Understanding the Value of the Decred (DCR) System

By now most people understand the concept of a distributed ledger and understand software is continually updated to support that process for all cryptocurrencies like Bitcoin (BTC), Etherium (ETH) and Decred (DCR). If you would like to brush up that basic understanding start with a one page primer at bitcoin.org before continuing to read.

Many people who have followed Bitcoin (BTC) for some time have seen the potential for the damaging impact of failed decision making in the development community. If you are not familiar with this, perhapsreading from one of the Bitcoin (BTC) developers Mike Hearn (who has one of the more extreme views) will help you understand how negative a failed decision making process and a lack of real scalable development support is.

Briefly Mike's explanations why Bitcoin network has failed is because the community has failed. What was meant to be a new, decentralized form of money that lacked “systemically important institutions” and “too big to fail” has become something even worse: a system completely controlled by just a handful of people. Worse still, the network is on the brink of technical collapse. The mechanisms that should have prevented this outcome have broken down, and as a result there’s no longer much reason to think Bitcoin can actually be better than the existing financial system.
How is Decred (DCR) different?

Unlike other currencies, Decred has a transparent process of rewarding developers for their contribution built into the mining process. When blocks rewards are granted, developers receive 10%, and those mining receive 90%. As the value scales, so does the development payout, ensuring resources are appropriately scaled.

Secondly, and equally as important, the payout to mining (unlike other currencies) is split between "Proof of Work" and "Proof of Stake" mining. Proof of Work (PoW) mining is the typical mining which processes transactions and ensures the security of the distributed ledger.

Proof of Stake (PoS) is a new addition which gives a voice to those who use/hold the currency Decred (DCR). Each time a block was found, 5 Decred (DCR) users who participating in voting (PoS-mining) are selected at random to cast a vote and they receive 30% of the block reward for doing so (6% each). To buy a ticket for voting they should lock their coins (current PoS ticket price) for quite long time (in average 28 days, but up to 5 months, when they cannot use or spend amount locked for PoS tickets).

In addition to the reward, these users also have the option of voting Yes or No if there is a decision to be made (accept software change, etc...). These PoS miners vote always for a previous block, and if it receive 3 / 5 "No" votes, nobody except PoS-miners receive reward and block will be removed from blockchain.

So again, how is Decred (DCR) different?

Bitcoin (BTC) first brought us a distributed ledger.

Decred (DCR) also has a distributed ledger, but additionally has brought us:

A distributed system of approving/denying changes and PoW mining rewards through PoS mining.

A distributed system of rewarding the development team to ensure resources are available to further the project decision making system. This budget is using to pay community members for the development of new resources and features for Decred Software. See the list of "Requests for Proposals" and payments on official forum.

Decred PoS-PoW Hybrid System Explained

Okay, Slow down for a moment..
Let's get to understand what's PoW and PoS, and then we will see how Decred uses it.

But before that, lets talk about the hashing algorithm that Decred uses, Blake-256. As per the highly educated experts and everyone who knows that they are talking about, this type of algorithm is less vulnerable to the security issues facing the Merkle-Damgård construction-based hashing algorithms (such as SHA-256, the hashing algorithm of Bitcoin). So, when all the professors are saying something.. we can accept it.

Now, PoW and PoS!! As many of you know, a lot of cryptocurrencies use either pure PoW or pure PoS (check out the video below for a clear explanation of the two).

The challenges with using pure PoW are that, over time, miners have an outsized influence over the blocks that get mined, which can be used to gain consensus and to censor transactions. The main challenge with pure PoS is that early holders of the currency end up owning everything by merit of passive income on their coins.

Decred will create a hybrid of the two systems. This way, a balance between miners and currency holders (voters) can be achieved, which will create system of community-based governance.
The decisions around Decred will be made by both insiders and outsiders. The community will include bottom-up decision making through the Decred Assembly. Community members who make non-financial contributions to the project will thus have a voice as well.

The last important reason why Decred may become big is related to its development. Decred is built in Go, a future-oriented programming language developed by Google. Decred welcomes and empowers participants who want to build new and improve on existing features. Development is open and self-funded, to ensure long-term development sustainability.

Furthermore, the core-development team has expert knowledge and experience with cryptocurrencies, since it has been involved in the development of bitcoin and btcsuite, and trust me I have been talking to many of them on a regular basis... And they know their shit.