Decred (DCR) Overview

A guide to understanding Decred in less than 10 minutes

WHAT IS DECRED?

HISTORY

TEAM

G2M AND PARTNERSHIPS

MINING

PROOF OF STAKE

  1. Allowing stakeholders to vote on proposed changes to the consensus rules
  • If enough stakeholders vote in support of a change, the chain will hard fork and the new feature becomes active automatically
  • Stakeholders can deem blocks invalid to discourage bad behavior (i.e. empty blocks)
  • PoS stakers have to validate the blocks that PoW miners mine and therefore the PoW miners cannot decide to change the rules of the network without true consensus.
  • When the Decred chain hardforks the old, smaller, chain will die off as a result of not being validated by the PoS component of the chain.
  1. Staking through a stake pool:
  • Users can connect to a stake pool through the Decred wallet UI. Using a stake pool does not give access to your funds but rather grants voting rights to the pool.
  • Solo staking is only possible through using the Decred command line. Full nodes are normally run within a VPS and require technical knowhow to setup.

VOTING / GOVERNANCE

  1. Approving the work of PoW miners on-chain
  • Every block, 5 tickets are chosen from the PoS ticket pool. If at least 3 of the 5 validate the previously mined block, the block is added to the chain.
  • Every block mined must include at least 3 votes and a proposed change must be approved by 75% of non-abstaining (voting) tickets to take effect. Ticket holders vote through their Decrediton wallet which is Decred’s wallet.
  • Politeia proposals are approved/rejected through “snap” voting. When proposals move to vote mode, all live tickets 256 blocks before the vote starts are eligible to vote Yes/No on the proposal. Ticket holders vote through their Decred wallet.

STEPS TO VOTING

  • You can buy tickets through the command line interface of dcrctl, or more commonly through a GUI like Decrediton (Decred’s GUI wallet)
  • When a ticket is purchased, it goes into a temporary ‘mempool’
  • Once a ticket is mined it will move from the ‘allmempool’ pool to the ‘immature’ ticket pool. After 256 blocks, which is roughly 20 hours, the ticket will mature and go into the live ticket pool where it is eligible to be chosen to vote
  • In order to use a ticket, your ticket must be chosen as stated above and that requires having your ticket online 24/7 and staking. There are two ways to stake. You can connect to a stakepool through the wallet UI or run a full node which is considered solo staking.
  • In stake pools you give the pool authority to vote on your behalf so if your ticket is chosen, the pool will cast the vote for you. Then you are personally rewarded with the full reward minus the stake pool fee, which is normally 0.5–5% (depending on the pool).
  • Roughly 50% of stakers stake through staking pools because it supports buying tickets and voting all out of the box and requires no devops knowledge.
  • Once your ticket gets chosen as one of the five tickets for a block, you vote. Block validity voting happens continually. Governance voting happens when proposals are open. You can optionally vote on outstanding governance issues by accepting, rejected or abstaining from such agenda items.
  • You get paid every time a ticket of yours gets chosen which is on average every 28 days. You can automate the buying of tickets so when a ticket is chosen, you automatically buy another ticket.

REASONS TO STAKE

COMPETITION

COIN SUPPLY AND DISTRIBUTION

  • 60% — Proof of Work miner that mined the block
  • 30% — Proof of Stake voters (divided among the 5 PoS voters that certified the block)
  • 10% — Project Treasury fund (holders of PoS live tickets decide how that treasury is used)

METRICS AND GROWTH

  • 397k wallet downloads
  • 479 stars on GitHub for dcrd
  • 9k subscribers on GitHub
  • 40K followers on Twitter

INVESTMENT CONSIDERATIONS

UPWARD PRICE CATALYSTS

  1. Rise of Staking
  • Developers and investors are looking to stake in order to receive returns on long-term holdings. Decred is one of the major PoS projects live today and is therefore well positioned to capture the market. As staking becomes more popular and sought after, the demand forDCR could increase, and indirectly increase value.
  • Governance is still a confusing concept for most of the community but has the potential to gain traction. As discussed governance provides stakeholders with the ability to transparently vote on changes to the protocol. If governance becomes a challenge to Bitcoin in the near future, Decred will become an obvious solution. For example, if Bitcoin hard forks again due to a split in belief systems, the benefit of governance will become more clear. If the desire for governance increases, Decred could gain popularity, increase in demand and ultimately accrue value.

DOWNWARD PRICE CATALYSTS

  1. Bitcoin develops a governance layer
  • If Bitcoin implements governance, the benefit of Decred is greatly diminished. Although implementing governance after launch is difficult, if Bitcoin did integrate governance somehow, I would anticipate that Decred would decrease in popularity and in value.
  • It is unclear if staking will be monopolized or regulated. If mining companies, such as Bitmain, monopolize the staking industry to a point where individuals and venture funds cannot profit from staking I think the appeal of Decred will decrease and ultimately perhaps the price of DCR.

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