Who Should Hold Power? Decred Governance And What It Means For Investors

As often as we hear blockchain catch phrases like “autonomous”, “decentralized”, and “no single point of failure”, the power holders are the ones who make the decisions. Even with a decentralized ledger, power can be centralized to a small group of decision makers. Jake Yocom-Piatt, who founded Decred sees it as a solution that puts voting power into the hands of its stakeholders.

To really understand Decred, it all goes back to Bitcoin.

“In Bitcoin, the miners hold all the power. Its governance is off-chain and ad hoc. We felt that as a stakeholder, you should have input on what happens. If you’re holding a cryptocurrency and miners are making decisions that aren’t good for you that’s unhealthy. We wanted to balance the decision-making power between miners and holders,” Yocom-Piatt said.

Decred is a cryptocurrency (DCR) founded in February 2016 in response to power struggles in Bitcoin. The project, which includes many early Bitcoin developers, seeks to change the incentives around who holds decision-making ability. Decentralized cryptocurrencies are supposed to remove a single entity from controlling the supply of money, and Decred is working to build a wide and populous network of voters. “Think of it as a company boardroom with thousands of individuals casting their vote across the internet,” explained Yocom-Piatt at a presentation in New York.

Chris Burniske, Partner at Placeholder, a venture firm specializing in cryptoassets, explained why his firm invested in Decred,

“In 2013, the Company 0 team built BTCSuite, the most widely used alternative to Bitcoin Core. That same team then moved on from Bitcoin to create Decred, a cryptocurrency they felt improved upon Bitcoin’s biggest challenges. So now you have a Bitcoin-grade developer team, a hyper-secure and fork-resistant design, and a treasury that’s likely capable of supporting the community for decades to come.”

Marco Peereboom, Systems Development Lead of Decred said,

“We wrote a full node Bitcoin implementation in Go, that wasn’t received as we’d hoped it would be. We weren’t there to have a power struggle, we really wanted to build a community and that set us on the path to build something where governance is center and avoids that problem altogether.”

Voting As An Investor

While most cryptocurrency investors aren’t used to having decision-making power, anyone holding roughly 100 DCR (approximately $1,700 USD at the time of publication) can enter a lottery to stake their coins in exchange for voting rights. Once a ticket is selected to vote, that investor can vote on decisions both large and small, from hard-forking the blockchain or funding a small project.

To do this, Decred hybridized its consensus mechanism.

“We wanted to change incentives around decision-making. By using both Proof of Work and Proof of Stake, anyone holding its coin, DCR can participate in voting decisions rather than only the miners with the best equipment. We wanted to engage stakeholders rather than having core members of the Decred team like myself and Marco making the decisions.” said Yocom-Piatt.

In October 2018, Decred put its entire treasury, worth more than $20 million into an off-chain voting structure called Politeia.

Yocom-Piatt said,

“Politeia is the off-chain component of Decred’s governance. This allows stakeholders to make project-level decisions with as much transparency as possible in a referendum-based governance system.”

Once a project is approved, funds come from a centrally managed treasury, and the release of funds is done on-chain.

When asked why a lottery for staking was important, Yocom-Piatt explained,

“A rolling lottery or sortition acts as a decentralization mechanism. While Proof of Work is a rolling lottery on hashpower, our model adds an opt-in lottery on coins staked for decision making. By sacrificing short-term liquidity, you gain the ability to participate in the decision making process and earn a reward.”

“If anything was going to serve as an alternative digital store of value to Bitcoin, I think it would be Decred,” said Burniske. Decred seeks to model a new form of blockchain governance and its highly transparent process will help show whether or not this model is a success.

 

Hayden P.

A blockchain and cryptocurrency enthusiast

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