Max Bronstein, the Business Development Manager at Dharma Labs, a San Francisco-based developer of a peer-to-peer (P2P) protocol for generic tokenized debt agreements, has published a blog post in which he analyzed the Decred (DCR) project’s hybrid proof-of-work (PoW) and proof-of-stake (PoS) consensus model.
1/ I just published ‘Decred Governance: An Iterative Approach’ which includes analysis on the @decredproject‘s PoW/PoS consensus, upcoming DAO-controlled treasury, Politeia, skin-in-the-game decision making, and much more.https://t.co/8OC4d0aa5Z
— Max Bronstein (@max_bronstein) May 28, 2019
“Creating a Level Playing Field Between Every Stakeholder”
Launched as an alternative to Bitcoin (BTC), the Decred cryptocurrency platform is a community-driven project which focuses on establishing decentralized governance. According to Bronstein, the most notable part of the Decred “experiment” is the “attempt to create a more level playing field between every stakeholder in a crypto network.”
These stakeholders, or network participants, include DCR cryptocurrency token holders, the platform’s developers, and miners, Bronstein noted. He also argued that all stakeholders must be able to must be able to “adapt to changing conditions.”
Hybridized PoW/PoS Consensus Protocol
Per the Nasdaq contributor, the core of Decred’s governance protocol is its hybridized PoW/PoS consensus algorithm. It requires that both DCR miners and stakeholders “lock up capital towards the network’s benefit”, Bronstein explained.
He also mentioned:
[When both miners and token holders lock up their funds,] it [becomes] more expensive to conduct a 51% attack and gives stakeholders a stronger voice in decision making.
The avid writer further noted that Decred’s governance system is “all based on tickets, which can only be accessed by time-locking DCR into Proof of Stake.” He added that “all decisions on the network are tallied in tickets” as these are similar to the “atomic unit of account in Decred governance.”
Potentially “One of the First DAOs to Manage Hundreds of Millions in Capital”
Ticket holders on Decred may vote on suggested modifications to network consensus rules and on decisions related to the platform’s treasury management, Bronstein wrote. Acknowledging that the $17.5 million DCR network treasury is “centrally managed”, Bronstein also revealed the cryptocurrency’s creators have been developing a DAE to decentralize the network’s asset management process.
He added that the Decred community believes creating a decentralized autonomous organization (DAO)-managed treasury is vital to the cryptocurrency’s long-term success. An autonomous treasury would “ensure outside interests” are not able to exercise control over Decred’s ongoing development, Bronstein wrote. He also revealed that it’s likely the DAE will be “one of the first DAOs to manage hundreds of millions in capital.”
Voter Turnout Relatively High Compared to Competing Networks
In addition to establishing a hybridized governance model, the Decred project is being supported strongly by community members. This, as Bronstein noted that “voter turnout has been considerably higher relative to networks with competing governance implementations.” Significantly, more than 50% of ticket holders “cast their vote in all of the network’s consensus changes and the average Politeia turnout is above 30%”, Bronstein mentioned.
According to the cryptocurrency investor:
Key to the effectiveness of Decred’s governance system is the fact that stakeholders are required to lock up skin-in-the-game in order to participate in decision making. Doing so aligns everyone in the best interest of the network and makes attacks prohibitively expensive.
Given these features, there’s no surprise that Decred is quickly developing a thriving two sided network effect. Stakeholders are actively participating in PoS and governance decisions, while a large economy of ASIC miners has emerged to secure the network.