Several people have questioned the name “Decred” in the last three years. Their reasoning: investors will only invest in digital currencies with catchy names, and since “de” has a negative connotation they may ignore Decred.
It seems that these people don’t understand what Decred really stands for. Decred is a blend word of “decentralized” and “credits”. But what exactly are “decentralized credits”? And why is it a great name for a digital currency? To find out, let’s dive into the history and future of money!
A brief history of money
It is believed that money, as a store of value and medium of exchange, first emerged from the trade of animals and grain. This was followed by the arrival of commodity money during the Bronze Age, where commodities such as gold, silver, salt or shells were traded.
Every object had two uses: the original purpose for which the object was designed, and secondly as an item to trade or barter. Bartering was a system where items were directly exchanged for other items. Because items exchanged weren’t always an exact match in value, it was common for people to be either left in debt or credit. As a result, some have suggested money was created to replace the need for barter.
Anthropologist David Graeber argued against this suggestion. His research indicated “gift economies” were common during the beginnings of the first agricultural societies, where humans used elaborate credit systems. In this view, money emerged the moment when the obligation “I owe you one” transformed into the quantifiable notion of “I owe you one unit of something”.
Either way, it was proto-money — items made of the precious metals (such as jewelry) — that eventually became most popular as store of value and medium of exchange. Precious metals were more divisible, portable and durable than commodity monies such as shells.
While many people thought that gold and silver had value due to their scarcity and use case in jewelry, not everyone was of this opinion. In pre-revolutionary America, traders quickly learned that gold and silver were of no use to the people who originally lived there. Instead they used beaver pelts as a currency in exchange for items they needed.
It should be clear that during these times there was no need to rely on any third party to store or exchange value. People were all in control of their own money. Money had value because people assigned and asserted it.
Back to reality
Even though proto-money gained most popularity, it wasn’t without issues. Gold and silver weren’t always easily divisible, and it was difficult for the average person to verify the weight and purity. This often led to fraudulent metals being circulated, such as pyrite (fool’s gold).
As a consequence, authorities such as kings, emperors, and governors began minting gold and silver bullion coins, to be used as a medium of exchange and store of value — the dawn of standardized coinage.
Minted coins brought about a number of improvements to money. It meant money could change hands in a more secure manner, with much less frequent need for weighing. Furthermore, although these coins were not always identical — most bearing their own unique imperfections — they did bring about a vast improvement in fungibility compared to proto-money. For this reason, civilizations quickly adopted and became reliant upon minted coins.
Bankers began to hand out notes of credit for gold or silver coins deposited with them. These receipts included the name of the depositor and promised to pay him or her on demand. At some point the words “or bearer” were added after the name of the depositor, which allowed notes to change owner.
The benefit of not having to trust or rely on third parties when exchanging and storing value had to be traded off against the requirement for money that was easy to use. It could now be divided into small, transportable units with a specific authenticated value.
One thing led to another, and here we are, carrying around worthless metallic discs and pieces of paper in our wallet that the authorities control entirely. This type of money is known as fiat money.
Fiat money is a currency that has been established as money, often by government regulation. It only has value because an authority maintains its value.
The future of money
When we consider the future, we often look at science-fiction (Sci-Fi) stories and movies. While comic books and novels do not accurately predict the future, they often offer a surprisingly relevant insight into things to come.
The use of “credits” is common in futuristic Sci-Fi settings. In fact, there is a well know cliché pointed out by the popular futurist and comic book writer Sam Humphries, who said: “In any science-fiction movie, anywhere in the galaxy, currency is referred to as credits”.
The first use of “credits” in Sci-Fi can be traced back to the novel “Galactic Patrol” by Edward E. Smith, first published in 1937. Smith wrote “Bid, one thousand credits per packet of ten. Offered, none at any price”.
The first published explanation of what a “credit” represents was in the science fiction novel “Space Viking” by Henry B Piper, published in 1962. Piper wrote, “Our currency is based on services to our society. Our monetary unit is simply called a credit”.
In the popular Star Wars movies, the concept of “credits” is also used and presented as a form of electronic money.
Back to the future
Today, money has already entered the digital realm: fiat money primarily exists on databases controlled by the banking industry. We use plastic cards with chips to exchange value and we have to trust our banks to carry out these transactions. In its physical form, fiat money is represented by metallic coins and banknotes, also referred to as cash.
Luckily a new phenomenon is emerging: decentralized, digital money based on cryptography. This type of money — sometimes called cryptocurrency — represents something fundamentally different, something more versatile.
The birth of cryptocurrency has eliminated the need to rely on authorities when exchanging value. We no longer need to use commodity money or fiat money to store or exchange value. We now have a choice.
Cryptocurrency evolved from all previous forms of money:
- Its units are divisible, durable, portable and fungible.
- It is censorship resistant and secured by cryptography.
- It has guaranteed scarcity and a transparent rate of supply.
However, a cryptocurrency is only as strong as its protocol and its social layer (a decentralized collective of miners, developers, investors, and users). Just like in the old days, we are again in control of our own money.
Our money has value because we assign and assert it.
In 2009, Bitcoin was the first cryptocurrency to launch. Early 2016, after identifying three fundamental challenges within the Bitcoin ecosystem and developing several unique features, Decred launched.
Behind the name Decred
Legend says that the early founders and organizers tacotime, _ingsoc and Jake Yocom-Piatt were brainstorming on the topic of “decentralized credits” when they thought of the name Decred.
Decentralization is important for blockchain-based cryptocurrencies such as Decred, Bitcoin or Litecoin. The more decentralized a cryptocurrency is, the more resistant it is to censorship or control from a centralized entity. A decentralized network is more secure since it is harder to attack.
The most valuable projects are those that have decentralized development, decentralized funding, and decentralized decision-making (governance). Decentralization is the missing piece of the puzzle that allows us to eliminate the requirement for a third party when storing and exchanging value.
Although many people now associate “credit” with credit cards (or the ability to obtain loans), understanding its place in the history and future of money makes it all the more meaningful.
Back when fiat money did not yet exist, credit systems were used to keep track of who owed what to whom. Much later, around the time of the global gold standard, notes of credit were issued as proof of stored value.
Perhaps more interestingly, the concept of “credits” is commonly used to refer to money in futuristic Sci-Fi settings, for example in Star Wars.
It seems only natural that the most significant feature of cryptocurrency is brought together with a word that describes money as it once was — before third parties became involved — and as it has been envisioned for the future.
Decred (DCR) stands for decentralized credits. It has taken decentralization to a whole new level — it is money that is developed and governed by us! The Decred treasury ensures we no longer need to rely on authorities to give us a medium of exchange and store of value. We have decentralized credits.
Who knows how far this project will reach? In a distant future, intergalactic travelers might pay for their drinks in DCR! 🚀