Decred: A Hybrid PoS/PoW Cryptocurrency Reinventing Governance
Governance is a complex area for many cryptocurrency projects, and the overarching idea has been the subject of much debate, especially among the Bitcoin community. While many would like to equate digital assets to precious metals like Gold, which have zero governance, cryptocurrencies require an element of direction to guide their development. In the case of Bitcoin, miners exert the most influence, followed closely by the core development team. However, Bitcoin’s governance model has resulted in much disagreement among influencing parties, leading to a significant lack of consensus on major technological direction.
One project whose founders saw the governance issue with Bitcoin early on and decided to develop a more efficient system is Decred, a cryptocurrency that leverages a hybrid proof-of-work (PoW) and proof-of-stake (PoS) consensus model to create a unique internal voting system. Decred’s ability to quickly find consensus among the influencing governance parties has resulted in a number of current and upcoming innovations, including a transparent off-chain public proposal system, successful atomic swaps, and the integration of the Lightning Network.
Interested in Decred? Here’s a quick rundown of the project:
Platform & Development
In traditional PoW consensus models, a concentrated group of miners is able to hold a significant amount of power. In Decred’s hybrid PoW/PoS, token holders can validate transactions virtually (PoS) to receive rewards and vote on network proposals, essentially evening the playing field among governance parties. This allows token holders to have a direct say in the progression of the project, aligning incentives and enabling a more efficient development process. Additionally, token holders earn approximately 2.25 percent per month on their investment, which works to bring in long-term investors.
Token holders lock up their Decred tokens in return for a ticket that, when randomly selected, allows the ticket holder to act as a block validator to earn token rewards. In Decred, newly generated tokens are distributed, as follows: ~60 percent to PoW miners, ~30 percent to PoS voters, and ~10 percent towards a development fund. It’s important to note that Decred is planning on developing a smart contract that will fully decentralize control of the development fund, creating an even more transparent system.
Decred’s core development team is working on a number of innovations, and in September 2017, Decred completed a successful on-chain atomic swap with Litecoin, a major accomplishment for both projects.
— Charlie Lee [LTC⚡] (@SatoshiLite) September 20, 2017
Decred has detailed its roadmap through 2019 and has highlighted a number of important upcoming milestones, including the launch of their Politeia Voting system and Lightning Network. Here are the upcoming milestones, as described by the Decred team:
SPV Wallet Support – Instead of taking the typical wallet service approach where wallets connect to a centralized server, we have added support for a proper SPV mechanism that uses compact filters and works over the P2P network.
Politeia Voting – Our proposal system is nearing completion and will allow users and stakeholders to make proposals, dictate what does and does not get funded, and participate in project-level decision-making.
Lightning Network – The bulk of the work to port Lightning Labs’ lnd to Decred has been completed and it will be released soon.
Initial Privacy Release – Privacy work has begun in earnest and we will make an incremental privacy release where we release working code and give further information about our plans and approach.
Decentralized Control of Funds – While Politeia voting will be used to control the flow of dev org funds in the meantime, we will be creating a smart contract that will fully decentralize control of the dev org funds.
Decentralized Autonomous Entities – Using a similar method as that used to decentralize control of the dev org funds, we will allow for the creation of DAEs on the Decred chain.
Scalability Optimizations – A variety of changes, some of which are consensus changes, are required to improve the scaling properties of Decred, e.g. a new signature algorithm, multipeer sync support, and header commitments.
Decrediton Integrations – The Decrediton GUI will be adding new integrations to support SPV, mobile, Politeia voting and Lightning Network.
Decentralized Exchange – We will draft a proposal for a cryptocurrency-only decentralized exchange and share it publicly.
Marketing Growth – Decred has lined up a presence at many of the premier cryptocurrency trade shows for the rest of 2018 and will continue dialing up its marketing efforts.
The main Decred team is based out of Chicago, but the project leverages a network of contractors from across the globe.
Decred (DCR) currently has a market cap of ~$330 million with a circulating supply of 7,021,396 DCR, a total supply of 7,441,396 DCR, and a max supply of 21,000,000 DCR.
Decred is developing one of the best governance systems in all of crypto, which ultimately creates a more streamlined and efficient development path. This underlying efficiency is the major value driver for Decred, which aims to rapidly expand its platform through lofty technological milestones in 2018.
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Disclaimer: The author(s) of this article may have a position in one or more of the securities mentioned above. This article is for informational purposes only and should not be taken as investment advice. Always conduct your own due diligence before making investments.