Decred: Governance and Funding Reimagined

Decred: Governance and Funding Reimagined

“Decred’s killer feature is good governance, and with good governance, you can have any feature you want.” – Placeholder VC

 

Introduction

The overwhelming majority of crypto tokens offer you zero governance features; no control over what happens in the network and no say in the future of the platform. If you want to change the block size, implement an upgrade or help innovating the future of the protocol, you’re out of luck owning most tokens. For example, you would have better luck knocking on the door of Bitmain’s affiliated mining pool Antpool and giving a powerpoint presentation so their full nodes can implement the upgrade you’re looking for.  

Miners in PoW systems control which chain is being worked on (through block production), which is the ultimate form of control. However, full (validating) nodes which don’t mine can choose which version of the software to run, which signals the chain that they support. This is a massive off chain governance feature that can bias the miners’ decisions. Off-chain governance suffers from signaling problems relating to which implementation a node should run as well as which trusted party we believe. This is since stakeholders signal their support for an implementation following off-chain discussion and discourse (message boards, meetups, developer calls).  

In reality, developers usually wield the most control; there are numerous examples (such as in Ethereum) where developers lowered the block reward (long term plan) despite opposition from miners, a topic we previously covered.  

Enter Decred (DCR), whose code traces back to Bitcoin, that features the most innovative form of governance available. A mix of proof-of-work and proof-of-stake enables a secure mining backbone with token holders who can actually vote on the future of the network. A hybrid PoW/PoS system isn’t an alien concept; Ethereum with Serenity is aiming to feature a similar framework initially having miners work hand-in-hand with PoS. Decred’s on-chain governance has lower social coordination costs; we no longer have to play signaling games on which implementation we may run on a node when an upgrade is ready. Decred enables automatic upgrades in an efficient manner decided in part by those who hold DCR tokens. Decred also offers an easy to use proposal change system known as Politeia that allows for real social deliberation in one place, instead of through a fragmented signaling system where nodes may or may not communicate.  

Bitcoin set the stage and is here to stay, but we believe the next wave of innovation around the architecture of crypto networks will have to provide for a well established and functional form of governance. We believe that Decred is well on its way to establishing supremacy in the next wave of innovation.  

 

Decred’s Backstory

Decred is a fork of of the BTC Suite, written in the implementation language GO instead of C++ which is the language Bitcoin Core is implemented in. Decred’s origins stretch back to 2013 when an anonymous poster, Tacotime, shared their white paper on Memcoin2 (MC2); a hybrid PoW/PoS cryptocurrency. 

As of Mid December 2018, Decred currently trades at ~$17.28 per DCR token, has a hard cap of 21M (like Bitcoin) and currently has ~9M coins in circulation resulting in a ~$156M market cap. Decred is meant to be a cryptocurrency (store-of-value, means-of-exchange), like Bitcoin, and is not focused on being a platform to build applications on, in our opinion.  

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Recognition

51percent runs its work by industry experts to ensure it is of the highest quality. Thank you to Gregory Rocco, Noah Pierau, Sam Corso, Itamar Rogel, Eric Olszewski, and Tim McDonald for their input, feedback and corrections on this report.  

Disclosures:

Tom Shaughnessy owns tokens in Decred (DCR). This research is strictly informational and is not investment advice. Do not buy or sell any tokens based upon this research. This research strictly reflects our views and opinions which can be wrong. 51percent did not receive compensation to create this report, outside of our subscription paying members. Membership prices can be viewed here.

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Forward Looking Statements and Projections:

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