DNA barcoding has attracted attention with promises to aid in species identification and discovery; however, few well-sampled datasets are available to test its performance. We provide the first examination of barcoding performance in a comprehensively sampled, diverse group (cypraeid marine gastropods, or cowries). We utilize previous methods for testing performance and employ a novel phylogenetic approach to calculate intraspecific variation and interspecific divergence. Error rates are estimated for (1) identifying samples against a well-characterized phylogeny, and (2) assisting in species discovery for partially known groups. We find that the lowest overall error for species identification is 4%. In contrast, barcoding performs poorly in incompletely sampled groups. Here, species delineation relies on the use of thresholds, set to differentiate between intraspecific variation and interspecific divergence. Whereas proponents envision a "barcoding gap" between the two, we find substantial overlap, leading to minimal error rates of approximately 17% in cowries. Moreover, error rates double if only traditionally recognized species are analyzed. Thus, DNA barcoding holds promise for identification in taxonomically well-understood and thoroughly sampled clades. However, the use of thresholds does not bode well for delineating closely related species in taxonomically understudied groups. The promise of barcoding will be realized only if based on solid taxonomic foundations.