Dash masternodes enable the following services: InstantSend, PrivateSend, Governance, Treasury, and Dash Evolution (an online payment system similar to PayPal). To own a dash masternodes you must be in possession of 1000 Dash which can be proved by signing a message and broadcasting it the Dash network. Each masternode earns ~8% return on 1000 Dash as of July 2017, but from this date onwards Dash masternode earnings will decrease by ~7% each passing year.
PrivateSend is Dash’s method of obscuring the origin of Dash funds. It was officially released in RC4 of the DarkCoin client as DarkSend, and was rebranded to become PrivateSend in May 2016. PrivateSend obscures a Dash users identity by mixing a users inputs with the inputs of two other Dash users, while each user maintains ownership of their Dash coins inside their cryptocurrency wallet. Every PrivateSend happens in 5 steps:
- The breakdown of transaction inputs into standard denominations of 0.001, 0.01.0.1, 1, and 10 Dash.
- Users wallet sends a request to masternodes to inform them the user is intersted in mixing a specific denomination of Dash for their transaction. During this process no information is exchanged that could expose the identity of the user.
- Once two other people on the Dash network send similar requests to the masternodes. The masternodes create a ‘change address’ by mixing up the inputs and instructs all three of the users’ wallets to pay the transformed inputs back to themselves in a different cryptographically generated address.This process is referred to as a ’round’.
- Users are able to instruct the Dash masternodes to perform between 1-16 rounds of mixing with each specified denominations. A users identity and transaction origin become exponentially more difficult to determine with each round of mixing.
- The round mixing process occurs on Dash masternodes automatically for users looking to make transactions. When a user decides to make a transaction their transaction amounts are already anonymized. All Private send transactions are rounded up so each transaction spends all its inputs and excess dash is used to pay Dash transaction fees.
InstantSend transactions are made possible through Dash masternodes. The masternodes create a secondary layer-notwork that allows users to call upon masternodes to form a voting quorum of 10 masternodes to verify the validity of their transaction. If the masternodes deem the user request as valid, the masternodes lock the transactions inputs on the Dash netowork and ensure the transaction will be mined in future blocks while preventing spending of those inputs until mining is complete. This allows Dash to significantly improve the speed at which the Dash network can confirm transactions, however, InstantSend transactions with more than four inputs are subject to paying higher Dash fees.