Decred (DCR) Review

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Decred is a digital currency similar to Bitcoin.

https://docs.decred.org/

Decred launched in Feb 2016.

The first quoted price per DCR on coinmarketcap is $0.95 (0.0025 btc).

For the first couple of months it traded between $1-$2 and ranked around 26th on coinmarketcap.

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2017

Rising to $48 per coin, Decred reached its all-time high against Bitcoin in June 2017 (0.018 btc).

Market cap = $249 million.

Coinmarketcap Ranking = 30th

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2018

Decred reached its dollar all-time high of $124 (0.008 btc) in January 2018.

Market cap = $809 million.

Coinmarketcap Ranking = 53rd

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At $118 per coin (0.014 btc), the all-time high marketcap ($846 million) was reached in May 2018.

Coinmarketcap Ranking = 30th

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Today’s DCR Price

The price in both dollars and bitcoin has plunged since May 2018.

Today 1 DCR = $16.37 (0.0047 btc).

Market cap = $145 million.

Since its 2016 launch Decred has been a great investment, giving similar returns to what bitcoin investors enjoyed.

 

Decred’s Development

Decred has a very interesting history, with it’s roots in bitcoin development.

2013 – The Beginning

Btcd/btcsuite

The team at Conformal Systems developed the open-source btcsuite/btcd (a bitcoin full-node implementation).

Among bitcoiners, btcd became a popular alternative to bitcoin core. It was described as “fast, and the code is gorgeously readable, tested to all hell, and documented back from“.

Btcd was entirely funded by Conformal CEO Jake Yocom-Piatt.

 

Memcoin2 (MC2)

Memcoin2 (MC2) was the first hybrid PoW PoS coin.

It was announced on bitcointalk by its pseudonymous founder tacotime (who later went on to become one of a handful of founding contributors to Monero and a core dev).

MC2 was developed with Confromal’s btcd software.

 

2014 – In Development

Conformal Systems Started Work on Decred

After a discussion with tacotime, Conformal’s Jake Yocom-Piatt started funding the development of a new project, Decred, basing it on the design of MC2.

The codebase of Decred was inherited from btcd/btcsuite.

Decred development started in April, 2014 with a single developer and expanded to include the btcsuite developers shortly thereafter.

Jake Yocom-Piatt

 

2015 – In Development

Conformal Systems was renamed Company 0.

Company 0 continued working on Decred in private.

In November, Company 0’s Jake Yocom-Piatt published a blog post outlining ways he thought bitcoin could be improved (clearer governance, developer funding, checks on miners misbehaving).

https://blog.companyzero.com/2015/11/bitcoins-biggest-challenges/

In December, this was followed by another blog post describing the technical details of Decred.

https://blog.companyzero.com/2015/12/iterating-bitcoin/

And then finally the announcement of Decred after almost 2 years of development.

https://blog.companyzero.com/2015/12/decred-rethink-digital-currency/

 

2016 – Launch

Decred went live in February 2016.

Costs incurred over the previous 2 years by Company Zero to get Decred launched on mainnet were said to be around $400k.

 

Today

Btcd/btcsuite is still being maintained by Company 0 and is the second most popular bitcoin implementation behind bitcoin core.

Decred’s Noah Pierau says that contributors to Decred have become more diverse. “The original developers (Company0) are outnumbered by independent contractors and other groups”.

 

 

Initial Distribution

As with bitcoin, the total supply of coins will eventually be 21 million coins.

0.84mill+0.84mill+19.32mill = A Total Supply of 21 million DCR

 

4% went to the Decred Founding Team (0.84 million DCR)

0.84 million was allocated to the founders to pay back development costs and continue working on the project.

Mesari.io states that this 0.84 million DCR “was purchased by Decred developers & founders (either directly, or via work-compensation) for $0.49 per DCR, under 1-2yr lockups that fully expired in February 2018.”

 

4% was given away in an airdrop (0.84 million DCR)

This was done to “spread the network effect as far and wide as possible.

Airdrop rundown: 8,793 entrants. 2,972 successful participants.

It was a free fair airdrop. You just had to sign up for it. They had to do some screening otherwise one guy could of received 100 airdrops.

“The airdrop opened with the public announcement of Decred on December 15th, 2015 and closed on January 18th, 2016.

“The airdrop sign up was open for 34 days and participants joined the project from 99 different countries.”

If you signed up you would have got yours and everyone would have received a bit less. A lot of people didn’t fully complete the registration process. Such as submitting dcr address.The distribution is verified by the Decred blockchain.

ItzSnowing

Each of the 2,972 participants received 282.6 DCR (worth over $4,000 at today’s market price).

More details about the airdrop can be found here: https://forum.decred.org/threads/airdrop-rundown.313/

 

The remaining 92% is distributed as the PoW/PoS block reward subsidy (19.32 million DCR)

The last block reward will be created in September 2120.

Instead of 100% of the block reward inflation going to miners, it is split:

  • PoW miners reward (60%).
  • PoS ticket holders reward (30%).
  • The Decred Project Treasury (10%).

 

Holders enjoy direct control of the project and earn additional coins through staking

STAKING = LOCKING UP COINS IN EXCHANGE FOR A “TICKET”

Anyone can stake by buying a “ticket”.

Buying a ticket means locking up your coins for an uncertain period of time (until you’re called to vote). The average is 29 days and the maximum time is about 4 months.

The current price of a ticket is 110 DC (dcrstats.com). The price is determined by an algorithm.

Decred holders can stake coins through the GUI wallet (Decrediton wallet). Each user can buy multiple tickets.

Roughly 29 days after buying a ticket, you’ll be called to vote, after which your coins are returned to your wallet (with some additional DCR as a reward).

Decred staking is pretty damn easy. Make an account with your pool of choice, copy+paste the key, and Bob’s your uncle. You can even ticket split if you don’t have a full ticket, making it accessible for everyone.

solar128

 

There are 3 important aspects of staking (buying a ticket).

1 – TICKET HOLDERS HAVE THE RESPONSIBILITY OF APPROVING THE PoW BLOCKS PRODUCED BY MINERS

Stakers (ticket holders) act as validators of the PoW produced blocks.

To be compensated for performing these checks and balances on the miners, PoS ticket holders are allocated 30% of the block rewards.

In each PoW produced block (about every 5 minutes), 5 tickets (from a pool of 40,829 tickets) are randomly selected to vote on whether or not to approve the miner’s work.

A PoW block needs 3 out of the 5 votes to approve it in order to be accepted.

If the block is rejected by a majority of the 5 stakers, it is discarded and the miners lose their 60% share of the reward from that block.

After voting, your coins are returned to your wallet (with some additional staking rewards).

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The idea behind having this PoW with PoS approval is to have “2 factor authentication” security

PoW is viewed as “providing a single authentication factor to the consensus system”.

PoS creates a second authentication factor for consensus.

This second layer of authentication can prevent a 51% attack, transaction censorship, empty block mining, or any other behavior from miners that stakeholders vote to be destructive.

 

2 – IN RETURN FOR HELPING SECURE THE SYSTEM, PROOF OF STAKE TICKET’S GET REWARDED

Staking returns come from part of the block reward (30%).

Staking returns are very attractive. They vary, but are currently about 12% annualized.

Returns are so high because the block reward (inflation) is currently high due to been only 3 years into the distribution phase.

As with Bitcoin, the block reward is reduced over time, so this yield will go down steadily over time.

Locking up the capital to stake takes supply off the market which creates favorable conditions for the DCR price to go up. Currently 47% of the total available supply is locked up, which means these coins are guaranteed not to be hitting the markets as sell orders in the immediate near term.

 

3 – TICKET HOLDERS CONTROL THE PROJECT’S DECISION MAKING BY VOTING

10% of all block rewards go to the Project Treasury (60% go to miners, 30% go to stakers).

This means that the project treasury is currently holding 603,114 DCR ($9.8 million at today’s market price).

Here’s the treasury address where you can see the funds: https://explorer.dcrdata.org/address/Dcur2mcGjmENx4DhNqDctW5wJCVyT3Qeqkx

Ticket holders (stakeholders) get to vote on what to spend these funds on.

Decred is not a democracy. users must obtain voting rights by proving that they have skin in the game.

Haon 

Voting to Change the Consensus Rules of the Protocol.

https://voting.decred.org/

75% or more of the vote is required to activate a protocol change.

These votes happen on-chain.

The biggest one so far was a proposal for Lightning Network integration. This passed with the vast majority of voters in favor.

On a separate occasion, a proposal to change the ticket price algorithm via a hard fork was approved.

 

Politeia Platform -Voting for Funding Decisions and Minor Decisions

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Politeia is a censorship resistant platform that “facilitates the submission, tracking, and discussion of Decred governance proposals by the stakeholder community”.

https://docs.decred.org/governance/politeia/politeia/

Politeia was activated in October 2018. The launch was a big deal for the community as it marked the handover of treasury funds to stakeholders.

60% of the vote is required to approve Politeia proposals.

Recently a bug bounty program was approved.

And a decision to hire a PR company to help with marketing made it through the Politeia process.

 

 

A CLOSER LOOK AT DECRED

Monetary Policy

Like Bitcoin, there will only be 21 million Decred.

Blocks are produced every 5 minutes via proof of work.

Block reward reductions are smoother than in bitcoin, reducing slightly every 6,144 blocks (around 21 days) rather than halvening every 4 years.

Last year coins in circulation increased from around 7.1 million to 9.4 million (an inflation rate of about 30%).

This year inflation will be around 18%, with coins issued increasing from 9.4 million to 11.1 million.

Inflation will fall to 10% by 2021, and 5% in 2024.

In 2028 inflation will be just 2%.

Overall Decred has good monetary policy that is moving towards low, and ultimately zero, inflation.

 

PoW PoS hybrid

Noah Pierau claims that the PoW PoS hybrid makes the network:

 

Proof of Work

Miners produce blocks via proof of work the same as with other coins.

The hashing algorithm is BLAKE-256.

The hash rate is currently 239 Ph/s

Decred hashrate has already doubled so far in 2019

Several large ASIC manufactures released Decred ASICs last year.

Bitmain released the AntMiner DR3.

MicroBT released the Whatsminer D1.

This resulted in the hash rate spiking exponentially. Sia developer David Vorick claimed that Halong mining controlled more than half the hash rate at one point.

 

DECRED COMMUNITY

Decred has quite a large and active grassroots community.

I’m surprised at how much is going on. It’s an impressive amount of activity that’s difficult to keep up with (it seems more active than Monero even).

The monthly journals are very comprehensive and helpful for getting a good overview and staying on top of what’s going on.

High quality discussions take place on Twitter and thoughtful ideas are presented in numerous blog posts and youtube videos.

The subreddit has close to 10,000 subscribers.

Decred development updates can also be found in the proof of work newsletter

Decred has one of the most active and engaged communities of any project I’m covering. Pretty amazing.

Eric/ (proof of work editor)

Overall, this is clearly a very serious project with an enthusiastic and dedicated community.

 

Skilled Developers

Decred developers are widely considered to be high quality.

http://GitHub.com/Decred

With 10% of the block reward going to the project treasury, there are plenty of funds available to hire quality full-time developers instead of “expecting benevolent donors to appear and fund this project

Decred uses a novel contractor model which allows for proven contributors to be remunerated for their good work.

This approach has helped forge a strong global team of developers, designers, and strategists, as well as a robust community. We welcome contributions from anyone who wishes to demonstrate their effort and skill in pursuit of the project’s mission.

https://www.decred.org/contributors/

An example of this can be seen below:

At the conference, many people asked me if I was employed by Decred, but this question is particularly difficult to answer since there is no such thing as a “Decred company” to employ me.

Decred is a revolutionary cryptocurrency protocol, which has by construction funds available for its own development – just as Bitcoin has funds available to pay out miners to secure the network.

Decred is a cryptocurrency protocol which allows its holders to vote on necessary upgrades of the network and spend funds on development and marketing.

Let that sink in for a moment (…). Yes, I have been employed by a cryptocurrency protocol. This indeed is futuristic and I am grateful to the Decred community for their trust in me to perform such an important task to bring Decred to the attention of people.

– eknirhendriksen

While mass layoffs are widespread among other projects during the crypto winter (ConsenSys, Bitmain, Shapeshift), the Decred workforce is expanding.

The December Decred Journal states that:

With DCR at $17.5 for December, that will likely be the first month where Treasury outgoings are greater than the incoming block rewards.

Even if DCR/USD stays low for some time, the Treasury could maintain its current USD-equivalent spending for several years (rough estimate is 8) at this rate before cut-backs became necessary.

This is a very different funding situation to most open-source projects.

For example, the PHDs at Monero Research Lab have to spend time fundraising from the community every 3 months (via the Forum Funding System) and in Bitcoin Luke Jr struggled for funding for years before he started receiving fiat donations on Patreon a couple of months ago.

 

DECRED INFRASTRUCUTRE

Wallets

Decredition

https://www.decred.org/

This is the GUI wallet.

Staking tickets can be bought directly from the wallet. Politeia voting can also be conducted.

The user experience is smooth and the interface is very easy to get to grips with.

 

Android Wallet

The native Android app is available for download but isn’t fully released yet.

The final release is still in testing and nearing completion.

The developers have been working on improving privacy in the wallet:

Decred’s SPV mode allows it to protect user privacy by requesting blocks directly from the P2P network instead of a centralized service provider — rare for mobile wallets.

Decred Journal

 

Other Mobile Wallets

Exodus, Coinomi, and Atomic Wallet.

 

Hardware wallets

Ledger

Trezor

 

Block Explorers/Stats

https://explorer.dcrdata.org/

https://mainnet.decred.org/

https://dcrstats.com/

 

Exchanges

Decred can be traded on several large centralized exchanges like Binance.

24 hour volume on exchanges is generally over a billion dollars.

It’s also supported on the decentralized exchange Bisq.

 

Merchant Adoption

Merchant adoption looks sparse at this point.

 

Transactions per Day

Decred only does about 3,000 transactions per day.

This is the same number of transactions per day as it was in 2016. It spiked up in 2017 to 4,500 transactions per day, but has since regressed back to 3,000.

For comparison, this is about the same level as Monero. Bitcoin does around 300,000 transactions per day and Litecoin does about 25,000, Dash 11,000, and Zcash 3,000.

A chart of daily transactions going back to 2016 can be seen here: https://coinmetrics.io/charts/#assets=dcr_roll=50_right=txCount

 

Institutional Investment

Decred’s governance structure, staking rewards, and experienced team appeals to some professional investors who’ve taken a look at it.

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Placeholder Capital

Placeholder Capital are huge supporters.

Last month they took part in a fireside chat in New York to explain the benefits of investing in DCR to an audience that included other VCs and investors.

The Decred journal published Chris Burniske’s (Placeholder partner) 4 reasons for their interest:

1 – Team — btcsuite when released was as good as anything put out by Bitcoin Core

2 – Hybrid PoW/PoS system is more secure than any other network

3 – Treasury funding allows development to be funded long term

4 – Fork resistance — Decred is designed to keep the community together through consensus

Placeholder Capital’s full investment thesis on Decred can be read here https://www.placeholder.vc/blog/2018/5/12/decred-investment-thesis

 

BlueYard Capital

BlueYard is a Berlin-based VC investment firm. A few weeks ago they raised a new fund of over 100 million Euros.

We began building a meaningful DCR position in early May and have completed an initial build just a few days ago.

We are doing this with a view to be long term active supporters of Decred and to actively participate in the network’s governance.

BlueYard Capital

 

 

THE FUTURE

Image result for decred staking pos

The most recent roadmap is from 2018. An updated roadmap for the year ahead is expected to be published sometime in February.

Decred developers are currently working on implementing the following features:

  • SPV Wallet Support for privacy – This is pretty much done (available for testing on the new android Decred app).
  • Privacy features
  • Lightning Network
  • A marketing push to raise awareness of the project.

 

 

SUMMARY OF BULLISH FACTORS

Functions Well as a Currency

  • Good monetary policy. Very low fees with fast confirmation times.
  • It’s been around for 3 years so is somewhat battle tested. No major incidents or security breaches.

 

Huge Staking Returns Available

  • This is a significant return (currently 12%) and will be compelling for both retail and institutional investors when they learn about it.

 

Very Enthusiastic Community

  • A real community provides a price floor and enables incremental organic growth.

 

Excellent Developers

  • Lots of technical talent.
  • Paid developers mean work gets done to ensure security/integrity of the chain.
  • 10% of the block rewards and funds stored in the project treasury means funds aren’t going to dry up and stall the project.

 

Great Software

  • The Politeia software and user interface is well designed. Smooth and visually appealing.
  • The wallet software provides a good user experience.

 

Streamlined and Transparent Decision Making

  • Fast and decisive decision making via Politeia.
  • Close to $10 million in the treasury (and growing due to the 10% block rewards) is available to be put to use.
  • Upgrades so far have gone well. Disruptive chain splits are considered unlikely due to the hybrid PoW PoS system.

 

Performed Relatively Well in the Bear Market

  • As bad as that sounds, it’s one of the best performing coins as most are down well over 90%.

 

Many Bitcoiners Have a Soft Spot for Decred and See it as a Backup Plan

In the event of a disaster occurring with bitcoin, Decred would be a tolerable ship to jump to:

That Guy Who: I will switch to #Monero, and whatever project the majority of #Bitcoin Core devs switch to.

nic carter: decred and monero I’d imagine. lots of philosophical alignment there.

 

SUMMARY OF WEAKNESSES/UNCERTAINTIES

Lack of Growth in Transaction per Day is Concerning

  • Although it works well, Decred hasn’t taken off as a currency.
  • Merchant adoption is very underwhelming.

 

Crypto Investment Market Share Hasn’t Improved Since Launch

  • Decred is quite far behind other projects (34th on coinmarketcap).
  • Decred has mostly been ranked in the top 30/40. Growing the network effect among users and investors has been a struggle so far.

 

Has all the Same Privacy/Fungibility Concerns as Bitcoin

  • Big privacy improvements are supposedly a top priority, but details are vague at the moment.
  • It’s difficult to see anything being implemented in the near future that would get it close to Monero’s level.

 

Governance Might be Good Enough On Other Coins Already

  • The likes of Bitcoin and Monero might continue to make enough progress with the way soft forks/hard forks are currently done.
  • Decision making/governance might not be enough of a differentiation to excite and inspire people to join and grow the network effect.

 

Security/Feasibility Concerns – It’s a Very Ambitious and Experimental Project

  • Hybrid PoW PoS model is unproven at scale.
  • Anything this unprecedented has real potential to blow up or turn out to be dysfunctional. Strays far away from what’s been tested with the bitcoin approach and the more proven architecture of simpler currencies.

 

CONCLUSION

Overall, I’m impressed with what I’ve learned about Decred.

I didn’t expect to like some of the features like the voting platform or the hybrid PoW PoS system, but they’re actually pretty compelling.

Decred is an interesting project and I’m looking forward to seeing how it will evolve.

I suspect it will do well in the long term and see it as a worthy investment as part of a digital currency portfolio.

 

Follow me on Twitter @leebanfield1

Bitcoin: 36AinjKMw1smLqM3S34nvCLbqxAVPEjeuf

 

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