Tag Archives: DAO

Sponsors

Dash Spotlight: Two-Tier Network for Decentralization

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Welcome our Truth in Media Sponsor Spotlight on Dash Digital Cash.

Dash Digital Cash is the exclusive sponsor of Reality Check and the Truth In Media project.

In our last Dash Spotlight, we explained how the Dash Treasury funds projects like Reality Check and Truth In Media to support the growth of Dash use and facilitate innovation in various industries.

But how is the Dash Treasury funded, and who manages those funds?
It all starts with miners, or Dash nodes, and Dash masternodes.

Like other crypto miners, Dash nodes solve complex math problems using specialized computers. When a problem is solved, a new block is added to the blockchain and the miner is rewarded Dash Digital Cash.

What’s different about Dash compared to other cryptos is its two-tier network.

This is where Dash masternodes come into play. Masternodes enable financial privacy and the decentralized governance of the Dash budget.

So miners power the first tier and masternodes power the second tier. And for powering that second tier, masternodes are rewarded.

In the last episode, we explained the budget breakdown: with each new Dash mined, 45% of the reward goes to miners, 45% goes to masternodes, and 10% goes to the treasury. The treasury is what funds projects like Reality Check and Truth In Media.

Dash is the first-ever crypto to set up this type of two-tier system, making the features implemented by masternodes unique in the crypto world.

And that’s why the growth of Dash is so vital in decentralization.

Masternodes are focused on ensuring anonymous and instant transactions, but also governance through monthly budgeting and voting.

Want to become a Dash node or masternode? Check out Dash.org for more information.

Be part of the revolution and start using Dash Digital Cash today.

Cryptocurrency, Featured

Dash Core Group Becomes First Legally DAO-Owned Entity

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(Dash Force News) Dash Core is now legally owned by the Dash decentralized autonomous organization (DAO), a cryptocurrency first.

Unlike many other top cryptocurrency projects, Dash is a DAO, an organized and self-funding entity that nonetheless has no central authority and is open to participation from anyone. To solidify this theory in practice, Dash Core Group, the legal entity for Dash’s development team, set up a legal structure representing the network, which now owns Dash Core Group. According to Dash Core CEO Ryan Taylor, this is a first, and solves many issues involving trust of a centralized party:

“To the best of our knowledge, this is the first time this particular legal structure has been established. The legal structure we created solved many issues for Dash. First, it enables DCG to grow to support the network without introducing risk that the legal entity or some set of owners of DCG could simply shut down, liquidate, and walk away with millions of dollars of assets, leaving the network with a substantial leadership and development vacuum. This also establishes a fiduciary duty back to the network, ensuring DCG is legally required to act in the best interest of the network.”

Most notably, this structure allows for a smooth transition in the unlikely event of the removal and replacement of developers and leadership:

“It also provides for a smooth transition path of the assets, organization, and human resources held in Dash Core Group should the network decide to replace its management. Taking all these benefits together, Dash Core Group is an enhanced asset for the network due to its vastly improved risk profile. This creates lower risks for funding initiatives, both those directly sponsored by Dash Core Group, as well as escrowed funds for other legal entities.”

Furthering decentralization by allowing the Core team to be network-owned

Taylor believes that this new structure allows the network to own various entities that it funds, without compromising masternode privacy, while still allowing them to directly vote on Core leadership, and have that decision legally enforced:

“The masternodes do not technically “own” Dash Core Group directly, which proved impossible to facilitate without requiring masternode owners to self-identify. There are two main benefits of company ownership – control and profits. Because DCG is not intended to generate profits, we really only needed to solve for the control issue to provide the benefits of ownership. The Dash DAO Irrevocable Trust is the legal owner of Dash Core Group, and ultimate control over Dash Core Group leadership resides with the Dash masternodes. The masternodes can feel confident that DCG leadership can be removed and replaced with another leadership team at any time they wish, through an explicit vote on the network. And the trustee must install leadership that the masternodes support.”

Decentralization is a hot-button issue in the cryptocurrency world, with many projects remaining completely open-source and volunteer driven. Subjects such as the employment by a single company of a significant portion of Bitcoin developers and controversy surrounding said developers’ scaling decisions (which ultimately resulted in the chain split to Bitcoin Cash), allegations of market manipulation by Litecoin’s founder, and similar dissatisfaction over faked announcements by Monero’s lead developer, all point to the importance of decentralized control over leadership decisions. Dash has a mechanism in place that would have proved useful in any of the three examples mentioned above.

An example for the rest of the network

While Dash Core may have been the first legal entity to engage in such an arrangement with the network, this first move may provide clarity to other Dash projects thinking of doing the same. According to Taylor, establishing legal ownership can assist in reducing the incidence of fraud or non-delivery by network contractors:

“I think this will have many benefits for the network. First, it creates a model that other contractors can consider emulating to improve their own risk profile and generate trust with the network. Second, DCG is now in a position to enter into legal agreements and escrow funds for smaller contractors, which should lessen incidences of fraud or non-delivery should the masternodes choose to hold proposal owners to a higher standard. In essence, the Dash network has a new tool at its disposal for making its investments deliver value more consistently.”

Finally, Taylor sees the specific setup as valuable for the establishment of nonprofit organizations under the network’s stewardship:

“Some legal entities serving the Dash network are doing so for profit, and that’s fine. But I believe that Dash Core Group is setting a strong example for other legal entities to follow when serving the network where profit is not the prime motive.”

Blockchain, Cryptocurrency

Dash: The First DAO

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(Dash Force News) The decentralized autonomous organization, or DAO is one of the most revolutionary concepts to take form in recent years thanks to advances in technology. Dash was arguably the first of such organizations, and certainly is the most successful one today, operating a rich ecosystem with significant funding. Here is a quick breakdown of the components of Dash’s DAO, and an explanation for how each concept works in practice.

Structure

Miners

As with any proof-of-work cryptocurrency, Dash’s base network runs on mining, running software to solve complex algorithms. This is used to both create new coins (diminishing over time until an eventual limit somewhere around 18 million) and run the network, processing transactions in exchange for minimal fees. In theory, anyone can be a miner and run the network. In practice, specialized machines called ASICs have a significant competitive edge in mining, and you’ll probably need one to get anywhere.

Miners receive 45% of the block reward, the newly minted coin supply.

Masternodes

The second part of the Dash DAO is the masternodes. These are nodes that run the second layer of Dash’s network and provide special services including instant transactions and private transactions through mixing of funds between peers. Most importantly, masternodes vote on major protocol changes and on the distribution of the treasury. Because of the importance of the masternodes, a proof of collateral of 1,000 Dash is required before operating a node. This ensures that an attacker can’t simply spin up thousands of nodes and hijack the network. In the future, masternodes will provide a host of additional functionality as Dash’s offerings expand, and as such may be required to run custom hardware.

Masternodes receive 45% of the block reward.

Treasury

Finally, the key to Dash’s DAO is the treasury. This is a portion of the new funds created which can be spent monthly on anything and everything, pending a masternode vote. Originally this was mostly used to pay developers, but since then it has expanded to feed a whole ecosystem. A proposal includes text, a Dash amount, and a timeframe (most commonly a one-month, one-off duration). A net 10% of the masternodes have to approve it, meaning with 4,700 nodes it would need to receive at least 470 yes votes, 600 yes votes and 130 no votes, or any similar combination. Once passed, a proposal is paid out straight from the blockchain.

The treasury can contain up to 10% of the block reward.

How It Runs

Mining/treasury/spending ensure open participation

The most crucial element to a DAO is its decentralization, and a requirement of this is open participation. With Dash, anyone can mine to run the network and receive funds in the form of fees and new coins created. There’s no way of stopping a particular person from mining, and therefore acquiring Dash. Acquire enough of it and you can form a masternode and vote on how the network is run and how the treasury is spent, all without the permission of existing holders. Theoretically, every single person involved in Dash presently could be wiped out or otherwise censored, and the DAO would continue on. Someone could simply start mining, collect and distribute/spend Dash, form new masternodes, start putting in proposals to fund a new development team, and revive the whole network.

It’s also important to note that the incentive structure of Dash contributes to its healthy distribution. Its value is drawn primarily from its usefulness as a payments system, meaning that in order to remain valuable it will have to be spent and used in commerce, thereby distributing the funds far and giving opportunities to more people to form masternodes and participate in governance. Treasury proposals are paid out to fund various projects, which will either sell or spend Dash in order to operate, further distributing coins. Finally, both masternodes and miners both receive income from the network and incur expenses to run their operations, encouraging them to sell or spend Dash to remain operational, further distributing the coin.

Collateralization and balanced ecosystem ensure decentralization and harmony

Dash has a balanced ecosystem with many actors, but can be roughly divided three ways: miners, masternodes, developers. The development team writes the code upon which the whole network is based, and relies on both the miners and masternodes to implement the code, and on the masternodes to vote to continue to fund them. Miners run the code and process the network’s transactions, and rely on developers to write valuable code for them to run, and on masternodes to help with special functionality and make governance decisions that will bring value to the network. Finally, masternodes need miners to run a smooth network of transactions for which they can provide additional functionality, and need a strong development team to keep the network innovative and stable so as to increase the value of their investment. All three complement each other and need each other to survive.

An important principle that keeps Dash’s DAO running smoothly is collateralization. Masternodes have a significant financial stake in Dash and can’t afford to make decisions that lessen its value. Miners invest in specialized equipment to run the network, equipment which may or may not work well for mining other coins (and in the future miners may be required to hold some Dash as collateral in order to mine). Developers, rather than volunteering or being paid by some outside entity, receive their salary both from and in Dash. All elements of the ecosystem have a direct financial interest in seeing the network do well.

Treasury, incentivized nodes, and digital cash focus ensure full self-sufficiency

An important element that makes a true DAO is autonomy. Dash is completely self-sufficient, with every aspect of the network funded by the network itself. Masternodes are paid to keep their nodes active, and as such will be able to afford better hardware and higher bandwidth as the network requires. Miners are paid to run the network, and as they must process more and more transactions, the fees they receive increase as well. Finally, development, public relations, marketing, distribution, and anything else required to make a robust ecosystem is able to be funded through the treasury. All these ensure that no outside entity has to fund any portion of the network, and therefore has no ability to provide undue influence.

Consensus

Finally, a key element of what makes a decentralized autonomous network an organization is consensus. While the network runs smoothly with each part acting independently, when decisions must be made for the network as a whole, consensus can be achieved through a masternode vote.

This was most famously demonstrated by the network vote on whether or not to raise the block size, cementing the network’s consensus to pursue a path to massive on-chain scaling through bigger blocks, rather than an off-chain approach using the main chain for settlement. This very issue was contentious in the Bitcoin community for years, until finally the coins split in two over an inability to find consensus over scaling. Dash’s ability to find consensus ensures that the network, while a decentralized web of thousands of individual actors, still operates under a singular vision.

Blockchain, Cryptocurrency, Featured, Technology

What Is a DAO and Why Is It Revolutionary?

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(Dash Force News)  First popularized by the ill-fated Ethereum project which resulted in the split to Ethereum Classic, the DAO is a bit of a blockchain buzzword. This innovation extends far beyond simple hype, however, and could revolutionize the way we structure organizations. Here’s a breakdown of what makes a DAO, as well as an explanation of why we should care.

What is a DAO?

“DAO” is an acronym for “decentralized autonomous organization.” In order to qualify as a DAO, an entity must complete all three requirements: decentralization, autonomy, and organization.

Decentralized

The first, and possibly most important, aspect of a DAO is decentralization. This means that no single person or group of people has control over the organization or can dictate its membership. In order to function properly, a DAO must have hard-coded rules for participation that theoretically could allow anyone to participate and have a say in how the organization is run without permission from existing members or founders. In order to test this theory in practice, an individual or group would have to participate in, and have some control over, parts of the DAO in a situation where founders and key members did not wish this to happen. A DAO has open participation and influence: just plug in members and it runs.

Autonomous

Another aspect that is as crucial as the first is autonomy. A theoretically decentralized organization that is not a self-contained ecosystem will have to submit itself to outside influences for funding and other support. This means that outside groups can control a decentralized organization simply by providing funding or other important functions, thereby rendering the organization centralized in practice. A true DAO, therefore, needs a self-funding model. For a currency-based DAO this simply means having a portion of funds set aside to self-fund the group. For others the model may vary, and may include token sales or group ownership over income-producing assets.

Organized

Finally, a DAO must be organized. An open-source project may be decentralized in that anyone can use or build on its services, and some decentralized projects may even provide internal funding for participants. However, in order to qualify as a DAO a project must have some sort of organizational structure that allows the entire group to come together and make unified decisions about the direction of the network.

A true DAO, therefore, has to be completely decentralized and open to participation from anyone who qualifies under its uniform rules, has to have completely independent funding and support, and must be able to come together as a unified network to make decisions.

[RELATED: 3 Reasons Credit Cards Are Blocking Cryptocurrency Purchases]

Why does the DAO matter?

That’s all well and good, and certainly exciting, but why does a DAO even matter? What problems does this innovation actually solve?

Trustless governance solves corruption

The main attraction of a DAO is how it enables trustless governance. This means that a true DAO will run itself automatically, without having to trust any individuals or entity to function. Historically, many theoretically decentralized governance structures have come to be, but with rules and laws written on paper. These systems inherently trust participants to follow the rules, or at best provide incentives to behave honorably, but can never ensure that the rules are followed. With a DAO, participants are limited to the rules of the system, with no room for corruption. A well-designed DAO can theoretically make decisions that are not optimal, but are technologically incapable of corruption.

Decentralized structure minimizes external threats

A true DAO also minimizes external threats, a concept commonly known as “censorship resistance.” A traditional organization that has somehow managed to remain true to its mission can nonetheless be conquered and compromised by force. A perfectly democratically-elected government or board of directors of a company can nonetheless be intimidated and taken over by a hostile group, and be forced to dismantle or centralize. With a DAO the rules of the organization cannot be modified through force, and the loss of a few key members does not jeopardize the rest of the group. Even if the majority of the DAO’s membership is destroyed or forced to exit, new members can simply join in and continue to run the group without issue. The implications of a truly censorship resistant organization on today’s global stage are huge.

Self-funding gives strength and autonomy

The final crucial piece of the DAO is self-funding. By functioning without any outside help, the organization remains immune to major conflicts of interest, or de facto control by powerful entities. A fully decentralized organization that doesn’t pay its own bills has to rely on donations, corporate sponsors, and other methods in order to continue to function, and those funding sources can completely control the output and actions of the group indirectly. Self-funding takes care of this problem and ensures the integrity of the DAO.