Crypto Market Commentary
14 March 2019
Doc's Daily Commentary
Decred (short for Decentralised Credits) is an example of a third generation cryptocurrency which is a response to the perceived limitations with in the Bitcoin and Ethereum networks. Decred aims to be a cryptocurrency with a similar monetary policy to bitcoin (21 Million max supply) whilst incorporating a governance structure to facilitate a functioning development decision making process.
Bitcoin is widely known to have an insular developer community and a complex relationship between nodes, developers and miners. What this result in is a slow and tedious development process which prompts many to criticise Bitcoin as being somewhat of a dinosaur. The result is an often stalemated decision making process on the future of Bitcoin and ultimately slow progress in development. Depending on how far down the maximalist path you are, this may be a feature or a bug.
Decred aims to retain Bitcoin’s core purpose as an alternative “Sound Money” with a fixed maximum supply and a disinflationary monetary policy. At genesis, Decred had an 8% supply pre-mine, with 4% of this paid for at a rate of $0.50/DCR by the founding team (Company 0) and the other 4% distributed via airdrop to the community to promote preliminary adoption. The team behind Decred has an impressive resume with most having a history as early Bitcoin developers who grew tired of the deadlocked decision making process and sought a better solution. The community Airdrop was intended to ensure that the founders did not have an excessive stake in the project.
Hybrid Proof of work / proof of stake consensus
Where Decred sets itself apart as a cryptocurrency is the implementation of a hybrid Proof-of-Work mining algorithm forked from Bitcoin and a Proof-of-stake governance structure. This system aims to alleviate Decred of slow development cycles and centralisation of decision making. The PoS nodes can override the consensus of miners and are selected on a randomized sequence to validate blocks. Furthermore, PoS nodes can vote on and propose development pathways. In theory, this provides checks and balances for investors in the Decred cryptocurrency.
This system aims to resolve the core problems with pure PoW and pure PoS cryptocurrencies whilst leveraging the strengths of both.
Challenges and Risks
- Decred technologically and objectively superior to Bitcoin in almost every way. However, Bitcoin maintains its position due to network effects, reputation and in some way, its inability to change. For Decred to emerge as a useful currency, it must attain a competitive edge in network effects, reputation and use cases in its own right or emerge in response to the demise of Bitcoin. Both may be low probability events, although the rewards are significant.
- The price for DCR tickets to allow for staking are not cheap (110DCR typical). Whilst this is a strength for security and in reducing DCR velocity, it may be a barrier to entry for the everyday person to engage in staking and governance voting.
- Decred maintains Bitcoin’s dis-inflationary and fixed supply monetary policy with what could be described as a fair initial distribution. It is unlikely to be seen as a security, more likely to be a commodity based currency in the eyes of regulators.
- Decred utilises a 10% block reward into the Treasury which enables self-sufficiency of development into the future. This provides significantly enhanced survivability. Furthermore, the opportunities for development and growth are limited only to the proposals and votes cast by the community. Decred may implement privacy, smart contracts, really whatever is voted in by the community.
- PoS requires purchasing a “ticket” which is a relatively large quantity of DCR, currently sitting at around 109DCR per ticket. These tickets must be locked for a period 28days which significantly slows the velocity of DCR and improves price stability and maintenance of value.
- Decred’s hybrid consensus does an excellent job of bringing forwards an alternative governance system to rival that seen in Bitcoin. It is genuinely superior to LTC, Bitcoin Cash and most “Bitcoin” clones which do not bring an alternative governance structure – arguable the most important diffractor for any cryptocurrency competing with Bitcoin
- The hybrid PoW and PoS acts to make Decred a highly secure network with the mechanism to implement a 51% or double spend attack requiring a significant stake in both the mining and staking pool. As such, the financial commitment and difficulty generally negates the risk of these attack vectors.
Decred is an extremely interesting and important project in the cryptocurrency space. In my eyes, it is arguable the primary hedge against the risk of Bitcoin collapsing under its own slow development and deadlocked governance system. The likes of Bitcoin Cash and Litecoin offer little in comparison to the governance of Decred in the event Bitcoin fails and similarly offer little in comparison to Bitcoin if it succeeds. The impressive security and sustainability mechanisms of Decred makes for a project which we can reasonably expect to be around for a while yet.
Human governance may be the Achilles heel of Bitcoin. Decred is a strong example of a potential solution and may be the strongest candidate as a hedge against this existential risk.
An Update Regarding Our Portfolio
We are diligently working on providing you with our new RSC Managed Portfolio (V3.01) in the coming weeks. We will be posting iterative updates in the discord.
We intend on this portfolio being balanced between the Three Pillars of the Token Economy & Interchain:
Crypto, STOs, and DeFi projects.
We will also make a concerted effort to draw from community involvement and make this portfolio community driven.
Thank you for your patience.
Here’s a sneak peek at the new portfolio:
Here’s our past portfolios for reference:
RSC Managed Portfolio (V2)
RSC Unmanaged Altcoin Portfolio (V2)
RSC Managed Portfolio (V1)