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A store of value with security, adaptability and sustainability

May 20, 2020

Decred is a cryptocurrency that competes in the same segment as Bitcoin, the store of value. Pablo Labarta, director of content for the Crypto Rocket Group in Argentina and employee of Decred, gave Cointelegraph a complete introduction guide in Spanish among other things to understand what this cryptocurrency is about and how the community around it works. What is transcribed below is the information, opinions, and analysis that Pablo Labarta shares:

The idea

The original idea comes from an article written by one of Monero’s developers and later edited by a team of programmers who had just written an alternative implementation of the Bitcoin protocol. Everyone agreed that Bitcoin had three major problems: funding, autonomy, and the lack of processes to make decisions about its development. “Who controls Bitcoin?” One of the fundamental questions that led to the creation of Decred.

The Decred network, launched in 2016, was developed using the bitcoin components that have proven to be successful: the blockchain based on transactions and blocks, the 21 million limit and the proof-of-work mining system.

A store of value with security, adaptability and sustainability
A store of value with security, adaptability and sustainability

However, problems and improvements were noticed that motivated the inclusion of new components. A proof-of-stake reconciliation system has been added to complement the proof-of-work reduction and empower those with DCRs decision-making powers, and a decentralized Treasury with governance systems has been created to make this fully sustainable without being dependent on investors or companies.

Decred is an interaction with Bitcoin with a special focus on governance. His model has earned a place in the portfolios of some of the best space mutual funds, including placeholder and adaptive capital. What has drawn the attention of these investors?

Differences to bitcoin

“One CPU, one voice,” wrote Satoshi Nakamoto. Should I have written “a BTC, a vote”? BTC holders have no say in the direction of the Bitcoin project.

In practice, only two groups make decisions:

  • Miners are the ones who decide what to implement by working and securing the chain of their choice. They are the only ones who have access to the blockchain.

  • Programmers decide what to implement by designing and writing the necessary changes. They are the only ones who can implement solutions and improvements.

Bitcoin has managed to get a large number of financial intermediaries out of the way, but by taking advantage of open source software, it has inherited its problems as well. Who funds Bitcoin development? The same openness that allows anyone to work with and use the code without having to pay a Satoshi to a company makes funding and maintenance dependent on donations, whether it’s time or money.

The problem is not new. On the contrary, it is so famous that it has a name: “The Commons Tragedy.” Since Bitcoin is unable to pay its programmers and can only pay miners, it depends on third parties to fund its improvements. These can be external investors or volunteers who have enough free time to spend hours on a project that doesn’t help them bring food to the table.

In these collaborative environments, where there are no hierarchies, positions, or salaries, meritocracy again becomes essential, and reputation is everything. Without formal governance structures, the reputation system will ultimately benefit small elite miners and programmers who are favored and consolidate their positions of power. In practice, these groups can prevent the implementation of new ideas from which they don’t benefit, as was the case with SegWit, the discussion about the size of the blocks or the change from ProgPow to Ethereum.

The main difference between Bitcoin and Decred is this vision of network governance. Decred includes adaptability in its design, with the ability to incorporate new ideas and constantly improve its technology. The proof-of-stake system gives those who are willing to freeze their DCR for a while. This gives way to formal governance mechanisms that include discussion and coordination. In this way, the group of stakeholder treasury funds can coordinate and invest to achieve their goals, regardless of whether this is as delicate as changing consensus rules or marketing measures such as organizing online events.

This feature enables the development of various technologies that, in addition to the economic possibilities, also examine the potential of decentralized autonomous organizations (DAO) and the forms of social coordination. The results include a decentralized exchange, a mixed / data protection service, an unchangeable forum for discussing proposals, a chain voting system and a transparent and decentralized system for managing and billing contractors.

The principles of the community

The basics of Decred can be summarized in the six principles defined by his community:

  1. Free and Open Source Software: All software developed by Decred is free and open source.

  2. Freedom of expression and consideration: Everyone has the right to communicate their opinions and ideas without fear of censorship. All constructive voices based on facts and reasons are taken into account.

  3. Involvement of all stakeholders: Involvement is a multi-stakeholder system and work needs to be done to maintain diversity of perspectives and users.

  4. Progressive data protection and security: Data protection and security technologies are implemented continuously and step by step, both proactively and in response to attacks.

  5. Fixed and finite emission: The emission is finite and the total emission should never exceed 20,999,999,99800912 DCR.

  6. Universal fungibility: Universal fungibility is essential for Decred as a store of value, and attacks on it must be actively monitored and countermeasures taken if necessary.

Hybrid consensus

The inclusion of DCRs in the governance model led to the implementation of a hybrid consensus system that combines proof-of-work and proof-of-stake. This way you can properly change the consensus rules and reconcile the needs of users and miners.

Building blocks with proof-of-work mining are a successful mechanism proven by Bitcoin. For this reason, Decred takes over the PoW component. But it is a system that also has its problems: The special features of the hardware industry concentrate the manufacturers and centralize access to technology. Manufacturing hardware such as graphics cards or ASICs, specialized single-use computers (in this case, mining cryptocurrencies) becomes the privilege of a few who can perform large operations.

With the addition of the proof-of-stake component, DCR holders, owners, votes and votes have the opportunity to change the consensus rules, finance new developments and review the miners’ work. In practice, it works as a double authentication system. The blocks have to go through two controls: PoW and PoS.

Decred promotes participation in security and decision-making processes. Anyone who buys tickets via the proof-of-stake system receives 30% of the block reward. The miners receive 60% due to the higher operating costs and the remaining 10% go to the state treasury.

Deceased holders can participate in the PoS system by freezing their DCR against tickets. This includes freezing a DCR amount, which is determined by the difficulty of the network, also known as the ticket price. In this way you receive a ticket that is called up in a block by a random lottery for voting. On average, it takes 28 days for tickets to be called up for voting. The current price can be called up with dcrdata, the block explorer from Decred. If they vote, users get their DCR back and receive part of the block reward.

Tickets offer voting rights in two systems: in the chain and outside the chain. The coordination in the chain defines the validity of the blocks and enables an orderly change of the consensus rules after a four-month formal process. The off-chain system allows you to control how treasury funds are used by voting for or against development proposals.

If you want to participate in Decred’s proof-of-stake system, you can buy tickets with Decrediton, the desktop wallet.

The treasure

The Decred Treasury is an address that receives 10% of all DCR generated. This is the cornerstone of Decred’s autonomy. So far, the keys have been in the hands of the Decred Holding Group, but the community could vote to change them, and the work needed to decentralize their administration will continue.

One of Decred’s goals is to remove all people from the environment and create an organization without intermediaries. The treasure becomes a special account with its own rules within Decred. In this way, stakeholders can validate the transactions that leave the Ministry of Finance and verify that the specified payments are made. The Treasury Department upgrade requires testing to ensure that attacks against the Decred Treasury Department, which has already collected over 630,000 DCR, are prevented.

People who work for Decred are referred to as contractors and are charged for their work at DCR through the Treasury. Although the Treasury has DCR, the proposals are all funded in US dollars (USD) to reduce market volatility. Payments to contractors are made in DCR at the average exchange rate over the working period. This means that they are also exposed to the volatility of the currency, some months they charge more USD and other months less.

The use of treasury funds is defined by Politeia, a governance platform for the publication, discussion and coordination of proposals. Decred’s stakeholders are the ones who define the projects to be funded, and the money comes from the Treasury only when the contractor presents its results. This is an important detail: the Ministry of Finance always pays after the presentation of the work, never before. This prevents people from approaching, promising, charging, and not fulfilling.

Politeia is a platform similar to discussion forums like Reddit, with two major improvements: DCRTime seals the content in the Decred blockchain, and users have to pay a small amount to avoid spam. Creating a Politeia account costs 0.1 DCR and submitting a proposal, another 0.1 DCR.

The proposals are action plans that include:

  • Problems

  • solutions

  • costs

  • Working group

  • Payment plan

Politeia’s infrastructure is not decentralized and depends on the administrators. To avoid censorship, users post or comment to generate an anti-censorship token that proves that they have posted the message.

In order to be approved, a proposal must go through three phases: discussion with the community about the different chat channels, publication of the proposal on Politeia and voting on it. The voting takes one week and has to achieve two goals: 20% of the active tickets must participate and 60% of the votes must be positive. After approval, the contractors involved can present the work performed and receive their remuneration in DCR via the Contractor Management System, Politeia’s accounting appendix.

Investment in the user

The Ministry of Finance is available to fund any developments that the stakeholder community considers necessary for the success of the project. These are not only limited to improvements to the software, the structure of Decred also enabled her to venture into other areas.

Decred is currently developing and maintaining:

Treasury and formal processes enable stakeholders around the world to coordinate to drive the most pressing initiatives, whether it be to improve security, film educational videos or create a non-profit exchange. As a result, Decred invests in the areas that have the greatest impact on its users and not in products that want to generate revenue.

Team and history

The Decred story began in 2013 when the founding team, then called Conformal Systems LLC, was working on an alternative bitcoin implementation called btcsuite. They took Bitcoin Core, written in the C ++ programming language, and wrote the software in Go from scratch. Today btcsuite is used in various projects, including Lightning Network (lnd), Ethereum and Factom.

Creating multiple implementations of the protocol is a controversial topic in Bitcoin. “Diversity is good. Diverse and interoperable implementations of the Bitcoin protocol make the network more robust against errors, attacks and vulnerabilities,” wrote Gavin Andresen, founder of the Bitcoin Foundation. Instead, programmer Peter Todd, who worked with Bitcoin Core and created OpenTimestamps, argued in 2015 that the Bitcoin protocol “was defined by the source code” and “rewriting it was a waste of time” because no group of miners would use it. knowing that it’s not exactly the same. The discussion continues to this day, but the picture has not changed, Bitcoin Core continues to dominate the network, and btcsuite was rejected by the developer and mining community.

At the same time, a Bitcointalk member named Tacotime, the inventor of Monero, had started working on “memcoin2”, a cryptocurrency that proposed a hybrid consensus system that “could ultimately allow its users democratic control of monetary policy” participatory voting. “

To put the idea into practice, Tacotime and _Ingsoc, another anonymous Bitcointalk member, in 2014, in conjunction with Jake Yocom-Piatt, CEO of Conformal Systems, brought him closer to the concept they had been working on. Conformal Systems was renamed Company Zero (C0) and Decred took shape.

Towards the end of 2015, C0 published a series of articles on his blog in which Jake detailed Bitcoin’s problems and some ideas for improving and creating a more robust and comprehensive decentralized digital money system. On December 12th they announced the launch of Decred and on February 8th 2016 the network started working on the Genesis block.

In 2016, Tacotime published his last post on Bitcointalk and mentioned Decred’s development in his post on Memcoin2. He devoted himself to working with Monero and then disappeared.

Today the Decred team consists of more than 90 people in more than 35 countries as well as some anonymous characters. There is no limitation and you can collaborate with the project through the Github repositories. If their work is valuable, they are invited to become contractors and to bill for their efforts.

Security, adaptability, sustainability

Decred’s thesis recognizes that technology is not static or absolute and that unknown new challenges will arise in the future. For this community, the smartest thing is to anticipate flexible structures that will allow them to adapt to these unknown problems.

The required resources must be available to continue with the changes. Treasury funds allow employees to continue working even when the market is declining. With its open and sustainable development model, Decred ensures the ability to further improve its infrastructure.

Unlike Bitcoin, Decred prefers investors who participate in the development, bring in their ideas and want to make decisions. Although it is constantly innovating, it is the design of incentives developed by companies 0 and Tacotime that enable new employees, miners and investors to join the project. All stakeholders are rewarded for their work and this enables this network to develop further.

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