What Is Decred?

Decred is a cryptocurrency based on an early Bitcoin blockchain fork. It is designed "to develop technology for the public benefit, with a primary focus on cryptocurrency technology." Decred also intends to decentralize its governance by allowing the community to vote for changes rather than only a team of developers who decide which direction a cryptocurrency can take.

Learn more about Decred, its purpose, and how it differs from other cryptocurrenciꦿes.

History of Decred

Cryptocurrency was gaining in popularity and traction after Bitcoin's release in 2009. Creating coins through cryptocurrency mining became popular with non-developers, enterprises, and interested investors. Developers began to notice that mining was becoming more centralized and began to worry about cryptocurrency not remaining decentralized as intended. As a result, many were trying to find ways to introduce and popularize new cryptocurrencies which circumvented the looming centralization.

Decred started in 2013 in a Bitcointalk thread about creating an altcoin. Shortly after the discussion, a whitepaper describing a new cryptocurrency called Memcoin2 was published. It was picked up by a company named Company 0 and launched in 2016 as Decred—a proof-of-work and proof-of-stake hybrid blockchain governed by the community via an on-chain voting process.

Decred Evolution

Decred has evolved since its introduction. In 2017, the blockchain was adapted to allow for atomic swaps—the ability for cryptocurrencies from different blockchains to be s🍎wapped or traded by users. This was significant because it allowed cryptocurrency users to exchange tokens without using a third-party exchange.

In 2019, Decred implemented the Lightning Network on its mainnet to add smart contracts and off-chain transactions to its arsenal of blockchain tools. The Lightning Network then allowed Decred developers to create the Decred Decentralized Exchange (DEX), which allowed Decrediton—Decred's wallet—to become the interface that allowed users to exchange tokens without a trusted third party.

In October 2020, The Decred DEX launched, allowing for the first trades between DCR and BTC (bitcoin) without an exchange facilitating the trade.

Due to a centralization issue where a mining cartel had cornered a large portion of the Decred network, the community switched its PoW algorithm to a different one that supported GPU mining in September 2023. The change appeared to have kicked the offending miners off the blockchain, as its hashrate dropped from about 55 peta hashes per second (15 zeros) to between zero and 46 tera hashes per second (12 zeros).

The drop in hashrate was attributed by some to the fact that the new algorithm didn't allow pooling, something the developers appear to have fixed. The switch also eliminated DCR mining on🥀 ASICs—at least until 🥂someone develops a compatible one.

How Is Decred Different From Bitcoin?

While Decred is a Bitcoin fork, it is significantly d♍ifferent in many aspects. Some of the key differences include:

• Community involvement
• Community governance
• A hybrid of two consensus algorithms
• A different 澳洲幸运5官方开奖结果体彩网:reward system

Community Involvement

Developers behind Decred believe that cryptocurrency is supposed to be fully decentralized, 🉐so anyone interested or who has a stake ⛎should be able to influence how it is developed. Therefore, users are encouraged to propose changes and become involved in the development in whatever way they can contribute.

Community Governance

To this end, DCR holders can stake their coins to acquire tickets that allow them to vote on changes to the blockchain, the Decred decentralized autonomous organization (DAO) budget, consensus rules, and block approvals. This approach ensures that no entity controls the cryptocurrency unless it is involved—this is commonly called a 澳洲幸运5官方开奖结果体彩网:proof-of-activity consensus.

Hybrid of Mechanisms

One of the most notable attributes of Decred is that it uses proof-of-work and proof-of-stake consensus. Decred's PoW consensus works almost the same as Bitcoin's—miners process network transactions to open new blocks for the blockchain. The miner receives the transaction fees and the block reward when a block is opened.

Coin holders can stake their coins to become voters. Voters—called stakeholders—can purchase tickets to cast votes for block approval or other governance issues. Multiple tickets can be bought and used. Tickets are mined into a block at random in increments of 20 tickets. The tickets only last until the voting period ends. To vote, stakeholders must keep their wallets online 24/7 or join a Voting Service Provider (VSP), which casts votes on their behalf.

Reward System

Because Decred is an incentive-based cryptocurrency that uses proof for consensus, it has a reward system similar to that of Bitcoin and Ethereum. The key difference for Decred is that because it uses two consensus mechanisms, it rewards network participants differently. Miners, whose job it is to process transactions, receive 40.34% of the block reward. Voters (those with staked DCR) receive 49.63% of the reward, and the remaining 10.03% is sent to the project's treasury fund.

Goals of Decred

Decred is innovative in that it attempts to improve upon other cryptocurrenci🔯es and blockchains by harnessing t🧜he power of its community of users rather than relying on only a few insiders to enhance the project.

The blockchain's overarching goals are to ensure the chain and users remain secure. Adaptability is essential for the blockchain to stay relevant, so developers created a novel solution. Decred has a built-in system called the Politeia Proposal System that allows the community to submit and approve proposals for blockchain improvements.

The Decred design solves the tragedy of the commons, in which self-interest becomes prevalent in any common enterprise no matter the design and intent. To keep the project from falling into this trap, 10% of every block reward goes into the Project Treasury for funding; no other sources of financing are accepted. This ensures that no parties can influence the blockchain's direction through funding. The community then votes through Politeia to implement or deny changes in a "Reddit-style up/down voting system."

The Bottom Line

Decred is a blockchain project that 🦂aims to be a community-governed payment method, contrasting the way other blockchains and cryptocurrencies are go♎verned. It was created in 2013 and, as of December 2024, continues to be updated and developed.

The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read our for more info. As of the date this article was written, the author owns BTC, ETH, ADA, and XRP.