What Is Decred?
Decred is a cryptocurrency based on an early Bitcoin blockchain fork. Decred got its start in 2013 in a Bitcointalk thread about creating an altcoin. A whitepaper describing a new cryptocurrency called Memcoin2 was published shortly after the discussion. It was picked up by a company named Company 0 and launched in 2016 as Decred.
Decred uses a hybrid model of the proof-of-work and proof-of-stake consensus mechanisms to secure its blockchain.
Learn more about Decred, its purpose, and how it is different from other cryptocurrencies.
- Decred is a cryptocurrency that uses two consensus mechanisms, proof-of-work and proof-of-stake.
- It was created to address the problems some believe are inherent to these consensus algorithms and redirect the centralization cryptocurrency has experienced.
- Decred development is community-driven by stakeholders with tickets through a voting process implemented in the blockchain.
- Decred splits block rewards between miners, stakeholders, and project development funding.
Decred is a cryptocurrency and blockchain designed "to develop technology for the public benefit, with a primary focus on cryptocurrency technology." It is also intended to decentralize its governance by allowing the community to vote for changes rather than only a team of developers who decide which direction a cryptocurrency can take.
Cryptocurrency was gaining in popularity and traction after Bitcoin's release in 2009. Creating coins through cryptocurrency mining became popular with non-developers, enterprises, and interested investors. Developers began to notice that mining was becoming more centralized; there was a chance that cryptocurrency would not remain as decentralized as intended. As a result, many were trying to find ways to introduce and popularize cryptocurrency that circumvented the looming centralization.
In 2013, Memcoin2 was introduced to the cryptocurrency community via the Bitcointalk forum, where all cryptocurrencies were announced. In 2014, the Memcoin2 project was adopted by Company 0, and Decred development began in earnest.
The anonymous persona "tacotime" that created Memcoin2 eventually moved on to create Monero.
In 2016, Company 0 launched Decred—a PoW and PoS hybrid blockchain governed by the community via an on-chain voting process.
Decred has evolved since its introduction in 2016. In 2017, the blockchain was adapted to allow for atomic swaps—the ability for cryptocurrencies from different blockchains to be swapped or traded by users. This was significant because it allowed cryptocurrency users to exchange tokens without using a third-party exchange.
In 2019, Decred implemented the Lightning Network on its mainnet to add smart contracts and off-chain transactions to its arsenal of blockchain tools. The Lightning Network then allowed Decred developers to create the Decred Decentralized Exchange (DEX), which allowed Decrediton—Decred's wallet—to become the interface that allowed users to exchange tokens without a trusted third party.
In October 2020, The Decred DEX launched, allowing for the first trades between DCR and BTC (bitcoin) without an exchange facilitating the trade.
How Is Decred Different From Bitcoin?
While Decred is a Bitcoin fork, it is significantly different in many aspects. Some of the key differences include:
- Community involvement
- Community governance
- A hybrid of two consensus algorithms
- A different reward system
Developers behind Decred believe that cryptocurrency is supposed to be fully decentralized so that anyone interested or has a stake should be able to influence how it is developed. Therefore, users are encouraged to propose changes and become involved in the development in whatever way they can contribute.
To this end, DCR holders can stake their coins to acquire tickets that allow them to vote on changes to the blockchain, the Decred decentralized autonomous organization (DAO) budget, consensus rules, and block approvals. This approach ensures that no entity controls the cryptocurrency unless they are involved—this is commonly called proof-of-activity consensus.
Decred developers feel cryptocurrency governance is best accomplished by a community because it steers development in the way the users want.
Hybrid of Mechanisms
One of the most notable attributes of Decred is that it uses proof-of-work and proof-of-stake consensus. Decred's PoW consensus works virtually the same way as Bitcoin's—miners process network transactions to open new blocks for the blockchain. The miner receives the transaction fees and the block reward when a block is opened.
Coin holders can stake their coins to become voters. Voters—called stakeholders—can purchase tickets to cast votes for block approval or other governance issues. Multiple tickets can be bought and used. Tickets are mined into a block at random in increments of 20 tickets. The tickets only last around 20 hours while waiting for a vote from the ticket holders. Stakeholders must join a Voting Service Provider (VSP), which casts votes on behalf of the ticket holders.
Because Decred is an incentive-based cryptocurrency that uses proof for consensus, it has a reward system similar to that of Bitcoin and Ethereum. The key difference for Decred is that because it uses two consensus mechanisms, it rewards network participants differently. Miners, whose job it is to process transactions, receive 60% of the block reward. Stakeholders receive 30% of the reward, and the remaining 10% is sent to the project's treasury fund development.
The PoS reward is intended to attract users to stake their coins to help the network process transactions and create blocks.
Goals of Decred
Decred is innovative in that it attempts to improve upon other cryptocurrencies and blockchains by harnessing the power of its community of users rather than relying on only a few insiders to enhance the project.
The blockchain's overarching goals are to ensure that the chain and users remain secure. Adaptability is essential for the blockchain to stay relevant. Decred has a built-in system called the Politeia Proposal System that allows the community to submit and approve proposals for blockchain improvements.
The Decred design solves the tragedy of the commons, in which self-interest becomes prevalent in any common enterprise no matter the design and intent. To keep the project from falling into this trap, 10% of every block reward goes into the Project Treasury for funding; no other sources of financing are accepted. This ensures that no parties can influence the blockchain's direction through funding. The community then votes through Politeia to implement or deny changes.
What Is Decred Used for?
Decred (DCR) is a cryptocurrency used to pay blockchain and network participants for work done processing transactions, approving blocks, and funding the Decred project.
Is Decred a Good Crypto?
Whether Decred is a good cryptocurrency depends on how you intend to use it or participate in the network. DCR has ranged in market value from $28 to more than $230 over its lifespan, but it is not intended to be used for investing or speculation—it is designed to be used as a community-governed cryptocurrency.
What Coin Is Decred?
Decred uses "DCR" as its ticker or abbreviation.
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