Decred

What is Decred (DCR)?

Decred is one of the oldest projects in the blockchain industry that is still going strong. Describing itself as “Money Evolved,” Decred is a hybrid blockchain that combines elements of proof-of-work and proof-of-stake consensus.

One of Decred’s biggest selling points is its focus on community input and open governance. Stakeholders make and enforce rules and direct the blockchain’s development, with proof-of-stake voting taking precedence over miners in governance and reward structure.

Decred is a fork of Bitcoin, and its origin is rooted firmly in the famous Bitcointalk forum. Decred’s code was built on the btcsuite codebase, an alternative full-node Bitcoin implementation in Go.

When Was Decred Launched?

The origins of Decred can be traced back to April 2013, when a Bitcointalk forum user called tacotime proposed a cryptocurrency called Memcoin2. Tacotime then published the Memcoin2 whitepaper shortly after the initial proposal under the name of Adam Mackenzie.

It remains unclear whether Adam Mackenzie is tacotime’s real name or a pseudonym similar to that of Bitcoin creator Satoshi Nakamoto. Interestingly, tacotime was also involved in developing Monero, the privacy-focused cryptocurrency.

In 2014, tacotime joined forces with a fellow Bitcointalk forum user named _ingsoc, and the hybrid cryptocurrency eventually known as Decred started to take shape. In the same year, _ingsoc approached an open-source development firm, Company 0, and its CEO, Jake Yocom-Piatt, for funding and resources to take the project further.

Company 0 was running under the name “Conformal Systems” at the time. It was known for products like zero-knowledge cloud storage Cyphertite and Bitcoin payment processor Coinvoice. The firm was focused on the btcsuite infrastructure at the time, which ended up being used by developers of Ethereum, BitGo, Factorm, OpenBazaar, and Lightning Network.

Development of Decred was funded solely by Company 0, and Yocom-Piatt officially announced Decred in 2015. In February of the following year, the Decred mainnet was finally live.

When the Decred blockchain launched, a premine was carried out. 8% of the 21 million DCR coins were distributed, with half of them going to Company 0 and the Decred developers. The other 4% was airdropped to a list of participants, each receiving just over 282 DCR.

According to Decred documentation, Company 0 paid approximately $415,000 to Decred developers in “bring up costs.”

How Does Decred Work?

Decred was created by forking Bitcoin or copying Bitcoin’s code and making some significant modifications to it. Much of the motivation for these alterations came from Bitcoin’s own governance structure.

In November 2015, C0 CEO Jake Yocom-Piatt published an opinion piece on Bitcoin’s governance, funding, and power centralization among proof-of-work miners. In it, he highlighted the battles over scaling between development teams and miners.

These disagreements among the Bitcoin community have led to many hard forks and offshoot projects. Bitcoin lacks a decentralized governance system that allows the entire community to formally decide on a single way to progress the blockchain.

One of the key points Yocom-Piatt made was that actual holders and users of Bitcoin have no say in the future of the blockchain itself.

Decred, standing for “decentralized credits,” was the solution to these problems. It was created to be a self-funding cryptocurrency with a system of community-based governance integrated into its blockchain.

This was accomplished with a hybridized proof-of-work/proof-of-stake (PoW/PoS) consensus that strikes a balance between PoW miners and PoS voters.

PoW miners play a similar role as they do in Bitcoin, securing the blockchain, while PoS voters (called stakeholders) stake their DCR to obtain voting tickets. Decred has a block time of 5 minutes, with confirmation taking half an hour.

What Makes Decred Unique?

Decred is unique for its strong focus on governance. Many, if not most, proof-of-work blockchains leave governance in the hands of miners, but Decred leans toward a proof-of-stake model by empowering DCR holders.

The main device through which this is done is the Politeia platform. Politeia facilitates the submission, tracking, and discussion of Decred governance proposals by the stakeholder community.

Voting on proposals doesn’t happen directly on Politeia. Rather, it is done from Decrediton or on the command line using the Politeiavoter CLI tool.

To vote, stakeholders time-lock or stake their DCR coins to buy tickets. Once tickets are live, which is usually 28 days later, they can be used to cast a vote for or against each open Politeia proposal. These votes are signed using stakeholders’ Decred wallets.

Detailed information on Politeia, including the entire proposal lifecycle, is available in Decred’s documentation.

More importantly, proposals submitted to Politeia are censored if deemed by administrators to be spam or invalid. However, this is done in a transparent manner.

When a user registers for Politeia, a cryptographic identity is created for them. This identity is then used to create a “censorship token” for each submission on the platform, including proposals, comments, and up/down votes.

If a user is censored, these censorship tokens can be used to prove that a specific submission was made as well as when and in what form.

How is the Decred Network Secured?

Decred uses a hybrid PoW/PoS consensus system that involves both miners and voters, allowing holders of the DCR cryptocurrency to play an important role in the network.

PoW miners run the hardware that keeps the network going, leveraging their computing power to solve cryptographic puzzles. This is the process by which transactions made on the network are tied together into blocks.

Each block is composed of a set of transactions and the cryptographic hash of the previous block in the chain. Blockchains are immutable because if one of the blocks is changed somehow, its hash will change as well, and the chain will break.

Mining is incentivized by a block reward or a certain amount of DCR given to the miner who solves the particular block’s aforementioned puzzle. In stark contrast to pure PoW blockchains, Decred miners are rewarded with only 60% of the block reward as per Decred documentation.

A further 10% of the block reward goes to the Decred Treasury, which makes it a self-funding network. Finally, the remaining 30% of the block reward goes to the holders of the tickets that voted during that block.

In most PoW chains, miners mine blocks, and then the entire network validates them. In Decred, PoS stakeholders are responsible for approving the work of PoW miners. This is done via a lottery system, with 5 tickets being called up randomly to vote.

What is the Use of DCR?

DCR, like BTC, is designed to be a peer-to-peer form of digital currency. Given its distribution and supply, it is also considered a good store of value. Decred’s differentiation from other projects is almost all to do with governance, and DCR is staked by users who want an active role in that regard.

Who Controls Decred?

Governance of the Decred blockchain occurs directly on-chain via its hybrid PoW/PoS consensus mechanism. However, PoW miners can be overridden if 50% or more of the stakeholders vote against a particular block.

Consensus rule amendment is also driven by stakeholder voting. If 95% of PoW miners and 75% of PoS voters have upgraded their software with a new version containing latent changes to the rules, an 8,064 block voting period begins.

The project as a whole intends to transition to a decentralized autonomous organization (DAO). This DAO will control the disbursement of Treasury funds.

Until the control of the project is fully decentralized and handed over to the DAO, Decred Holdings Group LLC (known as DHG) remains in charge of the Treasury.

However, Politeia proposals are the mechanism through which policy and work program decisions are made. Therefore, the will of the stakeholders is the ultimate decision-making force for the Decred project.

How Much DCR Is In Circulation?

Decred has a total supply of 21 million DCR, a common and often familiar figure for cryptocurrency holders. Out of this, just over 14.4 million DCR are already in circulation.

Much like Bitcoin, Decred is subject to halving. This means that the amount of DCR issued with each block is reduced by half at set intervals. However, while Bitcoin takes around 4 years to halve, Decred halves every 6,144 blocks—that’s just 21 days.

How Do You Buy DCR?

You can buy DCR on peer-to-peer platforms, exchange it for goods and services directly, or use a cryptocurrency exchange. Since it’s been around for so long, DCR is listed by many of the most popular crypto exchanges.

Is It Possible to Buy Decred Instantly?

Decred isn’t a very fast blockchain compared to a lot of the newest offerings, with a block time of 5 minutes and confirmations taking 30. The Lightning Network helps with that, though, scaling Decred and making transactions faster, just as it does with several other blockchains.

As such, transaction speed with Decred depends on whether you’re using the base layer or letting Lightning Network do its thing.

How Do You Store DCR?

You can store DCR in a cryptocurrency wallet. Some of the most popular multi-coin wallets offer support for Decred, including Guarda, Trust Wallet, Exodus, Coinomi, Trezor, and Ledger’s Live wallet.

If you’d prefer to use a native Decred wallet, you could use either Decrediton or GoDCR.

Decred Energy Consumption

Decred is a hybrid PoW/PoS chain, and given its strong emphasis on PoS voters, it doesn’t rely on a massively decentralized mining network for safety.

However, mining centralization is still a threat, so a wider mining network is a good thing for Decred. Unfortunately, if a lot of public discourse is to be believed, this is not true for the environment.

With Ethereum completing an extremely high-profile merge from PoW to PoS and reducing energy consumption dramatically, Decred has its own PoS going for it.

Is DCR a Good Investment?

As far as a Decred user is concerned, it’s just another name in a sea of payment networks. In that sense, the competition is stiff, as Decred has to compete with the likes of Bitcoin, Litecoin, Nano, Dash, Bitcoin Cash, and countless others.

However, Decred adds a pinch of philosophy to the mix. For those that consider decentralization and open governance of importance, Decred may be the network of choice. Proponents of Decred’s ideals are also incentivized to have “skin in the game” by staking DCR and actively participating in governance.

Decred’s governance mechanism is very similar to many of the PoS protocols out there. However, a lot of these PoS projects are criticized for their token distribution, with massive voting power being conferred to highly capitalized institutional investors early on.

Decred executed a relatively small premine and airdropped tokens to individuals identified to have made or be able to make contributions toward technology.

Along with Bitcoin-esque economics, the ability to stake, vote, and be compensated for it with a cut of the block reward is also a big draw.

Ultimately, Decred’s likelihood of long-term success depends on its ability to innovate. It isn’t slow in this regard and has already adopted the Lightning Network layer 2 solution for speed and scale.

With good governance, any project has a chance to succeed. Decred, at the very least, is well positioned in this regard.