The first generation of (core) blockchains have proven themselves incredibly valuable and resilient (e.g. Bitcoin, Ethereum). However, despite their considerable network effect of both machine and human (intelligence) power, they have not yet fully delivered on the promise of decentralized networks that are truly scalable, nor do they yet have the technological capabilities to empower an application layer, with robust systems for good, transparent and reliable governance, and with a broad participation of key stakeholders of their own ecosystems in major decisions and developments.
Whereas we believe in the merits of “starting centralized and then decentralizing over time”, in many cases core chains at scale are still plagued by centralization through overly powerful proof-of-work miners, de-facto gatekeepers, politics, infighting, no built-in recurring funding for development — and little possibility for stakeholders (i.e. token holders) to participate in the governance. All this leads to a slower development of blockchains, a mis-allocation of resources within the networks and fragmented communities around these chains.
As blockchains and cryptocurrencies go “mainstream” and increasingly have the potential to become new backbones for the world’s markets and societies, we need blockchains and currencies that provide a more reliable & effective platform for engagement and development, based on best-in-class governance that is hard-wired into the protocol.
Enter Decred. Decred (DCR) is a blockchain and currency based on the following core characteristics:
- Checks and balances: consensus is achieved through a hybrid Proof-of-Work and Proof of Stake architecture (where e.g. Bitcoin is just PoW). Specifically, the blocks mined by PoW are then validated (or not) by PoS miners (via a governance ticket system)
- On chain governance: protocol upgrades (both incremental upgrades as well as entirely new features) are voted upon by stakers
- Open participation / public proposal system: stakeholders are able to make proposals, determine what gets funded and are able to participate in project-level decision-making (Politeia)
- Self-funding: a portion of the block reward is dedicated to the development fund (currently worth $50m)
- The block rewards are split 60/30/10 between miners, stakers and the development pool. More details on the supply schedule here
There are a few other remarkable characteristics that are a testament to the DNA of the team behind Decred: there was no sale of DCR to investors, no venture funding, and no payment to exchanges to be listed — underscoring that the Decred team and contributors are all about doing the right thing for long term (as manifested in their constitution for the project).
This is not surprising, as Decred was very much a reaction to the frustrations with Bitcoin that are described by Jake Yocom-Piatt, Decred’s founder, in this blogpost from late 2015. Since launching in February 2016, Decred has gained meaningful traction, with tens of thousands of miners and stakers — and importantly, a very active, large and growing developer and contributor pool that has access to the built-in recurring funding for important features.
Significant and growing staking activity
This sets the tone for the development beyond a next generation currency and store-of-value chain to a rich layer 1 core blockchain, as evidenced by the 2018 roadmap, which includes — among others — Lightning Network integration and smart contracts ability, a new kind of decentralized exchange, enhanced privacy, DAOs and improved scalability. Instead of launching as a monolith, Decred is expanding over time and together with its community. The most encouraging thing we can see is both the quality and quantity of high calibre developers flocking to the project, in addition to a vibrant community attaching their identity to the project.
We think that for blockchains to deliver on many of their core promises, they will need to be more transparent and effective platforms. Best-in-class governance paired with perpetual funding and an open and collaborative environment with users and developers is the DNA that could achieve a breakthrough in blockchain development. If Decred can achieve this, it can not only become one of the major cryptocurrencies, but a much richer core chain with a thriving ecosystem around it.
After taking our time to engage with Jake Yocom-Piatt, Jonathan Zeppettini and the wider community 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. To get us started we are happy to announce we will be hosting a meet-up with some of the core Decred team and contributors in Berlin on July 18th. We will announce more details soon, but we hope to see you there.