What is Decred?
Decred is a cryptocurrency created in 2016 that aims to solve blockchain governance. It empowers its stakeholders to vote on the future iterations of it’s software. The idea is to have a democratic voting process for adopting new features to reduce the chances of a hardfork. Decred’s objective is to avoid forks like Bitcoin and Bitcoin Cash, that divide communities and potentially impede innovation. Decred has some major and minor differences to other popular pure cryptocurrencies. This summary will address some of its major differences such as its governance, treasury, and mining, but will not address some smaller technical differences such as its signature algorithms, hash functions, and script extensions.
Decred’s governance system breaks down into two parts: blockchain governance and project governance (off-chain).The blockchain governance verifies blocks and transactions as well as votes on coding editions and the project governance votes on Decred’s overall development.
Decred’s blockchain is verified through proof-of-work miners and proof-of-stake contributors (stakeholders). Stakeholders can override miners if 60% or more of the stakeholders vote against a particular block created by a miner. The proof of work and proof of stake hybridization distinguishes it from some other cryptocurrencies like Bitcoin, in which miners ultimately have more power to control the network because they are the only ones securing and verifying transactions.
Additionally, Decred holders can vote on system upgrades that can lead to hardforks. Some past votes involved changing the proof-of-stake difficulty algorithm and starting support for the lightning network. The results of those votes can be found at the bottom of this page. The Decred voting cycle is shown in the image below:
Each new block in the Decred blockchain rewards miners with 60% of the block, stakeholders with 30% of the block, and the development team with 10% of the block. This is a relatively unique way for the development team to stay funded and to ensure that the organization can sustainably support new developments. This contrasts with many other cryptocurrencies that launch ICOs that fund their team in a front-heavy format that could result in irresponsibly spending too many funds at the start of a project.
As mentioned earlier, Decred secures its network through a hybridization of proof-of-work and proof-of-stake. The hybridization creates a check and balance between miners and stakeholders and encourages any type of supporter to help secure the network without having tailored computers. It is worth noting that only 35.5% of the total 21,000,000 coins have been mined, which offers opportunities for new miners to tap into the network and start receiving block rewards.
Decred offers some unique characteristics that should make it a sustainable cryptocurrency but those characteristics may not be strong enough to help it eclipse major pure cryptocurrencies like Bitcoin, Monero, and Dash. Hardforks led by a minority can handicap a cryptocurrency community and Decred’s governance system should deter those minority hardforks, but that problem may not be that detrimental. Minority groups have hardforked Bitcoin several times, but Bitcoin remains dominant over the rest of the cryptocurrency industry. A coin that is more likely to overtake Bitcoin will probably be one to offer a significant technical upgrade. Decred is poised to incorporate future upgrades but does not provide a significant technical upgrade out of the box. Not only that, but Bitcoin is able to make upgrades without a democratic governance system. For example, Bitcoin will still be able to incorporate the lightning network and segwit, so it is not like a governance system is the only way of achieving system upgrades.
Decred will not disappear but BlockWolf does not expect it to outperform the market. However, Decred is important for the industry because it can offer a good framework for future cryptocurrencies to use. The general idea of governance and awarding a small block reward to the development team should make the cryptocurrency more sustainable, and other new cryptocurrencies could learn from Decred. It should be worth noting that it cracked the top 15 cryptocurrencies in terms of market cap size in early 2017.