You may have heard of Decred before. It’s one of the top 50 cryptocurrencies by market cap, nestled in between 0x and Dogecoin. But what is it, exactly? Something to do with credit scores, or credit cards? Not quite. In this article we’re going to take an analytical look at what Decred is, and what it’s trying to accomplish.
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Decred is a “self-funded” cryptocurrency with some interesting features. Some of those features include support for Lightning Network and atomic swaps. One of the most pertinent of these features relates to how governance and forks are handled. To understand this better, we need to take a look at how bitcoin is handled today.
Bitcoin is always in something of a state of civil war. There are different groups and vested interests that want what’s best for themselves. As a result, these groups are all pulling in their own direction and not towards a unified goal, since there isn’t one. These sentiments manifested themselves last year during the Bitcoin Cash fork. One could argue that the fork occurred largely because the community couldn’t agree on how to address scaling issues.
Basically speaking, every time the Bitcoin network is faced with the need to change or update itself, it’s met with a flurry of opposition, support, and demands for alternatives. Since there is no bitcoin company or foundation that’s leading the development (at least not officially), changes can only occur through mass adoption, and that isn’t always easy.
Decred has a method for dealing with this type of problem.
Instead of relying on mass adoption or contentious hard forks, Decred has a system in place in which stakeholders need to vote on impending changes to the network. If a proposed change is approved by voters, then a date is set and the decision is confirmed. This means that if a significant change to the blockchain needs to occur, that it has a chance of actually happening and not getting stuck in endless debates and blustering. Compare this to Bitcoin, which has no such voting mechanism.
While this solution isn’t perfect, it at least allows the network to have a certain degree of unity when trying to move forward. The problem, perhaps, is that it is much easier to acquire a large number of votes and impact voting results if one has access to many units of Decred. Much like Satoshi’s vision of “one CPU one vote” was largely eliminated by ASIC mining, wealthy Decred owners could over-represent their own interests and affect results.
We checked in with the Decred team and asked them if they could tell us in their own words what Decred was all about. This is what they said:
“Decred is an autonomous, community-based digital currency. It was created in the spirit of open participation. This means anyone can start contributing. We welcome individual contractors as well as small businesses and even larger corporations. We focus on getting things done and we maintain high quality standards for our products. Politeia — our new proposal system — will make it very easy for contractors to offer their services to the project. Ultimately it will be up to the stakeholders to vote Yes or No.”
Instead of relying on just one algorithm or the other, Decred uses a hybrid system of both proof-of-work and proof-of-stake mining.
When a miner finds a block, that block is presented to a few randomly selected “stakers” (Decred holders). It is up to the stakers to then confirm if the block is valid. If a majority of the stakers agree, then the block is confirmed and the reward is released. The rewards are split so that both the miner and the stakers get some of the reward. However, the proof-of-work miner gets the majority of the reward, as well as the transaction fees.
Much like other self-funded cryptocurrencies, a portion of each block reward is set aside for use by the people behind it. For example, this funding has been used to send Decred developers to various blockchain events to talk about and promote the platform. Presumably, it’s also used for marketing, hiring graphic designers, and so on.
This type of self-funded model seems to be at the core of the Decred team’s goals. On their official website, they refer to this as autonomy.
Decred uses the Blake-256 hashing algorithm. Currently, ASIC miners do exist for this type of algorithm. For instance, the Obelisk DCR1 is designed and targeted towards mining Decred. The miner has a speed of 1500 gigahashes per second.
The Decred group released a roadmap for 2018 at the end of February. The roadmap contained a number of changes and improvements that will be made to the system. One of the more important additions to the network is support for Lightning Network — which will allow for faster and lower-cost transactions.
The group is also working on developing a decentralized exchange, and working towards creating privacy features among other developments. Development of privacy features seems to be at a very early stage at this point.
In their roadmap, they describe their attitude as being “reticent to expose [their] plans for privacy”. Work has begun, and they say development has “started in earnest and steady progress is being made towards a prototype”.
We at Bitsonline had a chance to chat with Marco Peereboom of Decred, and he shared some insights into the development and use of atomic swaps and the Lightning Network. You can see our interview with Peereboom here:
An important thing to remember about cryptocurrencies is that they need to have a use case. Meaning, they should solve a real world need and not just be an interesting tech demo. For instance, bitcoin derives its value as being a sort of digital gold. Ethereum, on the other hand, derives most of its value from smart contracts and the necessity to use ether when moving around ERC-20 tokens.
So what is Decred for, and what are some of its use cases?
A quick Google search for “stores that accept Decred” didn’t yield many results. We found some info about a service called Coin Gate that allows payment at participating shops and websites through any currency offered by ShapeShift.
Still not finding much information online, we checked the Decred subreddit and Telegram chat. But again, we were met largely with silence or no search results. A search of the Telegram channel for the phrase “spend Decred” yielded only one person asking where they can be spent, and that person did not appear to get an answer.
We got in touch with Noah Pierau of the Decred team to ask about how Decred can be spent or used. He told us that Decred works “with payment processors like Coinpayments.net and Globee” and that the group is currently “developing [their] own payment plugins that don’t require a third party solution.”
Decred has a number of interesting technical features, and its hybrid blockchain is certainly attracting a lot of attention. Its position among the top 50 cryptocurrencies proves it.
What isn’t clear, however, is what Decred is being used for today. Is anyone buying things with it? Are businesses using it to transact amongst themselves? Are there any small businesses that accept Decred as payment directly and not through Coin Gate?
At this point, it is difficult to tell. Based on available information, it’s safe to assume that the network is valued quite highly. But it’s difficult to tell what people are using it for outside of either price speculation or holding it in an attempt to earn staking rewards.
We should note that this is also true for many of the top cryptocurrencies in 2018 — but at some stage or another, they’ll need to find a real-world niche in order to survive into the future.
Tech development is certainly on their side however, so it will be interesting to see how the group grows in the coming months.
What do you think of Decred, its model, and its longer-term prospects? Let’s hear your thoughts.
Images via Decred.org, publicdomainpictures.net