Centralization is one of the biggest enemies in the crypto space. The more centralized a cryptocurrency project is, the more likely it is to fail. In contrast, well-developed and highly decentralized platforms tend to be more attractive, especially if they have a specific use case. This is what a project called Decred has been aiming for through a free and fair approach to governance.

Decred (short for decentralized credit) is a cryptocurrency network that leverages a hybrid consensus mechanism to facilitate financial independence and open governance. It was launched in 2016, making it one of the early projects to grace the crypto market.  Its consensus approach includes both proof of work and proof of stake mechanisms to strike the right balance between miners and users, thus solving some of the problems that have plagued major cryptocurrencies such as Bitcoin.

Decred integrates the smart-contract enabled lightning network to achieve high transaction throughput. Because of this, the network facilitates atomic swaps, allowing users to swap tokens across different networks.

How does Decred work?

The first major use case is that users can send or receive funds on the Decred network. Because it leverages proof of work as part of its consensus approach, one can participate as a miner, thereby earning DCR for confirming transactions. Users can also stake DCR through the platform’s proof of stake to participate as a transaction validator and also to vote on network developments. Interestingly, proof of stake participants verify and authorize transactions as soon as they are mined by proof of work miners.

The approach sets Decred apart from many other projects that only focus on one type of consensus mechanism. Those that wish to participate as miners can do so through ASIC miners and those who want to take part through proof of stake can stake their tokens through a staking pool. Decred implements measures that ensure randomness when selecting the staking participants to be rewarded. Miners earn the largest share of the rewards at 60% while staking participants receive 30%. The remaining 10% is used to cover network development costs.

The hybrid consensus approach is not only ideal for optimal governance but also for ensuring a high level of security. Another benefit is that the network facilitates financial independence for its developers.

DCR tokenomics

DCR is the native cryptocurrency on the Decred network where it plays an important role in facilitating transactions. This includes mining and staking rewards. Decred has a low maximum supply at 21 million DCR and an even lower circulating supply at 13 million DCR.

DCR is currently trading at $132 which is a long way from its peak price of $250 which it achieved in mid-April this year. However, it is still an impressive performance considering that it traded below $15 before November 2020.

The current DCR price seems heavily discounted not only because it is notably lower than its peak price, but also because it has such a low circulating supply. It is safe to say that an influx of capital would easily elevate its price performance. It currently has a low market cap at $1.7 billion, which pales in comparison to Bitcoin’s $656 billion market cap.

Some of Decred’s other wins include a robust development team, the strong governance approach that allows DCR holders to determine the direction of the network, and a committed community. However, the one downside to this project is that it lacks the proper adoption. Decred needs to ramp up its marketing to spread awareness especially now that the market is paying attention to how networks approach governance, security, and decentralization.