Decred recently announced a proposal system that allows users to participate in governance, a major milestone in the projects road map. Allowing stakeholders to vote on changes ensures interested parties have representation in major decisions that will affect the cryptocurrency.
“The ability to implement ongoing user-approved hard fork changes will give Decred the ability to continuously adapt and evolve,” states the organizer of the Decred project Jake Yocom-Piatt. “In terms of relative difficulty, this hard fork voting is the highest hurdle to cross since it deals with consensus code, which is notoriously brittle and challenging to write.”
“Bitcoin demonstrated that it is possible to disintermediate the storage and transmission of value, an area that is the mainstay of the banking industry. Decred will demonstrate that it is possible to disintermediate the process of political decision-making for a cryptocurrency.”
- Jake Yocom-Piatt
Jake Yocom-Piatt first announced Decred late in 2015, after spending more than 2.5 years financing and overseeing the development of an alternative full-node Bitcoin implementation, btcsuite.
Btcsuite is a fully functional alternative full node to Bitcoin Core’s reference implementation, like bcoin, libbitcoin, and bitcoinj. It is a widely respected Bitcoin library, and has been used by several high profile projects including, but not limited to, the Lightning Network, BitGo, Ethereum, and Factom.
Bitcoin had “several persistent and severe problem areas,” Yocom-Piatt said when announcing Decred, including project governance, funding development and miners having too much power. “Having rebuilt the Bitcoin infrastructure from the ground up on my own dime, I have a rather unique perspective on Bitcoin despite being late to the game.”
Yocom-Piatt subsequently turned btcsuite into Decred, and quickly implemented a hybridized governance system, a combination of the Proof of Work (PoW) system found in Bitcoin and Proof of Stake (PoS).
PoS adds an extra layer of decentralization to Decred and allows users to vote on suggested network changes. Users can supply tokens rather than using computational power to participate in votes for protocol changes. The fundamental change was based on MC2 and proof-of-activity (PoA) by Iddo Bentov, Charles Lee, Alex Mizrahi and Meni Rosenfeld.
To become a voter, users must “stake,” or purchase voting rights in the form of “tickets,” at an average cost of 50 Decred tokens (DCR) per ticket, although this price fluctuates. Staked coins can be locked up for a period of up to 6 months, ”skin in the game,” Project Manager Marco Peereboom explains.
“The proposal system is a signaling mechanism versus a rule-change mechanism. So the hard fork voting is meant to enforce new consensus rules whereas the proposal system is going to be more of a signaling to indicate to the development organization that the community wants a particular feature implemented.”
- Marco Peereboom
The network token, DCR, was introduced without having fundraised using the now highly popular Initial Coin Offering (ICO) model. The first 840,000 Decred native tokens, DCR, were “airdropped” to 3,244 recipients. The airdrop simply distributed tokens to participants who had registered.
There are currently 5.1 million coins in circulation out of a total 21 million possible coins in existence. The block subsidy works the same way as Bitcoin in the sense that newly minted coins are rewarded every few blocks. The difference is, rather than having 100% of the block rewards go to the miners, 60% go to the Proof of Work miners, 30% go to the Proof of Stake holders, and 10% go to the development organization (DHG) which will ultimately become a DAO.
The concept of hybridizing PoW and PoS consensus mechanisms creates a stratification of consensus between PoW miners and PoS miners. PoW miners are needed to generate the blocks that build the blockchain and PoS miners are needed to ensure that PoW miners create blocks that are consistent with the desires of the users of the currency.
“In order to create a sustainable system of governance, we have created a project Constitution and extended the notion of consensus hybridization to apply more generally as one of several layers in a stratified consensus system. This stratification allows various groups of stakeholders to have representation at various consensus layers.“
- Jake Yocom-Piatt
If the maximum block size issue were raised in the context of a hybridized PoW/PoS system, PoS voters can force PoW miners to support the agreed on changes. In the context of contentious issues like maximum block size changes, this gives a clear resolution to the dispute via the PoS voters.
The PoS holders can force consensus changes by invalidating PoW blocks that go against the new consensus rules, removing the incentive for PoW miners to behave without regard for PoS holders.
“A very rough analogy here would be that PoW is to PoS as banks are to their depositors, so what this hybridization of PoW and PoS has created is analogous to a bank that actually acts according to the will of its depositors,” Yocom-Piatt explains. “In my opinion, this substantially improves on the system we currently have in Bitcoin, where holders of bitcoin have no say in the consensus process.”
This ability to change the protocol on an ongoing basis with stakeholder support is key to the decentralized governance that was proposed as part of the official Decred launch in February 2016.
While attempting to achieve true decentralization, the core developers are trying to remove themselves from the project, transferring decision-making power from the current top-down model to a bottom-up model driven by the community that their protocol supports.
“Instead of knocking out the easier more visible tasks first, we have opted to clear the most difficult hurdle first and move to unlock what we see as the most valuable part of Decred.”
A recent vote, that had just been passed, marked a significant moment in Decred’s history. Upon voting on what would have been a highly controversial change in Bitcoin, the economic community passed a PoS algorithm change which effectively lowered the fee subsidy for its miners.
The current Decred lead developer, Dave Collins, told Brave New Coin that the algorithm drives certain behaviors, “one of those behaviors is that people compete to buy tickets….The fees go to the miners. The PoW miners are incentivized to keep the current algorithm whereas the new algorithm makes the overall process for purchasing tickets and dealing with that hybrid system much nicer. It also comes at the expense of PoW miners where they get fewer fees. There’s a conflict of interest where the PoW miners want to keep the current rules while the PoS and rest of the ecosystem want to go to the new rules.”
“In Bitcoin, there’s really no good way to solve that,” Collins states. “In Decred, we created a vote, the vote passed, it’ll activate in about a month, and we’re in the lock-in period. It’s monumental because it was a controversial change that went through and it’ll pass without any fuss.”
The voting system is part of an overarching goal to become a stakeholder directed Decentralized Autonomous Organisation (DAO), as outlined in the 2017 Roadmap. While other projects have attempted to create a DAO via a monolithic smart contract, Decred will build a DAO in several steps, ensuring each component works independently before putting it into production.
“Decentralizing the larger-scale decision making is the first step of several towards making Decred into a robust and fully operational decentralized autonomous organization (‘DAO’).”
- Jake Yocom-Piatt
The next step in achieving this goal is the Public proposal system, an off-chain system where Decred users can submit proposals for future work to be performed by the development organization, Decred Holdings Group (DHG). Developers will then start work on decentralizing control of DHG funds, by creating a system based on stakeholder voting.
The proposal system is comprised of two component products: dcrtime, a timestamping feature, and an off-chain “anchored” proposal data repository. The system draws on the work of Peter Todd’s opentimestamps, which allows a nearly unlimited number of hashes to be timestamped on a blockchain.
Proposals and their anchors, or pointers, are stored on a separate off-chain database. Anchors are then episodically committed to the blockchain. “The timestamping feature allows users to track how a proposal was submitted, when, what files were added, etc.” Peereboom explains. “We want to make sure that people can see every proposal being made, including spammy ones, to ensure we’re not silencing anybody.”
The downside to having an off-chain data store is giving up a core advantage of blockchain solutions: censorship-resistance. Off-blockchain data storage is typically done in centralized servers, which can fail or be shut down by a government. “We use a variety of strategies to deal with failures,” Peereboom explains. “Everything that can be made redundant is and we have people on staff that monitor this.”
Dave Collins states that the worst case scenario would be an inaccessible front end until the situation is resolved, “The blockchain will absolutely not depend on the off-chain system in order to function in any way, so regardless of anything that might happen on the proposal system side, the core network will continue operating as normal.”
“The anchoring process involves immutably adding the details and results of the user-based decisions to the public ledger in a compact and cryptographically verifiable fashion, so there are no privileged servers. Due to this, it will be possible for any stakeholders to independently and trustlessly prove those results regardless of the status of any ‘official’ servers there may or may not be.”
- Dave Collins