Decred Research Report 2021
Overview
Decred is a cryptocurrency that has stood the test of time and is one of the oldest operating blockchains in the world. Decred was built from the btcsuite codebase which was itself created by the Decred developers. To clarify: It is not from the Bitcoin core codebase that is in C++ from the lineage of the Satoshi reference client.
Decred encourages user participation in its governance process, resulting in a novel idea that empowers and rewards token holders who contribute to the network.
Team
Alex Yocom-Piatt — Cofounder
Twitter: https://twitter.com/_alyp_
David Hill — Cofounder
Twitter: https://twitter.com/dajohi
Jake Yocom-Piatt — cofounder
Twitter: https://twitter.com/behindtext
Josh Rickmar — Cofounder
Twitter: https://twitter.com/joshrickmar
Technology
Decred’s (DCR) consensus algorithm has been engineered to be a hybrid one taking components from proof of work (PoW) and proof of stake (PoS), where the PoW miners verify transactions and the PoS stakers propose and vote on network upgrades.
Decred uses a proposal system called Politeia to tie this all together, where stakeholders vote on project funding, new initiatives, and various other changes to the protocol’s code.
The project’s native cryptocurrency, decred (DCR) competes with other cryptocurrencies, such as bitcoin (BTC), dogecoin (DOGE), or litecoin (LTC), while adding additional features such as the ability to participate in governance, interact with the community and use it to fund the network upgrades.
To stay up to date on Decred, you can check out the project’s frequently posted updates on their blog.
Politeia
Politeia is a platform that supports Decred’s governance. It facilitates the submission, tracking, and discussion of Decred governance proposals by the stakeholder community. The Politeia web platform facilitates browsing, discussing and submitting proposals.
Reddit-style up/down voting is used for comment sorting. Up/down votes are not anonymous.
Voting on proposals does not happen directly on Politeia, as it requires signatures from your Decred wallet. Voting can be done from Decrediton or on the command line using the politeiavoter CLI tool.
There are two broad types of proposal:
- Proposals that aim to establish voter support for a course of action. For example, the direction of software development, or adopting or changing some policy.
- Proposals that commit to spending DCR from the Decred Treasury. These proposals create a budget that some entities can draw down against as they demonstrate progress towards the proposal’s aim.
How Politeia Works
To vote, stakeholders must time-lock DCR to buy tickets. While tickets are live they can be used to cast a vote for or against each open Politeia proposal. For more information on tickets and their role in Decred’s governance, see the Introduction to Decred Governance page.
There is a fee for submitting a proposal (0.1 DCR) to limit the potential for proposal spamming. There is also a fee for registering a Politeia account (0.1 DCR) to limit comment spam and up/down voting sock-puppetry. Fees may be altered if a) they aren’t serving as a sufficient spam-deterrent, or b) the price of DCR changes considerably.
DCR DEX
DCR Dex is a decentralized exchange built by the Decred project. You can trade crypto peer to peer there with no KYC or any trading fees. The dex supports trading pairs for Decred, Bitcoin, and Litecoin. Additional pairs including Etheruem and Bitcoin Cash will be deployed incrementally in the near future.
Layer 2 Solutions/Features
With reference to the above image, we can see that Decred adopts several design elements from Bitcoin, such as its 21 million total supply. However, its block-time is only 5 minutes (compared to 10 for bitcoin), its difficulty readjusts every 12 hours (144 blocks), and its block reward decreases by 1% every 21 days, a more gradual decrease than bitcoin’s halvings every 4 years.
Lightning Network
Just like how Bitcoin has adopted the Lightning Network, Decred also has the same layer 2 functionality. LN in short is a layer 2 payment protocol designed to be built on top of blockchain-based cryptocurrencies such as Bitcoin, Litecoin, and Decred. It’s intended to enable fast transactions among participating nodes and has been proposed as a solution to the bitcoin scalability problem. It features a peer-to-peer system for making micropayments of cryptocurrency through a network of bidirectional payment channels without delegating custody of funds.
Coin Mixing
Coin mixing makes it easy to anonymize Decred transactions. All you need to do is press one button on the mixer and your DCR will be mixed with DCR of other users. Once they are mixed, tracing your coins back to your original wallet is almost impossible.
To know more about coin mixing or coin shuffle, you can refer to Decred’s documentation.
Tokenomics
DCR’s maximum supply is capped at 21 million just like Bitcoin but its circulating supply is much lesser than Bitcoin because of the fact that its emission schedule or block reward is reduced gradually by 1% every 21 days compared to every 4 years for BTC.
According to dcrstats, the total value locked into PoS staking is around 7,766,119 DCR tokens which are around 59.10% of the circulating supply. This is positive as these tokens are taken out of circulation and are locked up to earn rewards leading to reduced price manipulation.
The image shows us the source of the emitted supply. The majority of the supply has been mined by PoW miners and the PoS stakers.
Block Reward/Treasury
Cryptocurrencies and open source projects typically fall victim to the tragedy of the commons, where individuals who share a resource act in their own self-interest, depleting or spoiling that resource. Numerous methods have been used to solve the funding issue across cryptocurrencies, including donations, founders funds, venture capital funding, and various forms of ICO/IEO/IDO. All of these methods come with shortcomings, including agency problems, conflicts of interest, and a lack of ongoing funding.
Decred solves this problem by distributing the block rewards between 3 participants. 60% of the block reward goes to the miners, 30% to the stakers, and 10% to their treasury. Decred has solved the funding problem by directing 10% of every block reward into their Project Treasury. This ongoing solution funds Decred for generations to come. To this point, the Treasury has been managed conservatively with a long-term perspective in mind and cognizant of the release of Politeia in 2018, which transitioned control of funds to the Decred stakeholders. Through Politeia, stakeholders vote on budgets, policies, and the direction of the project as a Decentralized Autonomous Organization (DAO).
According to Decred’s block explorer, the rich list shows us that the address with the highest number of DCR tokens has about 6.93% of the entire circulating supply. This address is the treasury where 10% of the block rewards go to. The address is decentralized as it is controlled by the voters.
All the addresses in line after the treasury have less than 2% of the supply.
This indicates that the token distribution is very decentralized and there are no wallets owning a large chunk of the supply.
DCR’s issuance is very similar to BTC and all of the 21 million coins will be in circulation sometime in 2038. Decred’s Reddit post shows us a yearly comparison of Decred and Bitcoin total supply.
The hard cap with no tail emissions beyond the scheduled ~21M is designed to provide certainty in the monetary policy and prevent existing holders from being diluted by future manipulation of the monetary supply.
Roadmap
Decred has completed most of its proposals in its roadmap. You can see their roadmap here.
As Decred moves towards a full DAO, there will be no further roadmap milestones. Instead, the Politeia proposal system will function as a living roadmap that is constantly adapting.
Performance
The chart above from dcrstats indicates that the hashrate is well distributed and there doesn’t seem to be any miner or mining pool with too much hashpower. F2pool, poolin.com, and antpool have the majority of the hashrate with 27.1%, 16.5%, and 9.9% respectively. Another positive aspect with regard to the hashrate distribution is that 38.5% of the hashrate comes from solo miners proving that the steady supply emission is beneficial for them.
The total hashrate of the Decred network has been steady but due to the decline in prices, there has been a reduction in hashrate by around 50%. As the market recovers, we can expect the hashrate to pick up once again.
Social dominance has corrected with correlation to DCR’s price correction. With strong fundamentals and experience behind DCR, it will recover and increase over time as the userbase of the space increases over the years.
Price Performance
DCR has performed well over the past 12 months gaining by around 1500% or 15X. The price is currently at 6X from last year.
DCR’s performance over the past 6 months has been good, gaining around 430% or 5+X. The price is currently at 1.4X from the past 6 months.
DCR’s price action for the past 3 months has declined by around 60% due to a market correction. It’s expected to recover once the market turns around. For the latest price updates, you can refer to Coingecko.
Developer Activity
Decred’s developer activity has been steady over the years with not a lot of additions/deletions. A cryptocurrency that’s so old it should be stable in terms of code.
However commit activity on DCRandroid, Politeia, Decredition, and DCR wallet are quite active.
Developer trends have seen growth on DCRdata and Politeia over the past 1–2 years indicating that these are the key areas where code is being given attention to.
Ecosystem
According to dcrstats, there are around 232 PoS nodes around the world most of them being in North America and Europe. This indicates that there are enough stakers securing the network and are geographically distributed.
Grant Programs Given through Politeia
- Decred DEX development: In August 2019, DCR stakeholders approved the development of the Decred Decentralized Exchange. After intensive testing, the DCRDEX software was officially released in October 2020 where tens of thousands of DCR was being traded daily between users with no 3rd party custody. It’s is estimated that this scope of work was to be valued at around $245,000. To know about this grant, you can refer to this link.
- Decred Mobile Wallets: This proposal is for continuing work on the Decred Mobile Wallets for Android and iOS platforms. This covers all work for the mobile applications under a proposal, which were previously being covered by the Decred treasury as part of core development. This work will be performed mainly by the Raedah Group and the proposed billing limit was around $44,000. To know more refer here.
- Decred Address Scanner: A lightweight app that can track decred addresses on android. It has already been in the google store for over a year with 500+ downloads and is already open-source on Github. This proposal aims to get the source code into the decred repository and a little more developed. A total of $9000 was approved for the same.
- GODCR- Golang Native Desktop Wallet: GoDCR is a desktop wallet for Decred. It was written using Gio (gioui.org), a GoLang library for implementing immediate mode user interfaces. GoDCR shares backend golang code with the decred mobile wallets via the dcrlibwallet component. The billing limit was approved for around $60,000 for this wallet to be developed.
- Decred Onchain, Research, and Charting Resource: This project created 1 single website that displayed onchain performance, metrics, charts, analysis, and research. This resource will provide the community, traders and stakeholders alike with reference locations for data-driven insights and aims to be a complimentary resource https://explorer.dcrdata.org/# and https://decredpower.com/.
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Credits
Special credits go to dcrstats, Coingecko, and Santiment for providing the necessary data.
We would like to show appreciation to Decred’s Reddit members raedah and davecgh for pointing out a few changes in the report.
