Decred is a cryptocurrency leveraging the benefits of both the Proof of Work & Proof of Stake consensus algorithm. It also has an interesting back story that we will explore in some time. Decred aims to empower the community & allow them control over the flow of transactions within the Decred ecosystem. A combination of PoW/PoS consensus mechanism and open governance will not allow any individual or group of individuals to dominate the network or control the flow of transactions. Decred also wants to fund their development more sustainably. Decred’s tagline is “Secure, Adaptable, and Sustainable,” and it perfectly sums up what Decred stands for.
The History of Decred
It all began in 2013 when a developer under the pseudonym of tacotime announced in a BitcoinTalk thread that he is thinking about launching a new cryptocurrency. The developer said that the new cryptocurrency would be a hybrid cryptocurrency. It will employ both the Proof of Work & Proof of Stake consensus mechanism. The developer using the pseudonym tacotime also said they would announce the technical details about the project soon.
The developer, indeed, came up with a whitepaper on the new cryptocurrency. To share the white paper, Tacotime created a new thread on the Bitcointalk website, and the title of the whitewater was “Memcoin2 (MC2): A Hybrid Proof-of-Work, Proof-of-Stake Crypto-currency.” The new coin was developed on a platform called btcd, which, too, was developed by the Decred developers. In the whitepaper, Cryptocurrency was referred to as Memcoin2. In terms of principles, that Memcoin2 had traits of both Litecoin & Peercoin.
Tacotime, the main developer of MC2 cryptocurrency, began working on a private coin project in 2014. The privacy coin project was Monero. Thus, Tacotime is also a part of the core team behind Monero. But regardless of his involvement with Monero’s development, Tacotime was still involved in the development of MC2.
There was one more developer who was actively involved in the MC2 project. The second developer was using the pseudonym _ingsoc on Bitcointalk. Tacotime was coordinating with _ingsoc throughout 2013. _ingsoc approached Jake Yocom-Piatt, the CEO of Company Zero, in early 2014 with the concept of MC2, and that’s how Decred came into existence.
In 2015, Company Zero published multiple blog posts about the challenges of Bitcoin along with the solutions for them. Finally, later in 2015, the company announced Decred as a cryptocurrency. The premise was that Decred doesn’t suffer from the problems that Bitcoin does.
Decred is headquartered in Chicago, Illinois, United States, and the legal name of the company behind Decred cryptocurrency is Decred Holdings Group LLC. The founders of Decred are Alex Yocom-Piatt, Dave Collins, David Hill, Jacob Yocom-Piatt, John Vernaleo, Josh Rickman. Decred has gone through one funding round, where they raised an unannounced sum from the Berlin, Germany-based BlueYard Capital. As per LinkedIn, Decred has 32 employees. They have a distributed workforce with employees working from United States, Ukraine, Mexico, Poland, Nigeria, Canada, Israel, Vietnam, and Brazil.
What Problem Does Decred Aim to Solve?
Decred aims to solve the inefficiencies of the Bitcoin blockchain. According to Company Zero, Bitcoin has multiple issues like lack of development funds, too much control of core developers, too much reliance over the mining power, among other things. These are the problems that Decred aims to solve.
The design of the Bitcoin blockchain network is such that miners hold too much control over the Bitcoin network. The Bitcoin miners are the ones who conduct transactions and create new blocks, as that’s how the Bitcoin blockchain was supposed to operate. The issue is that it gives too much power in the hands of Bitcoin miners who hold the largest mining hash power.
The problems regarding Bitcoin have been known for quite a long time. Experts believed sooner or later, the issues regarding Bitcoin will crop up as the number of users grows. It’s just that these problems have become too significant in recent times. It does not mean that there are no solutions to Bitcoin’s problems. There is a possibility that given enough time and resources, experts will come up with solutions to solve these problems, but miners must be ready to accept. Without miners agreeing to the solution, it’s just not possible to implement the changes to the Bitcoin network.
Due to differences in the interests of various user groups within the Bitcoin network, there has been no progress yet. For instance, the interest of Bitcoin miners is not in the same line as that of the developers and the Bitcoin users. The Bitcoin miners hold so much power over the Bitcoin network that they can block any implementation of updates. Then there is the issue of lack of development funds. So far, the Bitcoin community has managed the development activities with voluntary donations. But donations aren’t an effective way for development activities.
A development fund is a must to ensure steady and regular development activity to keep the network running without any hiccups. A lack of development funds is not good for the entire network as the development team itself will remain dependent on the users and the miners. The absence of voting privileges in the Bitcoin network aggravates the issues further.
There is also the issue of the Bitcoin network being controlled by large players. A large number of smaller miners are not as large of a threat as a group of large miners controlling the network. If a handful of large Bitcoin miners join hands, they can have control over 51% or more of the Bitcoin network. It will result in a much-feared situation known as a 51% attack.
Bitcoin mining also puts undue stress on the Bitcoin client as miners receive rewards on every block regardless of the number of transactions it contains. Even if a block has no transactions in it, the miners will receive rewards no matter what.
Then, there is another big question that is yet to be answered. What will happen after the maximum supply of Bitcoin, which is 21 million, is over? Who will run the Bitcoin network at that time? Miners won’t see a point in running the network if they won’t receive any rewards to continue mining. If miners leave, the Bitcoin network will be left on its own, which will be enough to collapse the entire BTC ecosystem.
How Decred Works
As we have seen in a Proof of Work consensus mechanism, there is a real threat of a miner or a group of miners exercising control over the entire network solely based on the mining hash power they hold. If their combined mining hash power is 51% or more of the respective blockchain network, they can initiate what we call a 51% attack.
PoS/PoW Hybrid Cryptocurrency
If a 51% attack becomes a reality, these rogue miners will begin double-spending their coins, which will be detrimental for the entire network. But using a combination of Proof of Work & Proof of Stake consensus mechanism, Decred has effectively tackled this challenge. A PoW/PoS hybrid system gives the miners, users, and developers an equal say in the network. Hence, miners won’t have too much control over the Decred network.
Voting Process
Decred also has an interesting voting process. The integral part of the voting process on Decred is voting tickets. Anyone who wants to own a voting ticket in the Decred network can do so by freezing 5 DCR tokens. A voting ticket will enable you to vote on crucial changes in the Decred ecosystem. To prevent spamming, Decred charges 0.1 DCR token on every suggested change. It is a well-planned safeguard against spam attacks. Due to this safeguard, no one will submit irrational or senseless changes for implementation on Decred.
Open Censorship
Let’s say that a user submits an idea that can benefit the Decred network, but developers are strongly against it. Then, the developers will use their voting tickets to vote against the proposal. In this case, the user who had submitted the proposal can use the special token given to them & move the discussion on their proposal to the community members.
Every proposal, even after receiving approval from the administrators, will go through a referendum process. For the proposal to be implemented, it must receive 75% of all votes. But the voting results will only be considered acceptable if at least 20% of the entire user base. Otherwise, the results will be considered null & void.
Lightning Fast Transactions
Due to the increasing number of users transacting on the Bitcoin network, all Bitcoin transactions have become slow & costly. Decred transactions, on the other hand, are faster due to the successful implementation of the Lighting Network Protocol.
Decred (DCR) Tokenomics
At the time of writing, Decred is the 59th largest cryptocurrency by market cap. The maximum supply of DCR tokens is 21,000,000, whereas its current circulating supply is 12,949,660. As for the distribution of DCR tokens, 60% of DCR tokens are for PoW miners, 30% are PoS validators, and 10% of DCR token supply has been set aside for the development of the Decred network.
How to Buy Decred (DCR)
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Decred – A Better Alternative to Bitcoin?
There are more than 5000 cryptocurrencies today, and most of them are in it to compete against Bitcoin. The premise behind a majority of these cryptocurrencies is to become what Bitcoin cannot. Decred, in its part, has achieved moderate success so far by achieving a rank within the 100 largest cryptocurrencies by market cap. It makes Decred far better than 1000s of cryptocurrencies out there. As of now, Decred is a kind of hidden gem in the crypto market. Being one of the leading projects leveraging the PoW/PoS hybrid model, it is certainly among the most interesting crypto projects in existence today.