

Regardless, the surge in the price of Dash has attracted a lot of attention in recent days. In the past week, the price of Dash has risen by more than 100%, far higher than the more popular Bitcoin. According to data from CoinMarketCap.com, the price of Dash hit a record high in the early hours of this morning, approaching $60 (about RMB 400).

With Dash up 40% yesterday alone, market observers, traders, advocates and critics have taken to social media to voice their opinions on the currency’s recent price action, with the topic becoming a major topic of discussion among traders and investors on Twitter.

For those who are new to this project, Dash was originally called Darkcoin, but it was later changed to Dash because a pyramid scheme used the name Darkcoin to commit fraud. Since Dash was launched, it has received a lot of support, but also attracted a lot of criticism.

So why has Dash exploded recently?

Some people believe that exchange integrations and plans to improve the user experience (among other technical updates) have driven hype and caused Dash's crazy price increase. In their view, this is the result of years of development and expansion of Dash.

Others believe that the rise is simply due to the pump-and-dump schemes that are very common in the cryptocurrency market, and the coin itself is trading on low volumes. In addition, some believe that "black market makers" who hold a large amount of Dash have actually controlled the entire market.

There have also been accusations that the digital currency Dash was involved in an “instant mining” scam, with a large number of coins mined on the first day, a claim the Dash team has denied.

As of press time, the price of Dash is around $44.22 (308 RMB).

What is Dash?

First, Dash has been described by some as a two-tier network that relies on miners as well as masternode .

The Dash network is secured by Proof-of-Work mining (the consensus mechanism used by Bitcoin) using the X11 algorithm based on 11 different hash functions.

Masternodes are a proof-of-service layer. These nodes act as both transaction mixers and boosters, and also serve as a voting mechanism for the Dash governance system.

Additionally, Dash’s block rewards are divided between two tiers (miners and masternodes).

Miners receive 45% of the rewards, masternodes receive 45%, and the remaining 10% is allocated to the decentralized Dash Budget System, which allows users to vote to allocate resources, such as for development, marketing, or other purposes.

The scarcity factor

Another factor that seems to be directly related to the increase in Dash’s price is that Dash held on major exchanges is relatively scarce relative to the total amount of Dash in existence.

For example, data on the Poloniex exchange shows that there are only 40000 Dash sell orders, while there are 1,500 BTC buy orders.

The use of master nodes further fuels this "scarcity".

It is reported that a master node requires a deposit of 1000 Dash coins, so that it can receive a portion of the block reward (45%). According to existing data, there are currently about 4000 master nodes in operation, which means that more than half of the total amount of Dash coins (about 7.1 million) are locked and immobile.

Chris Burninske, head of blockchain products at ARK Investments, analyzed the Dash market and said that in his opinion, the only key indicator for Dash to grow upward is trading volume. Others, including market analyst Willy Woo, have expressed similar views.

“Dash has proven itself in a very competitive space,” Dash CFO Ryan Taylor told CoinDesk, adding that he also mentioned the project’s governance approach and features.

“I believe we are seeing Dash emerge as a true challenger to Bitcoin. Dash is focusing on user experience and enabling best payment practices in a way that Bitcoin is not,” he said.

A sharp correction

However, after reaching a new high of $60 (about 400 yuan), Dash's price plummeted, falling to a low of $37.1 (about 255 yuan).

Many investors have expressed on social media (including the Dash official subreddit forum) that Dash is currently experiencing a very large bubble.

Meanwhile, the price of Bitcoin has also seen a notable rise in recent days, even surpassing the price of gold per ounce after hitting a record high.