Decred DCR
What is Decred (DCR)?
Back in 2014, the Decred network was built on the original Bitcoin code with a set of features related to obtaining a greater degree of scalability and fostering a network incentivization system. Basically, Decred (DCR) is considered a Bitcoin fork.
Decred (DCR) functions similarly as Bitcoin, but includes a special hybrid consensus mechanism and governance model to foster community input as its main identifying features.
When Decred copied Bitcoin’s code to modify it, the project had one goal in mind – to empower and reward token holders who contributed changes to the platform.
Such a vision amounted to experiments that encouraged user participation in the governance process and led to engineering the network as a hybrid consensus mechanism including components of both Proof-of-Work (PoW) and Proof-of-Stake (PoS) consensus methods.
To dive into Decred's technology, it is useful to know a few things about consensus mechanisms. You can start by reading this article: 'Proof-of-Stake vs Proof-of-Work: Is PoS better than PoW?'.
Simply put, the Decred cryptocurrency uses two consensus mechanisms to address the problems that are inherent to these consensus mechanisms, and deal with the centralisation issue.
Decred (DCR), the project’s native cryptocurrency, falls in line with other popular cryptocurrencies on the crypto market such as Bitcoin (BTC), Litecoin (LTC) and Dogecoin (DOGE) while providing users with additional governance and community-driven features.
Let’s take a look at how it all started.
A peek into the past
One of the earliest versions of a hybrid consensus mechanism emerged from BitcoinTalk forums in 2013. Anonymous users named tacotime and _ingsoc introduced the Memcoin2 cryptocurrency. The project’s whitepaper was created by a user named Adam Mackenzie; it included Decred’s key features such as enabling users to vote and a hybrid Proof-of-Work/Proof-of-Stake consensus structure.
The unknown persona 'tacotime' that created Memcoin created Monero as well.
The founders created it because of their alleged experience with the Bitcoin's governance model, which gave core developers and miners the bulk of the control.
In 2014, this idea became a reality when Company 0 started the Memcoin2 crypto project. The founders remained anonymous, yet the project saw the light of the day when it was officially launched in 2016.
The Decred project went through many changes over the years. The original idea of enabling user input led to the creation of several other interesting features that have been implemented.
In 2017, the Decred blockchain allowed users to swap tokens with other blockchains; atomic swaps enabled Decred users to exchange tokens without an exchange system as an intermediary.
Two years later, the system implemented the Lightning Network on its mainnet with the addition of smart contracts and off-chain transactions to the Decred network. This led to the emergence of the Decred Decentralised Exchange (DEX) and Decred’s wallet named Decredition. The Decred DEX was officially launched in October 2020.
What's next on Decred's roadmap?
The Decred crypto utilises a community-based governance so it doesn’t follow a strict roadmap like some other crypto projects. Users are allowed to propose changes anytime. However, there are still consensus rules about where the community wants the project to go.
In 2022, Decred started to focus mainly on enhancing privacy and functionality. Most approved proposals in 2022 discussed manners of enhancing the Decred community such as adding more plug-ins for authentication, notifications and DCR payments. Several other approved proposals were about privacy enhancements and improved support for the Lightning Network.
How is Decred different from Bitcoin?
Decred is frequently compared to Bitcoin; the original Decred blockchain assumed the role of a Bitcoin fork. Therefore, it utilises a similar hash function to create tokens. This is not the only similarity – both cryptocurrencies have the same maximum supply of 21 million tokens.
Since their similar features are quite obvious, both of these crypto projects encompass the same amount of complexity, privacy and security. While Bitcoin is the most popular cryptocurrency, it has received its share of criticism throughout the years. You can read more about it in our 'What are the arguments against Bitcoin?' article.
However, they are not the same; the major difference can be spotted in the way these blockchains are governed. While Bitcoin contains a board of a few developers which govern the blockchain’s operation and updates, Decred takes input from the entire crypto community.
The second difference lies in the fact that Decred doesn’t rely only on a PoW consensus method as Bitcoin. The hybrid structure, as stated by the Decred team, provides a higher level of scalability and sustainability, along with giving users more ways to obtain block rewards. However, Decred’s production is slower than Bitcoin’s.
These are two core differences between Bitcoin and Decred. If you dive deeper into the comparison, you could see that there are several minor differences between these two crypto projects related to functionality and finances.
Key advantages of Decred (DCR)
Decred includes a set of advantages which make it stand out on the crypto market. Here are some noteworthy features of this crypto project.
Hybrid Proof-of-Work/Proof-of-Stake consensus mechanism
Decred utilises a unique hybrid consensus algorithm that combines PoW and PoS consensus methods. This presents a unique feature on the crypto market and enables a higher degree of security as well as a more efficient use of resources at the same time.
The adoption of the hybrid model stems from the aim to increase decentralisation. The Decred team and its community claim that the hybrid consensus mechanism improves decentralisation in contrast to solely PoW projects such as Bitcoin.
Decentralised governance
The hybrid model blurs some of the traditional governance categories within the crypto space since it encompasses both a voting and an on-chain governance structure. It is self-funded because 10% of each reward goes directly to the treasury.
Back in 2018, Decred implemented Politeia, a governance system that aims to provide an open environment for novel proposals and a voting system for implementing them. The Politeia feature enables stakeholders to approve all development spending by submitting proposal tickets for a fee.
DCR holders who wish to provide potential policy changes or upgrades can do so using Politeia’s public proposal web platform. The platform in question lays down options such as submission, tracking and discussion of suggested proposals.
Decred treasury
The Decred treasury presents a store of digital assets with which Decred users can facilitate changes on the blockchain. Since a small portion of each novel block goes into the treasury, it is constantly expanding.
The Decred treasury is currently valued around $21 million. Given that the treasury is self-funded, there is a less risk of outside influence. Until 2018, the treasury presented an autonomous entity, but the introduction of Politeia enabled stakers to vote on the allocation of treasury funds.
Privacy and security
Decred provides several privacy and security features, along with the ability for users to choose the level of privacy they want. The project includes a Bug Bounty Program which lets users submit warnings for any bugs they bump into.
To incentivise users to report bugs, Decred laid down a payout system that is based on a few parameters such as how likely the bug is to emerge, how much it could affect the network and whether the user also submitted a patch.
Community-driven approach
Decred utilises a community-driven approach when it comes to its own development. It is entirely open-source so any user can contribute to the codebase or propose updates. Additionally, it includes several initiatives to support the community such as a project proposal system and decentralised funding.
Block explorer
To make use of blockchain technology at a greater degree, Decred introduced block explorer options. In other words, users are enabled to audit individual blocks and other transactions. They can take a look at ticket purchases and votes as well.
Given that Decred developers stated that the project prioritises user privacy, it is not possible to reveal user identity.
Main risks associated with Decred
Even though Decred includes a number of interesting features and upper-hands, there are some weaknesses that should be addressed.
Is the decentralised network actually centralised?
While there haven’t been any official allegations or affairs, an online debate took place via Decred Reddit and Bitcoin Forum regarding potential centralisation issues.
The community claims that there is evidence that over 2 million tokens of the total supply are owned by the founder. If this turns out to be true, it would mean that a single person has potential veto power over all governance decisions.
The discussion in question started on the Decred reddit at first. As a part of the community claims, admins asked for evidence and started censoring the posts afterwards. The discussion moved to a second reddit.
Limited adoption
Another of Decred’s drawbacks refers to limited adoption. Compared to other cryptocurrencies, Decred maintains a relatively low rate of adoption and market capitalization. This makes it hard for the project to obtain mainstream acceptance and could make it more vulnerable to potential attacks.
Other obstacles that stand in the way of wider adoption refer to high costs of purchasing a ticket and participating in the network’s governance as well as a relatively high level of inflation when compared to its market competitors.
Too complicated for beginners
The hybrid consensus model may be complicated for new users to comprehend. This could make it more difficult for crypto newcomers to join the project.
On the other hand, Decred is not the only cryptocurrency that uses the hybrid structure and a community-based governance. There are other projects that provide similar features and benefits on the market, which could make it harder for Decred to expand its user base.
Addressing Bitcoin's failings as a pain point
Decred presents a young project with a hybrid consensus method as its main innovation; it has experienced no attacks or severe vulnerabilities so far. However, the hybrid structure that deals with Bitcoin’s shortcomings could be a potential point of vulnerability for Decred.
Let’s lay down a technical analysis of this notion; theoretically speaking, if only a minor percentage of Decred (DCR) are staked and a broad percentage of a given staked pool is controlled by a malicious actor, the hashrate needed to double-spend fails. In simple terms, the more Decred is spent, the fewer Decred coins would be available for staking.
In addition, operating an on-chain governance protocol diminishes the incentive for non-mining nodes since the voting procedure is conducted on-chain with tickets instead of signalling support with your node as in Bitcoin. This situation could possibly amount to fewer nodes in the system and less hash power security.
Inside Decred's technology
As mentioned a few times in this article, Decred’s main upper-hand, when compared to other digital assets on the crypto market, is the hybrid PoW/PoS consensus mechanism. The team behind Decred claims that it was originally created to address several shortcomings of Bitcoin such as mining difficulty and open governance.
Let’s gain more insight into the functioning of the hybrid invention.
Decred mining and the PoW consensus mechanism
The PoW component of the hybrid models functions like this; PoW miners dedicate computational resources to validate transactions on the blockchain network. In relation to the hash function in use, miners facilitate this procedure using Graphics Processing Units (GPUs) or Application-Specific-Integrated Circuits (ASICs). These concepts provide more options for independent miners.
Similar to Bitcoin miners, DCR miners receive rewards in the project’s native cryptocurrency in exchange for validating the network. Each time a block of valid transactions registers to the blockchain, a miner gets minted DCR coins.
In contrast to Bitcoin, Decred mining rewards are split between network participants by a determined system of allocation. In other words, validators receive 60% while 30% goes to stakeholders, and the rest belongs to the Decred treasury.
Such a system of allocation was put into place to incentivise miners and to keep a distinction between the role of mining and that of the other two categories on the network.
Decred’s average block time amounts to roughly 5 minutes with a block reward of about 16 DCR and a reward adjustment approximately every 21 days. The network is able to process 5-10 transactions per second on the main blockchain.
Decred staking and the PoS consensus mechanism
The PoS component of the hybrid model mainly relates to the network’s governance system. Once users stake the DCR coins, they can participate in the project’s governance to confirm the validation of blocks, propose and enforce consensus rules, decide how the Decred treasury will fund initiatives and vote on decisions regarding future updates.
Each DCR coin staked, as part of the governance structure, is time-locked in the protocol. As such, the DCR tokens present a so-called ticket or non-transferable vote on the Decred blockchain. Ticket holders vote to validate the blocks proposed by PoW miners and participate in voting on proposals. Token holders can vote for every ticket they hold.
Let’s talk numbers; typically, it takes 28 days for a ticket to vote but it can take up to 142 under particular circumstances. In other words, the ticket price adjusts dynamically every 144 blocks or 12 hours. Users that want to be stakers can purchase tickets on Decred wallets or the block explorer.
Tokenomics of Decred (DCR)
The DCR token presents the native cryptocurrency of Decred. The Decred coin is primarily used as a digital currency to pay network participants for processing transactions within the Decred ecosystem as well as a governance token that can be staked to vote on proposals.
DCR market cap, total supply and current price
The basics of Decred closely resemble Bitcoin’s structure. DCR has a total supply of 21 million, just like Bitcoin, and roughly half of that amount represents the current circulating supply.
At the time of writing, the Decred (DCR) current value equals $14 with a market cap of $229,020,887 with an average trading volume of $788,599.
DCR price analysis
Let’s start this analysis by checking out the DCR price history. Even though past performance doesn’t serve as an indicator of future successes, it could be useful to know how the coin behaved in the past.
Back in 2016, DCR went live with an opening price of roughly $0.95 and remained at that level for the rest of the year. Decred had a bull run as it achieved the price of $126.81 on 9 January, but soon it experienced a bearish momentum by falling back down to a low of $40.66 on 5 April.
Only 20 days later Decred (DCR) reached a daily high of $139.94 only to fall down to $14.21 in December.
Decred’s most significant rally took place in the first quarter of 2021 due to the boom of the crypto market and a new software update that improved the governance system. When the community voted for the decentralisation of the treasury, Decred reached its maximum price of $250.02. It closed the year at $69.90.
Decred’s bearish trend continued into 2022 due to several market crashes. Following a few fluctuations, the token's price remained under $20.
DCR price prediction
Keep in mind that any price forecast, especially those concerning assets as potentially volatile as crypto assets, can end up being wrong. Additionally, many long-term price predictions are done with the help of algorithms, meaning that they can change momentarily. We are going to lay down a few DCR price predictions conducted by crypto experts.
For example, DigitalCoinPrice conducted a DCR price prediction in which it saw a potential of the DCR coin to reach $23.43 this year before rising to $88.23 in 2025. Another DCR price forecast indicated that the cryptocurrency could close this year at an average price between $15.20 and $15.21 before going up to $27.01 in 2025.
On the other hand, a price prediction conducted by WalletInvestor stated a bearish trend for 2023 which could continue over the next year as well.
How to buy DCR coins?
The whole process of buying Decred coins is simple; you just need a computer or smartphone, photo identification and means of payment. Before starting the process, take a look at crypto exchanges that support Decred (DCR) such as KuCoin, Binance or Uphold.
After choosing a crypto exchange, start with creating an account and going to identity checks. Once you're done with that part, add a supported payment method to make a deposit. Now you can buy Decred.
If you're a crypto novice, check out our guide on buying cryptocurrencies: 'How to buy crypto'.
Is Decred (DCR) a good investment?
Even though the Decred price prediction may be positive and indicates that DCR prices may reach an upward trend, this doesn't present investment advice. You should proceed carefully and do your own research before investing in the cryptocurrency market. Before you invest money, get to know the crypto space and the market itself.
You can start by checking out the latest market trends, news, technical and fundamental analysis, along with the opinion of a qualified professional, prior to making any investment decision. Crypto assets are associated with high risk when it comes to investing so educate yourself properly. Whether DCR is a suitable investment for you depends on your risk tolerance and how much you intend to invest, along with other relevant factors.