On this day in 2016, a new cryptocurrency project called Decred airdropped 840,000 tokens to 2,972 community members—four percent of the planned total supply. In the three years since, Decred has been quietly building one of the most interesting projects in crypto, largely ignoring the hype cycle and speculative bubble. Now, surrounded by the shattered dreams of a hundred ICOs, the project looks increasingly like a long-term winner.
As with many great things, the seed of Decred came from failure. Jake Yocom-Piatt, organizer of the Decred project, says he spent “millions” of his own money building btcsuite, a set of tools for the alternate bitcoin implementation Bitcoin in Go. But the project became, he says, “a tragedy of the commons situation. Should I keep spending money on this, even though I’m not making money?” The problem of sustainability hasn’t gone away: Grin, launched last month, attracted tens of millions of dollars in mining investment, but had some trouble raising a mere $62,000 to pay its lead developer for six months.
Even more surprising, Yocom-Piatt said his alternative BTC project met with resistance by established bitcoin developers. “The reason I was so drawn to Decred,” he says, “Is that we experienced some strange things in our interactions with Bitcoin Core. … What we encountered was basically a central planning committee that was unaccountable.”
That, of course, is the opposite of the decentralized ideals cryptocurrency is meant to embody, motivating Yocom-Piatt and his team to try and do better. Decred was conceived from the ground up with the goal of balancing community-driven decentralization, long-term leadership, and sustainability, in part by building a formal voting system. Decred is secured through a mix of proof-of-work and proof-of-stake, with holders of the DCR currency able to put their coins in escrow to buy “tickets” that let them vote on technical changes.
“One of my goals in the project,” says Jake Yocom-Piatt, “is to automate myself out of the major decisions.”
Though the Decred launch also included a four percent premine for development, Yocom-Piatt and his team decided that the best way to keep the project healthy long-term was to build a development fund into the code. That ended up being funded through a 10 percent cut of all mining rewards, but the founders didn’t want to control that money. Last October, Decred launched a second voting system, called Politeia, that would allow stakeholders to vote on how to spend dev funds, now on the order of $20 million.
Those systems were built with a very clear goal: to move the founders out of the spotlight, and encourage vibrant community participation. “One of my goals in the project,” says Yocom-Piatt, “is to automate myself out of the major decisions.”
Decred’s approach now looks prescient, in various ways. Development funds have also been implemented by other projects, including Dash, Beam and Zcash. But the Zcash fund in particular has attracted significant criticism, in part for being too generous, and because it is effectively centrally managed by a small group of founders. Other crypto founders, particularly Vitalik Buterin, have expressed discomfort with being viewed as leaders, but without formal systems to delegate authority, they may be trapped in their roles.
Decred has also made very different tactical decisions than some other projects, particularly during the bubble in crypto-assets that inflated over the course of 2017. Most surprisingly, the team didn’t make any effort to diversify its development fund as the dollar value of its tokens exploded. “We didn’t touch any of it,” says Yocom-Piatt. “We keep it all in Decred. The intent of these funds was to decentralize control of it, and you can’t decentralize funds once you diversify.”
The structure of the development fund also reduces the incentive to cash out: “We’ve got infinite runway,” Yocom-Piatt says, as long as Decred’s token price stays above roughly $10. (At this writing, one DCR is valued at just over $16.)
Decred has also kept relatively quiet. “Unlike almost every other team in the top 20 crypto assets, for the past two years, instead of pumping it, they’ve just been building,” says Murad Mahmudov, an investor in crypto-assets. In an atmosphere of feverish hucksterism, often premised on minimal actual utility, that silence speaks volumes.
But, three years in, the Decred team and community are moving to become more visible. One of the biggest decisions made using the Politeia system so far was whether Decred should use developer funds to hire a public relations firm, and if so, which one. Proposals were submitted by both Wachsman and DittoPR, the two dominant crypto-focused PR firms.
Yocom-Piatt tried to stay out of the discussion, modeling his desire to eventually recede from a leadership role. “Most of the senior project people stayed neutral,” says Yocom-Piatt. “I wanted to see what our stakeholders actually thought about the two proposals. But a few [Decred insiders] were really out there trying to influence the vote. I said, I guess you can do that, but I don’t know if I like that.” Ultimately, he says Ditto won narrowly because “they adapted better to the process.”
Though at root it is a cryptocurrency much like many others, Decred’s governance features have broader implications: Yocom-Piatt sees the project fundamentally re-imagining politics. “The future, I feel, is in collective intelligence,” he says. “The 2016 election has shown how difficult it is to get a single person elected president, and have them represent a huge, diverse population.” The kind of direct democracy he wants Decred to embody, he says, would “elevate policy decisions above personality decisions.”
There is a major obstacle to that goal, both within Decred and more generally: People don’t actually seem to like voting all that much. According to Yocom-Piatt, the voting rates on Politeia proposals have been on the order of 30 percent, about 10 percent lower than the average turnout for American midterm elections. That’s also down from an early participation rate in Politeia votes that was closer to 50 percent. The dropoff may be worrisome, given that many Decred participants are early-adopting enthusiasts and should be expected to participate at higher rates; or it may reflect the potential to make the process itself easier.
But their progress so far suggests Decred at least has as good a shot as anyone of making blockchain governance work, which should help make the currency both robust and flexible. Mahmudov, who is spinning up his own hedge fund to invest in crypto-assets, believes that the profusion of blockchain products will thin out rapidly in the next few years, leaving “three to four dominant chains. And I think Decred stands a chance to be one of those three or four.”
Correction 2/11: A previous version of this story mistakenly stated that Dash was created after Decred. Dash’s creation, and deployment of a developer fund, actually predated Decred’s. We regret the error.