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Mixing Proof of Stake With Proof of Work For a Better Bitcoin

Decred
Source: Coinmarketcap.com

Many people have the misconception that, when it comes to cryptocurrencies, there will ultimately be one coin to rule them all. Not Jake Yocom-Piatt, CEO of Decred. In fact, he calls it “fallacious thinking,” and adds, “No one currency will dominate; that’s wishful thinking.” Instead, he sees a future with a multi-stake holder system where a consumer might use one coin to buy a house and another to buy everyday items. His goals are to make Decred one of the players that hold those stakes and to have his company help solve the problem of blockchain governance. He and his team are working hard toward those ends.

What is Decred?

A fork off of Bitcoin, Decred, an open cryptocurrency with a community-based system of governance, launched in January 2016—when its developers noted a problem with Bitcoin governance—with the aspirations of creating a truly decentralized coin ecosystem, like Bitcoin was supposed to be. It has a current market cap of $585,053,116 with 8,100,760 coins (DCR) in circulation.

Decred
Source: Coinmarketcap.com

Feeling ethically compromised at the thought of asking people for money on a promise and not wanting to create regulatory risk and risk securities issues, Yocom-Piatt chose to fund the protocol’s development on his own. He has also elected not to go the ICO route; rather, an airdrop of 3,000 coins were distributed to select players, and another lot were distributed among the designers. These actions served to put the system into motion.

The Decred Protocol

Yocom-Piatt says that Decred is Bitcoin with a better thought out governance model. Not simply relying on the proof of work (PoW) consensus model upon which Bitcoin is mined, Decred adds a second authentication factor to its blocks, a proof of stake (PoS) protocol. The goal for this approach is to create a better and more attractive store of value and for the use of the PoS consensus protocol to change the consensus rules. In time, the hope is for the platform to progress and become more transactional and dynamic.

“As soon as you start changing consensus rules, things get contentious,” Yocom-Piatt said. “We wanted to do away with that (contentiousness), so we made it so we can adjust our consensus rules more easily.”

How it Works

The protocol is based on the PoW of gamified timestamping. Yocom-Piatt states that Decred has gamified decision-making. The coin holder receives rewards for participating in the game, which, in turn aids the company in resolving disputes. The process can continue through a series of discussions before a dispute goes up the chain to be voted on. This process puts governance in the hands of coin holders. The consensus rules are such that they can’t be changed without changing the software (PoW).

Yocom-Piatt says that this makes Decred the same as Bitcoin, but with real decision making. The company offers a true transactional currency, to which it can add privacy features and modify to stakeholders’ specifications.

The team is presently creating an infrastructure to vote on the application of development organization funds. Ten percent of the blocks will go to the development fund, which will be centrally administered and allow stakeholders to vote on consensus rules as well as how funds are actually spent.

The Rewards

If a client holds coins, he or she can build passive income by purchasing tickets on an ongoing basis. Rewards are given to anyone who buys $1,000 worth of tickets, and the company has it set up so that a person doesn’t have to work on the math every day to earn semi-passive rewards and store value in the system. Rather, one simply has to lock their coins in pseudo random fashion, from days to several months, and their vote carries a reward similar to interest. Anyone who purchases Decred can earn passive income, not unlike a bank where one is permitted to participate in the changing of the rules. The two ways to acquire coin are to perform work for the project or to bill the company for their work.

The company is focusing on consensus rules, because consensus rules are what make the blockchain work, and the blocks aren’t valid without agreement on those rules. “We’re trying to extend the process so we can change consensus rules and extend them to create new infrastructure,” Yocom-Piatt says.

Of the 21 million coins that will ultimately be issued, 7.6 million have already been distributed.

The Decred Wallet

Decred’s wallet, the Decrediton, is a graphical and open source wallet, which allows the holder to stake coins and get in on governance. The company also suggests Exodus, a multiple currency wallet that allows people to swap coins back and forth.

The platform offers simplified payments with Simple Payment Verification (SPV) and secure wallets on mobile phones, and in the near future they plan to activate a lightning network, which will provide nearly instant payments worldwide.

DCRs have some fiat liquidity; they are listed on some exchanges with the Euro and the Brazilian real, but there are no exchanges with the U.S. dollar at this point. It’s also possible to trade Bitcoin and other coins for DCR.

Decred’s Progress and Competition

While the company doesn’t track usage figures, the CEO estimates that the number of users to this point is in the low tens of thousands. The hash rate has been raised to just over two petahash. In the past, DCRs were mineable with GPUs, but now there are several ASICs on the market.

Yocom-Piatt says that there are a number of ways to characterize the competition. You can view one sector of the players as smart contract coins, privacy coins, and decentralized exchange coins. These are app coins, which are created to address a particular use case. Then you have coins like Dash, Tezos, and Cardano (the latter two of these aren’t live yet), which are governance coins. Decred joins Dash as the most developed of these governance coins.
Still, despite being at the head of the pack with this technology, Decred’s design team isn’t rushing the process. Yocom-Piatt says that the design is to build slowly and intentionally, rather than racing to be first to the market. The focus here is on quality not speed.

What the Future Holds for Decred

Yocom-Piatt envisions a future when cryptocurrency exchanges eventually replace banks. A lot of pruning will be done, of course. With so many investors being undereducated, he understandably sees that a lot of the “hot money” will pull out and products will fail, and he has his company geared to not be among those.

Citing that the signal-to-noise ratio is big in crypto, the company is poised to get the word out. The focus going forward is on education and visibility, and the plans are for a lot of trade shows and crypto meet-ups. Beyond that, they are just going to be focused on doing the things that successful companies do–continue to develop their product and update their documentation, advance the website, ensure the sound nature of the engineering to decrease vulnerability, and audit the source code.

When it comes to the company’s present needs, the team is looking for people who understand the value of decentralization, knowing that not progressing as a function of time will ultimately lead to irrelevance. He sees people holding, just as a hedge in case Bitcoin fails. In this case, it is better that people are holding Decred for any reason, but the company sees the potential when people acquire and hold coins because of faith in the protocol.

The company also needs people to do all that work detailed in the previous section. Among others, they will be hiring website designers, marketing professionals, and advertisers.

Conclusion

For one to consider the viability and potential of a company, he or she must first consider the people. It is important to note that Jake Yocom-Piatt understands the crapshoot potential of the future of the cryptocurrency space. His goal is for Decred to not be one of those that gets swallowed up when the hot money does pull back. His knowledge of this potential–where some CEOs would take the more bravado-filled “Yes, but that’s not going to happen to us” stance–has his team rolling up their sleeves and setting to the tasks to better ensure that won’t happen.

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Written by Paul Keenan.

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