DCR(Decred): Adopting Hybrid PoW+PoS Consensus Mechanisms

2022-08-22 15:31:42

Like Bitcoin, DCR (Decred’s native token) also comes with a total supply of 21 million, which seems like it shares some connection with Bitcoin, and surely it does. Decred was built to meet the demand for improving Bitcoin. Moreover, the core Decred team also participated in the development of Bitcoin. With a strong technical background, Decred’s developers created a version of the client that differs from the Bitcoin core.

 

We all know that Bitcoin uses PoW, but there are also drawbacks associated with using PoW and PoW alone. This is the case because according to the consensus rules of PoW, the network grants the bookkeeping right and validation right to hashrate providers, while most BTC holders are not hashrate owners. This means that the system of one vote per CPU fails to achieve decentralization. Plus, under PoW, nodes could be easily controlled by major mining farms, which creates dominance. What’s more, developer teams of PoW cryptocurrencies also face the problem of centralization. For instance, the Core team almost monopolized the software development of Bitcoin.

 

The root of the problems facing Bitcoin mainly lies in governance. This includes concerns such as who is responsible for the project, what rights they enjoy, and whether they are recognized by community users.

 

Initially, several Bitcoin Core developers noticed that Bitcoin was subject to centralization in terms of both development (the Core team’s monopoly) and issuance (concentrated hashrates). In addition, the developers also noted that Bitcoin needs sound management and upgrading mechanisms. In response, they developed Decred.

 

Decred combined PoW with PoS to make sure that all decisions are jointly taken by the community, instead of a few developers or early investors. Moreover, its token incentives encourage developers to make more high-quality contributions to the growth of the community.

 

The fundamental tech of Decred

Decred uses a hybrid PoW/PoS consensus mechanism, which combines features of the two most popular consensus models. It aims to strike a balance between PoW miners and PoS voters to create a more robust notion of consensus. On Decred, miners use proof-of-work (PoW) to mine new blocks; however, they receive only 10% of the reward after a successful mining operation.

 

The voting organization, on the other hand, uses proof-of-stake (PoS). It allows users to participate in the voting system, and voters employing the PoS consensus receive 80% of the block reward.

 

The remaining 10% of block rewards are stored in the Decred Treasury. Decred hosts frequent Politeia discussions and votes on how the funds from the Decred Treasury should be spent.

 

In Decred’s hybrid PoW/PoS consensus, PoS voting is a form of PoS security, but the way Decred integrates this as a complement to PoW mining gives it a distinctive set of roles and characteristics.

 

Decred’s PoW consensus works virtually the same way as Bitcoin’s, and the innovation lies in the fact that for a block to be valid, it has to be signed by at least 3 of the 5 tickets that are called to vote in that block. Any DCR holder can participate in the selection, but they’ll need to “lock” a certain amount of DCR as the guarantee. This encourages the selected holders (tickets called) to make decisions that are in the best interest of Decred. In addition to confirming the validity of blocks, tickets have a more important purpose: they allow users to change the consensus mechanism through voting.

 

PoS voting is at the heart of Decred’s governance. One of the main goals of the protocol is to ensure that all DCR holders have the same amount of decision-making power. By introducing ticket-holder voting, Decred makes sure that people with enough DCR will have the opportunity to participate in votes on the project/token’s future and operations. Decred also created a dedicated voting platform called Politeia, which allows users to participate in votes, submit proposals, and start discussions.

 

In short, Decred uses a hybrid PoW/PoS consensus mechanism and allocates block rewards more reasonably, making power more decentralized.

 

Decred’s features

Secure

Decred Coin employs an innovative hybrid PoW/PoS system that features layered security strategies and optimized incentives. This system yields the best of both worlds, making it much more expensive to attack than pure PoW or pure PoS.

 

Adaptable

Decred’s governance system empowers its community with direct rights to make consensus changes and manage the project’s future decisions. This system makes Decred adaptable, allowing it to evolve according to the will of the stakeholders, resist forks, and incorporate new technologies.

 

It is well known that in the Bitcoin network, core developers, miners, and the community (mainly BTC holders) are all required to cast their votes in the event of a major update, and it would be difficult for them to reach a consensus if any one of the three parties is not happy with the decision. In reality, it’s hard to keep all three of them satisfied, and a hard fork (e.g. BCH) could easily occur. In the Decred network, on the other hand, major updates are primarily decided through community voting. In other words, they are decided by DCR holders, which protects most stakeholders.

 

Sustainable

Decred uses 10% of each block reward as its community fund and employs a flexible contractor model that allows contributors to receive compensation for their work, which makes it a sustainable and self-funded DAO. Once a virtuous circle has been created, DCR can grow on its own without external funds because the development foundation will continue to make automatic contributions. In addition, the funds of the foundation are controlled by voters under the PoS rules.

 

To sum up, Decred uses a hybrid PoW/PoS consensus mechanism, which combines features of the two most popular consensus models. The cryptocurrency uses proof-of-work (PoW) to mine new blocks on the blockchain; however, miners receive only 60% of the reward after a successful mining operation.

 

 [More Information]

Website: https://decred.org/

Whitepaper: https://docs.decred.org/

Block explorer: https://dcrdata.decred.org/

Market cap ranking: https://coinmarketcap.com/currencies/decred/

Buy DCR: https://www.coinex.com/info/DCR

Manage DCR: https://wallet.coinex.com/download

 

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