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Decred Review – Democratic Governance Puts Users in Control

Decred in Brief

Decred (aka DCR) is a blockchain-based cryptocurrency that was launched in 2016 by Company0. As is the case with Bitcoin, the term Decred has a double meaning. Decred can refer to both the Decred cryptocurrency itself and the blockchain that facilitates Decred transactions.

Decred’s most notable feature is its unique “embedded governance” system. This system provides a way for Decred developers to avoid the conflict of interest issues that have created controversy around some Bitcoin development decisions. The main problem: some Bitcoin developers work for a development company called Blockstream which is in the business of creating Bitcoin sidechains. As a result, Bitcoin developers that work for Blockstream tend to vote against adding new Bitcoin features that eliminate the need for sidechains.

Since 2016, Decred developers have continued to expand the cryptocurrency’s feature set. Last year, Company0 completed the first-ever cross-chain atomic swap. Additional features– like improved privacy, a zero-fee decentralized crypto exchange and Lightning Network integration– are on the horizon.

Pros

  • Decred users can submit feature proposals and vote on whether or not to implement them.
  • Company0’s leaders have been involved with cryptocurrency since 2013.
  • Rather than spend money on marketing Decred, Company0 has chosen to focus on expanding its functionality.

Cons

  • Many Decred features are still in development.

Exchanges that list Decred

Over 20 cryptocurrency exchanges list Decred. Notable international exchanges that offer Decred trades include Binance, Huobi and Upbit. American exchanges that support Decred include Poloniex and Bittrex.

Decred’s History

As mentioned above, Company0 is the development firm behind Decred. In addition to Decred, Company0 has produced two other notable cryptocurrency-related projects: the collection of Bitcoin software programs known as btcsuite and a suite of secure chat programs called Zero Knowledge Chat.

Decred’s origin story

Company0 CEO Jake Yocom-Piatt revealed his inspiration for starting Decred in a 2015 blog post:

“In early 2013, after one of my developers had a less-than-pleasant interaction with the Core developers regarding porting [Bitcoin] to OpenBSD, I decided that making an alternative from-scratch implementation of Bitcoin would be an interesting project and benefit the Bitcoin community by offering an alternative to the Bitcoin Core (BC) monoculture.”

Yocom-Piatt’s main issue with bitcoin at the time was its system of governance. He has described the system as an “informal oligarchy.”

In particular, Yocom-Piatt was troubled by the fact that some of Bitcoin’s developers are employed by a development firm called Blockstream. Because Blockstream is in the business of producing and maintaining Bitcoin sidechains (separate blockchains that work alongside Bitcoin’s blockchain), the Bitcoin developers that it employs are incentivized against adding features to Bitcoin that would make Blockstream’s sidechains obsolete.

Yocom-Piatt goes on to say that because Bitcoin doesn’t provide a way for its developers to earn a living, they are more likely to be influenced by companies that offer to fund their development efforts. The first version of Decred was designed to solve those crucial issues.

Skeptics raise doubts

Not everyone in the cryptocurrency community was convinced that Decred would succeed. One prominent critic of the altcoin was Ethereum creator Vitalik Buterin.

Buterin shared his skeptical outlook on the altcoin with CoinTelegraph:

“Right now, I believe that in order to succeed, a new blockchain project has to bring something genuinely new to the table, and it can’t just be a slightly better consensus algorithm.”

A number of other prominent cryptocurrency thought leaders expressed their doubts about the coin to CoinTelegraph. Bas Wisselink of NXT Foundation wondered if Decred’s development team would follow through on their initial plans:

“It’s pretty much like any other startup with aims to which it’s hard to say ‘no’ to, but once again without providing anything more than plans. Unless this is more than just a plan, it will probably go the same way any airdrop went: it will get dumped and then no interest will remain.”

Susanne Tarkowski Tempelhof, CEO of Bitnation, went as far as to label Decred as a possible scam:

“Decred is currently utilizing highly unethical marketing strategies, making it a project with possibly fraudulent intentions.”

Initial development

Yocom-Piatt and the rest of Decred’s development team decided to address concerns about their project by focusing on building out Decred’s feature set.

Initial software products for Decred included a Decred wallet called Paymetheus and gominer, a cross-platform Proof-of-Work miner. Later in 2016, Company0 improved the speed of the Decred blockchain and rolled out Decred’s Proof-of-Stake features. Company0 kicked off 2017 by tweaking Decred’s sdiff staking algorithm and improving its stability. Next, it announced that Decred will eventually join the Lightning Network— a micropayment system that improves the speed of transactions, reduces fees and corrects a number of other cryptocurrency usability issues.

Politea rollout

Politea is Decred’s built-in voting system for determining the direction of the coin’s development. Shortly after the launch of the beta version of Politea last year, the Decred team used DCR rewards to encourage its users to submit proposals. The first place winner won $10,000 worth of DCR for submitting Titan Seal— a proposal for creating a Decred-based, decentralized system for making traditional paper seals obsolete.

Decred goes atomic

Decred made headlines in September of 2017 when the development team announced that it had successfully completed the first ever cross-chain DCR / LTE atomic swap. Atomic swaps facilitate the exchange of one cryptocurrency for another without the use of cryptocurrency exchange. The test was significant because it provided a glimpse into how crypto trading might work in the future. Further atomic swap development could eventually reduce or eliminate the need to use a 3rd party exchanges when trading cryptocoins.

Leadership

Company0’s core leaders are CEO Jake Yocom-Piatt and CTO Marco Peereboom.

  • Jake Yocom-Piatt – CEO. Yocom-Piatt is a cryptocurrency pioneer who’s been closely involved in the industry for over 10 years. He holds an M.S. in Physics, which he received from the University of Chicago.
  • Marco Peereboom – CTO. Before joining Yocom-Piatt’s team at Company0 in 2016, Peereboom was a Senior Architect at Dell. He graduated from the private Dutch university Rens & Rens with a B.S. in Computer Engineering.

What Does the Decred Blockchain Do?

Allows commission free crypto-to-crypto trades

The Decred blockchain allows for a simplified method of executing crypto-to-crypto trades called atomic swaps. Atomic swaps allow crypto traders to exchange one cryptocurrency for another without the need to go through a third party.

Because atomic swaps remove the middleman, in the near future, traders may not have to pay commission fees when they want to trade one cryptocoin for another. Decred completed the first cross-chain atomic swap in September of last year.

Source: Twitter

Decred’s developers have noted that there are several aspects of atomic swaps that limit the feature’s utility. The most significant limitation is the cost involved with processing an atomic swap. Currently, users must pay transaction fees for both the swap transaction and the redeem transaction on each chain. In addition, atomic swaps may require an hour or more to process.

The developers hope that future improvements will solve these problems and mark a leap forward in the development of cryptocurrency technology. Technical details about how this feature works are available here.

Facilitates democratic development decisions

Most cryptocurrencies are controlled by a small group of developers that make all the important governance decisions. This isn’t the case with Decred.

In November of last year, Decred developers debuted a limited version of Politeia Voting– a mechanism for allowing stakeholders and users to decide how Decred development will proceed. The full version of Politeia was rolled out this month.

Anyone who is willing to pay the 0.1 DCR fee can submit a proposal. Information about how to fill out a proposal is available here.

Once a proposal is approved, the developers will begin to work on it. Any type of proposal– from specific technical changes to Decred’s code to marketing ideas– can be submitted through the governance system.

Source: Decred

How Does the Decred Work?

Combines the benefits of Proof-of-Work with Proof-of-Stake

The most innovative existing aspect of Decred is the way it combines two different consensus algorithms: Proof-of-Work with Proof-of-Stake.

In a Proof-of-Work system, miners compete against each other to solve cryptological math problems. Whoever solves the problem first wins the right to process the transaction and receives a mining reward. Bitcoin and many other cryptocurrencies rely on Proof-of-Work to process transactions and verify that they are legitimate.

Proof-of-Stake provides a different way of distributing mining rewards. Instead of requiring miners to compete in a Proof-of-Work lottery, Proof-of-Stake systems distribute rewards proportionally amongst the coin’s holders. Generally, the more of the asset you have and the longer you hold onto it, the more rewards you get.

Decred’s unique governance system combines the benefits of Proof-of-Work with Proof-of-Stake by incorporating both methods of verification. In Decred’s hybrid system, the Proof-of-Stake verifiers authorize a transaction after it has been verified by the Proof-of-Work miners. The verification reward is split up accordingly. Rather than giving miners 100% of all transaction verification rewards, they only get 60%. 30% of the reward goes to Proof-of-Stake voters and the final 10% funds development costs. The end result: Decred’s developers can remain financially independent and the Decred network is more resistant to 51% attacks and other kinds of exploits.

How mining works

Gominer is the official Decred miner. It was created and is supported by the Decred development team. Other miners that work with Decred include cgminer, ccminer and sgminer.

Because the Decred network is competitive (the network hashrate typically averages 10,000Gh/s, according to Decred), solo mining is not a practical option for most people. Many mining pools support Decred, including BeePool, F2Pool, Poolin, UUpool, Luxor and others.

How Is Decred Distributed?

Decred never had to launch an ICO because the cryptocurrency’s governance system provides a built-in way for the team to generate revenue. As mentioned above, 10% of all mining rewards go to fund Decred development, marketing and other costs.

Shortly after Decred debuted, the team airdropped 282.64 DCR to 2972 hand-selected beta testers.

Does Decred Have a White Paper and Blockchain Explorer?

The Decred team has produced an extensive amount of documentation. The technical debrief describes how the cryptocurrency works on a nuts and bolts level. The Decred Github repository contains additional technical documents.

The Decred Business Brief provides a high-level view of how Decred works and how it fits into the cryptocurrency industry. Additional technical and non-technical documentation can be found at docs.decred.org.

Decred’s blockchain explorer is powered by Insight.

Where Does Decred Stand Now?

Decred’s price recently reached an 11-week high after it earned a Binance listing. That positive news came on the heels of an announcement that the Politea governance system had gone live. The launch lets Decred stakeholders decide what to do with $20 million worth of DCR.

Notable features that are still in development

Lightning Network integration

Decred will soon integrate with the Lightning Network– a protocol designed to solve slow transactions, high mining fees and other problems driving cryptocurrency network scaling issues. During a recent Q&A, the Decred development team stated that this feature “will make point-of-sale transactions possible in a way they just aren’t right now.” According to the 2018 Decred roadmap, Lightning Network integration is supposed to happen sometime this year.

Enhanced privacy features

New privacy features for Decred are supposed to come out sometime this year, as well. Very few concrete details have been released, though. The 2018 roadmap only states that “privacy work has begun in earnest” and that further details will be released at a later date.

Decentralized Crypto Exchange

In June, Decred proposed “a new kind of DEX” that takes advantage of Decred’s atomic swap feature to offer zero commission trading. Other notable elements of the proposal include improved transparency, Politea-based reputation scores and decentralized regulations to prevent fraud.

Final Thoughts

Decred’s atomic swap feature seems particularly innovative– and potentially disruptive. Today, crypto-only exchanges seem to be lucrative. In February, Forbes reported that Binance founder Changpeng Zhao’s net worth exceeds the one billion dollar mark. One of Binance’s main attractions is its low commission fees. If Decred’s atomic swap powered exchange allows traders to exchange cryptocoins for free, it might be able to compete with Binance and other similar exchanges.

The fact that Decred’s long-awaited Politea governance system is now live seems like a positive development. However, only time will tell if Decred users will spend their treasury wisely. Lightning Network integration might help Decred compete with point-of-sale oriented coins like Dash. Moreover, enhanced privacy features could help Decred gain ground against Monero and other privacy-focused coins.

Alex Munkachy

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