Decred

Decred (/ˈdi:ˈkred/, /dɪˈkred/, dee-cred) is an open-source, community-directed, and self-funding Layer 1 cryptocurrency, similar to Bitcoin. It was designed to address Bitcoin's perceived shortcomings, including inefficient governance and lack of development funding, by integrating a community-driven governance model directly into its blockchain^[7]^[8]. Decred's core principles are security, privacy, and scalability, with a focus on providing stakeholders with tools to enhance their financial sovereignty^[9].

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Ecosystem map

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History

The conceptual foundation for Decred originated in 2013 on the BitcoinTalk forums with a cryptocurrency concept called "Memcoin2," introduced by users 'tacotime' (who later created Monero) and '_ingsoc'^[7]. In 2014, a developer entity known as Company 0 began formal development on the project, which was built on Bitcoin's original code^[10].

Decred was officially launched in February 2016 by some of the same Bitcoin developers that engineered btcsuite, an alternative full-node Bitcoin implementation written in the Go (golang) programming language^[11]^[4].

Key milestones in its development include:

2017: Decred implemented atomic swaps, enabling users to exchange tokens with other blockchains directly without requiring a centralized exchange^[10]^[5].
2018: The project implemented Politeia, its off-chain proposal and voting system for governance decisions^[10].
2019: The Lightning Network was implemented on the Decred mainnet, which also enabled support for smart contracts and off-chain transactions^[10].
2020: DCRDEX, Decred's native decentralized exchange, was officially launched^[7].

Consensus Mechanism

Decred is designed with a built-in governance system to resolve centralization and governance conflicts present within the Bitcoin system and address the 'tragedy of the commons' that can occur within decentralized cryptocurrencies^[1].

Decred's governance system is engineered with a hybridized Proof-of-Work (PoW) and Proof-of-Stake (PoS) consensus protocol^[2]. In this model, PoW miners are responsible for validating transactions and creating new blocks, while PoS stakeholders validate the work of miners and vote on governance proposals. This dual-layer system is designed to be significantly more difficult to conduct a 51% attack against than pure PoW or PoS chains^[8].

Block Reward Distribution

The rewards for each new block are split among three groups to align incentives across the network:

89% to Proof-of-Stake voters (ticket holders)
1% to Proof-of-Work miners
10% to the Decred Treasury This distribution model ensures that stakeholders who secure the network and participate in governance receive the vast majority of rewards^[12].

Hash Function

Decred uses BLAKE-256 as its hash function. BLAKE-256 is based around a HAIFA construction that incorporates a variation of the ChaCha stream cipher by Daniel J. Bernstein. The BLAKE-256 hashing function has high-performance ratings on x86-64 microarchitecture^[3].

Governance

Decred operates as a Decentralized Autonomous Organization (DAO) where coinholders who stake their DCR have direct voting rights on network changes, development proposals, and treasury spending^[8]. Influence is acquired by having "skin in the game" through staking^[9].

Politeia

Politeia is Decred's off-chain proposal and voting system. It allows stakeholders to publicly propose, discuss, and vote on project-related initiatives, including treasury fund allocations, protocol upgrades, and policy changes. All proposals are time-anchored and censorship-resistant to ensure a transparent governance process^[8]^[10]. A Decred Constitution sets out guiding principles for the project, which can also be amended via Politeia proposals^[12].

Decred Treasury

The Decred Treasury is a self-funding, decentralized entity that receives 10% of every block reward. This model creates a sustainable source of funding for project development, marketing, and other initiatives as approved by stakeholder votes, eliminating reliance on external capital^[9]^[8].

Key Features and Ecosystem

DCRDEX

DCRDEX is a native, peer-to-peer decentralized exchange (DEX) built using atomic-swap technology. It is funded by the Decred DAO and features no trading fees or Know Your Customer (KYC) requirements, facilitating trustless trading across different blockchains^[8]^[13].

Privacy

Decred incorporates optional, opt-in privacy through CoinShuffle++ (CSPP), a trustless coin mixing protocol that enhances user anonymity. The technology uses post-quantum secure cryptography, and the total coin supply remains auditable to prevent hidden inflation^[8]^[12].

Scalability and Lightning Network

Decred has integrated the Lightning Network for Layer 2 scaling, which enables faster and cheaper payments. An application built on Decred's Lightning Network is Bison Relay, a secure communication platform^[8].

Tokenomics

Decred Token (DCR)

Token Utility

Decred's native cryptocurrency, DCR to receive tickets, which are non-tradable assets used to participate in the Proof-of-Stake (PoS) consensus mechanism and vote on governance proposals^[6]^[10].

Supply and Emission

Like Bitcoin, Decred has a maximum supply of 21 million DCR. The block reward, which is the rate at which new DCR are created, reduces by 1% approximately every 21 days^[8].

Initial Distribution

At launch, 8% of the total 21 million DCR supply (1.68 million DCR) was premined and distributed as follows:

50% was allocated to the founding organization, Company 0 (36%), and the Decred development team (14%). Company 0 airdropped its DCR for free over many years, as a way to decentralize it's holdings and bootstrap the network; while the development team’s allocation was locked for 12 months.
50% was distributed via an airdrop to eligible participants, with a cap of 5,000 maximum participants. Preference was given to contributors to the project. The remaining supply is minted through mining rewards^[6].