Due-Diligence Report on Decred

Decred is a cryptocurrency, similar to Bitcoin, with a strong
focus on community input, open governance and sustainable funding and
development. It utilizes a hybrid “proof-of-work” and “proof-of-stake”
mining system to ensure that a small group cannot dominate the flow of
transactions or make changes to Decred without the input of the
community.

Main features:
o Reduce mining subsidy by 1% every 21 days
o Hybridized Proof-of-Work (PoW), Proof-of-Stake (PoS) blockchain
consensus protocol.
o Proof-of-Activity (PoA): Both Proof-of Work and Proof-of-Stake
mechanisms are used to provide the consensus that confirms new
blocks including transactions.
o Protocol Governance: a binding on-chain vote. For a change to be
adopted it must also be accepted by miners of the currency, who
must adopt a new version of the software, and ultimately
merchants and users of the currency, who must also adopt this
software and accept a new version or chain as having value in
place of the old version.

What is Decred?
Decred was launched in February 2016[3] by the bitcoin developers that engineered btcsuite,[4] an alternative full-node Bitcoin implementation written in the Go (golang) programming language and used by development projects such as Ethereum, Factom, BitGo, OpenBazaar, and
the Lightning Network 1 Decred, which stands for “Decentralized Credit”.
Why create another blockchain such as Decred? According to Noah Pierau, from Decred, there are three main reasons for the creation of
Decred.

Reason #1
Conflict of Interests between the users and the miners.
Users want transactions as to be as fast and as cheap as possible. But the miners, the people that are actually operating the infrastructure who are providing the blockchain to the us, they want to run their operation at the lowest cost possible and because they are getting paid by our transactions fees as well, they would like the highest possible transactions fee. Because in the
end they are profit maximizers as well. So, this creates a direct conflict of interest between the
users and the miners.

Reason #2
There is a second reason, every open source software project has different development groups working for it. What happened in Bitcoin , Bitcoin is written in C++, a programming language as some of you may know. And what happens if you create an alternative version of the Bitcoin
code? So, for example, there was a group of developers who started an alternative implementation of Bitcoin in the development language of Go, and for a long time these developers were sort of censored. They were almost blackballed. The core developers at that time that were in control of the Bitcoin core software, they were telling companies and people,not to run this alternative implementation. And when development groups clash like this, it
creates a very unhealthy ecosystem within a project.

Reason #3

The third and most important reason why you would create a new blockchain is because Bitcoin has a lack of an on-chain decision making system. So, whenever people don’t agree on how to solve a problem or how to integrate a new feature you get a fork. And some of you may think forks are a good thing. Because it means free money. But it is actually really dangerous, because
what happens if a project forks off, the different ideas, the diversity within a project, it splits off as well. So, you get two projects which are a little bit more centralized and the next time when there is a conflict of interest, the project split again and that’s how you get really centralized projects. And also, the likelihood of a 51% attack, where one group of miner’s controls more
than 50% of the network becomes a lot more relevant, if you have 10 or 15 different kinds of forks.
Ideally what you want to have is a contest of ideas. You want people to challenge each other. You want to find the best idea possible and implement that instead of having chain splits. So, where Bitcoin was created to address the flaws of our monetary system, Decred was created to address the flaws of Bitcoin.

The above-mentioned history on Decred, introduce the idea of a hybrid Proof of Work and Proof of Stake blockchain, which is the basis of Decred.

Decred Highlights

● Launched in early 2016, Decred was launched without any ICO or any external venture capital and no private investors.
● Decred was launched just like Bitcoin or Monero. Essentially, starting up the miners and everyone that wanted to join the project was welcome.
● To kick start the project there was a pre-mine of 4%, which was airdropped to everyone who was interested in participating. And another 4% was reserved to fund early
development.
● This ensured that the project would remain independent and self-sustainable.
● The innovation the Decred brought into the blockchain world really hybrid Proof of
Work/Proof of Stake
o Verify that the blocks the miners create are verified

Business Idea

Decred’s main idea is an open and progressive cryptocurrency with a system of community-based governance integrated into its blockchain. Decred is a cryptocurrency, similar to Bitcoin, with a strong focus on community input, open governance and sustainable funding and development. It utilizes a hybrid “proof-of-work” and “proof-of-stake” mining system to ensure that a small group cannot dominate the flow of transactions or make changes to Decred without the input of the community. A unit of currency is called a ‘decred’ (DCR). To ensure the integrity of the currency and prevent people from making fraudulent transactions or creating their own coins, Decred uses a method of recording
transactions known as a blockchain.
● Decred was launched just like Bitcoin or Monero. Essentially, starting up the miners and
everyone that wanted to join the project was welcome.
● To kick start the project there was a pre-mine of 4%, which was airdropped to everyone
who was interested in participating. And another 4% was reserved to fund early
development.
● This ensured that the project would remain independent and self-sustainable.
● The innovation the Decred brought into the blockchain world really hybrid Proof of
Work/Proof of Stake
o Verify that the blocks the miners create are verified
o Vote on proposed changes/innovations to the blockchain

Challenges

The three areas that could potentially cause an issue are:
● Growth
● Execution
● Mass User Adoption

Growth
As with any emerging project that is gaining in popularity, growth and scaling to meet that growth can be an issue, albeit a good issue to have, it is nonetheless an issue worth noting. How well Decred scales as notoriety increases is to be seen. Up until last year in 2017 the team was pretty discreet. But now they are becoming more forthcoming in their road map and community involvement. Time will tell how well Decred can handle the growth that may be coming their way.
Execution
Decred has executed rather well on their deliverables and there is no reason to think that that will change. I mention execution as like growth, they are both factors that can play an important role in the success of any project.

Mass User Adoption

Being good at what you do is half of the equation to success, the other half, is being good at telling others what you do, in other words, marketing and gain mass user adoption. Decred was originally proposed as an alternative blockchain, but to gain mass user adoption, which is required to achieve its goal of being an “alternative” blockchain, they will need to market efficiently, effectively and often to the general audience. Their social media presence is average, and they will need to turn up the notch if they want to
be considered a true alternative blockchain.

Conclusion

Decred has emerged as true contender amongst the blockchain competitors. With so much talk around interoperability, it will be seen how Decred can manage to integrate and address this newest challenge. Creating a strong blockchain is one thing, but as more and more blockchains emerge on to the scene, a link and or mezzanine will be a necessary part of the equation. With Rootstock coming into play, thus allowing for smart contracts on Bitcoin, how this will affect Decred is to be seen. And it may even be a non-issue, but, Decred needs to address this pressing public demands, in smart
contracts and interoperability.As a digital currency Decred has much appeal, and with Atomic Swaps and smart
contracts via Lightning Network, an enhanced governance system, Decred is even more
interesting and becomes more than just a digital currency.