Blog Crypto Decred (dcr) Coin Review: Is It A Good Investment for 2021?

Decred (dcr) Coin Review: Is It A Good Investment for 2021?

date June 18, 2021 time 8 min read 2922 views

The decred coin (DCR) cryptocurrency — often referred to as “bitcoin with governance” —  launched in 2016. Among decred’s unique selling points, according to the project’s website and interviews with its co-founder,  is that — unlike bitcoin — decred coin is a highly decentralized, community-directed cryptocurrency. Decision-making for decred is shared with stakeholders beyond miners and the core team. 

Other crypto networks, like Nano, make similar claims. So, how is decred coin different from bitcoin and other cryptocurrencies?  Where can you buy decred? Is decred a good investment?

Read on to find more about all of the above, plus what makes decred unique, decred coin’s history, and how decred works explained.

What is decred?

As states, “Decred is an open and progressive cryptocurrency project with a system of community-based governance integrated into its Blockchain.”Decred’s history dates back to 2013, when several early bitcoin developers, led by Jake Yocom-Piatt, grew disenchanted with how decisions regarding bitcoin’s direction were being made. 

According to Authority Magazine: “Prior to Decred, Jake funded and oversaw the creation of btcsuite, an alternative full-node Bitcoin implementation written in go, whose source code has been used in several other notable projects, e.g., Lightning Network (lnd), Ethereum, and Factom.”

For Piatt and his co-founders, bitcoin had a fundamental flaw. Decision-making power regarding the future direction of the cryptocurrency rested 100% with bitcoin’s miners and developers. As a result, Bitcoin users and investors have no say in the cryptocurrency’s governance.

Decred was designed to address this imbalance. According to Piatt: “Decred is an effort to create a fairer financial system driven by sound money, where its community makes decisions as a group and every decision-maker has skin in the game.”

From a tech perspective, decred coin is similar to bitcoin in many ways.  Despite being based on bitcoin’s code, the people behind decred insist that “it is a standalone cryptocurrency, not a ‘bitcoin fork’.”   

What is decred coin?

Decred coin (DCR) is the community-governance-based cryptocurrency coin created by decred with underlying bitcoin-based and blockchain technology.  Decred launched on February 8, 2016, and is traded on various crypto exchanges — though notably not Coinbase. 

Coinbase is the most widely known (and used) crypto exchange, but its lack of decred coin support shouldn’t necessarily be considered a red flag or a sign of decred coin’s lack of legitimacy. Some of the best-known crypto exchanges where you can buy decred coin include Binance, CoinEx, and Bittrex.

Decred is also trying to establish decred coin as a viable payment method for e-commerce transactions. Payment processors that provide decred coin integration to e-commerce sites include Coingate and Globee. 

Adoption of decred coin as an e-commerce payment method may help decred coin’s visibility. Certainly, decred coin lacks anything approaching the name recognition of bitcoin, ethereum, tether, or even dogecoin.

It’s an imperfect metric, but it is worth noting that decred has consistently averaged in the bottom 20% or lower of the top 100 cryptocurrencies by trading volume, according to Coinmarketcap. Many crypto observers believe this is due to decred coin’s relative lack of profile compared to the likes of ethereum and bitcoin, rather than an indication of its value.

Biggest cryptocurrencies in the world based on 24h volume on April 14, 2021

Top ten cryptocurrencies in the world
Top 10 Cryptocurrencies by 24h volume April 14, 2021. (Source: Statista)

As you can see from the chart below, on April 14, decred coin ranked #89 in trading volume.

Decred was positioned at number 89 in trading volume on April 14 2021
Bottom 89-100 Cryptocurrencies by 24h volume April 14, 2021. (Source: Statista)

As of June 14th, 2021, Coinmarketcap ranked decred #52 by market cap, with a per decred coin price of $143.85 and a market cap of close to $1.9 billion.

Decred ranks just outside the top 50 by market cap (Source: Coinmarketcap)

Also from Coinmarketcap, here’s decred coin’s historic performance from inception through mid-June 2021.

The price of decred coin has gone through some ups and downs (Source: Coinmarketcap)

What sets decred coin apart from bitcoin?

Decred coin, despite using much of the same underlying technology as bitcoin, distributes governance of the cryptocurrency more equally amongst stakeholders.

Here are the stakeholders most cryptocurrencies have in common:

Stakeholders are all interlinked in cryptocurrency
Most cryptocurrencies have these stakeholders and they are all interlinked (Source: Medium)
  • Miners
  • Developers
  • Users
  • Speculators
  • Exchanges 

Bitcoin — among other cryptocurrencies including decred — is based on a Proof of Work (PoW) system.  According to Investopedia: “PoW is a decentralized consensus mechanism that requires members of a network to expend effort solving an arbitrary mathematical puzzle to prevent anybody from gaming the system.” 

The most well-known application for PoW is cryptocurrency mining. PoW is used in transaction validation and for mining new tokens. In addition, PoW allows bitcoin and other crypto transactions to take place peer-to-peer without the need for a third party (such as a government or bank.)

Bitcoin relies solely on a PoW system. As a result, miners arguably have too much (some would say 100%) control over the governance of the cryptocurrency, leaving users, investors, and all but a handful of core developers out in the cold. Miners power bitcoin by mining new tokens, yet they can’t create value in a vacuum. 

Without developers, users, speculators, and exchanges (or at least some combination of each), the financial ecosystem that gives bitcoin and similar cryptocurrencies value wouldn’t exist. Developers outside bitcoin’s original core team and users — like decred’s co-founders — have argued almost since the inception of crypto that miners have far too much power in bitcoin’s PoW model. 

Blockchain PoW workflow
Blockchain PoW Workflow (Source: Alibaba Cloud)

It’s not easy to become a crypto miner. You have to invest in mining equipment, computational and electrical power — and know how to operate a mining rig. Under its current PoW model, bitcoin wouldn’t exist without miners. But other stakeholders also face significant barriers to entry. 

If you’re a non-mining bitcoin user or investor, you need money. To become a developer, you’ll need a high level of coding and technical proficiency.. If you’re bringing cash or expertise to the table, why wouldn’t you demand a more equitable form of crypto governance?

That’s where decred comes in.    

What makes decred coin different from bitcoin?

Decred is a community-directed cryptocurrency as opposed to bitcoin, where crypto miners control the decision-making. But what does that actually mean? And how does it work?

Proof of Stake (PoS)

The primary difference between decred coin and bitcoin is that bitcoin operates as a pure Proof of Work (PoW) system, whereas decred is a hybrid cryptocurrency based on PoW and Proof of Stake (PoS).

The difference between PoW and PoS explained
The difference between PoW and PoS (Source: 101 Blockchains)

Decred implements its hybrid PoW/PoS model in a unique way, utilizing a system it calls PoS voting. The goal of PoS voting is to distribute decision-making power between stakeholders more equitably than pure PoW or PoS coins.

Here’s how it works:

  • All stakeholders (miners/users/developers) are given an opportunity to vote on any changes to the decred Blockchain. 
  • Non-mining stakeholders have the power to influence PoW miners by voting to withhold a miner’s reward if they engage in problematic behavior, e.g., mining empty blocks.
  • To validate a block, at least three out of five voters must sign off. The validation process must be completed before any rewards are paid, giving decred an additional layer of security that bitcoin lacks.
  • Requiring a majority consensus from stakeholders also “makes the decred Blockchain resistant to contentious hard forks.” In layman’s terms, this means stakeholders other than miners have to vote for significant changes to the decred Blockchain. The power of miners to make decisions without consensus from all stakeholders is eliminated in the decred community. Stakeholders other than miners are heavily incentivized to participate actively in the decred Blockchain.   

By combining PoW and PoS, decred arguably achieves the best of both worlds. The primary advantages decred claims over bitcoin are:

  • Increased security: Decred’s hybrid PoW/PoS is estimated to be 20x more expensive to attack than bitcoin. Theoretically, this makes decred more secure because there is far less incentive for hackers to target the coin. Decred is also less vulnerable to a “51% attack” thanks to its PoW/PoS hybrid model.
  • Community-driven decision-making: As outlined above, all stakeholders — not just miners — have a say in decisions regarding the cryptocurrency
  • Adaptability: With formalized governance baked into decred’s model, consensus rules can be changed while avoiding potential disruptive hard forks. 
  • Sustainability: Decred funding comes from block rewards. Only decred coin holders can vote to authorize spending from the Treasury, leading to long-term sustainability.

Is decred a good investment?

Now that you know what makes decred coin unique from bitcoin and other cryptocurrencies, you probably want to know how decred stacks up as an investment. 

At MyConstant, we’re not here to offer investment or financial advice. With that in mind, here are some things to consider when it comes to investing in decred coin or other cryptocurrencies.

Growth of decred coin: 

In recent years, a diversified portfolio with just 2% invested in crypto significantly outperformed more traditional portfolios. Making the right crypto investment can lead to substantially higher returns than more traditional vehicles.

Cryptocurrency can be an integral part of a diversified investment portfolio
Crypto can prove to be an invaluable addition to a diversified investment portfolio (Source: Seeking Alpha)

Over the course of 2021, the value of one decred coin increased from $41.11 on 1/1/21 to $141.97 as of 6/15/21 — a percentage increase of +245%. Over the same timeframe, one bitcoin rose from $29,374.15 to $40,155.30 — a percentage increase of 36.7%.

Stability of decred coin

Seeking Alpha, the world’s largest investment community, considers both bitcoin and decred store of value (SOV) investments. According to CFI, a store of value is “an asset, currency, or a commodity that can be stored and retrieved at a later date without losing its value. An investment with a good SoV comes with a perpetual lifespan and infinite demand, making them low-risk.” 

The oldest and most well-known SoV investment is gold. In April 2021, Federal Reserve Bank of Dallas President Robert Kaplan said: “Right now it’s clear [bitcoin] is a store of value,” according to Yahoo News. 

Also according to Seeking Alpha: “Decred is perfect for [SoV] investors who would like to diversify from Bitcoin. Decred is better than Bitcoin in all aspects, except for the long history of Bitcoin and its liquidity.”

Availability of decred coin

As outlined above, decred is available on multiple exchanges, including Binance, CoinEx, and Bittrex. Interestingly, even though decred coin isn’t currently supported by Coinbase, the exchange’s Head of Listings, Zach Segal, told the Trading Place podcast on May 27, 2020, that decred is his #1 cryptocurrency project to watch in the future.

Additional considerations

  • Looking for a coin where stakeholders — other than miners — have significant control over the cryptocurrency’s future direction compared to bitcoin. Then decred coin is clearly worth considering. But a more “democratic” cryptocurrency could theoretically be a double-edged sword. First, you have to trust in what decred’s co-founder Yocom-Piatt calls the “wisdom of stakeholders.”
  • Like most cryptocurrencies, including bitcoin, decred’s value can be highly volatile over the short term. Decred’s founders encourage longer-term investment and “participation” in the decred community. 
  • Decred shows strong potential as a bitcoin alternative with governance and better security. But, like most investments, that doesn’t guarantee a positive return or recovery of your principal investment.  

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Sounds interesting? Sign up for a free account today and start investing in decred coin.

Written by Sean Shuter

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