Jake Yocom-Piatt, co-founder and project lead at Decred, spent some time with host Nick Gregory to discuss the project’s latest release, v1.6. Decred is an attempt to iterate upon the insights of Bitcoin and do it in a way that evolves over time. Put another way, Decred is money evolved.
Their goal is to take the notion of cryptocurrency as a way to move the peg forward from traditional fiat banking and credit systems in a way that is secure so that people can’t attack the network by double spending coins. It is also adaptable so that features can be added and consensus can be changed on the fly, unlike Bitcoin. And it’s also sustainable, in that the project is self-funded.
(2:07) “ Our legend is this. Back in 2013, we started working on a full node bitcoin implementation from scratch called BTC Suite. We saw Bitcoin core, we really thought the technology was great. We tried to participate with them. We found them difficult to participate with, so we figured, hey, let’s bring some diversity to this ecosystem and start up another full node implementation,” said Jake.
So they did that but ran into governance problems. So after working on it from 2013-2016, the team moved on from that. That’s when they started working with @TacoTime, who is behind a paper called Memcoin2 (MC2), which addressed the hybridization of proof-of-work (POW) and proof-of-stake (POS) networks. The POW and POS components do separate things, but if you interweave them in a sensible fashion, you could get something greater than individually, said Jake.
For example, the incentive alignment with POW is rather weak because miners don’t have to hold coins. They usually dump them into the market and they still have their power in the consensus system. So they blend that with POS, which has strong incentive alignment where you must hold the coins in order to have sovereignty in the network.
It took two years to develop the platform, from 2014 to 2016, and then the Decred project went live in February 2016 with old-school Bitcoin devs, albeit not Bitcoin core devs.
The focus of Decred V1.6 is three-pronged: security, adaptability and sustainability. To that end, you can’t double spend, consensus rules can change and they are a self-funded project. The three major components of this release are decentralization of the treasury, fully accessible privacy tools and full-on Lightning Network integration.
Decentralizing the treasury is a tricky problem to solve. Historically, Decred has had a centralized corporate entity. That corporate entity pays contractors who bill via invoices. That is similar to how most other foundations work. So Decred was already distributing funds on the basis of what stakeholders vote for.
To fully decentralize, you need to give control of those coins on-chain to the stakeholders, which is not a trivial thing to do. Dash has done it before but they don’t have a treasury. Every month they have a disbursement of a subsidy. People vote on-chain about what to approve in terms of who it gets dispersed.
(7:52) “What we’re doing here is instead of relying on a corporate entity and the good will of someone like myself or others to not go and piss the money away on something useless…we effectively created minimally complex built-in smart contact for Decred. It’s effectively a hardwired one…We hardwired it in, we coded it. And so the way it works is once a month there is effectively a draw from the treasury that pays a whole bunch of contractors. And then that draw must be approved on-chain by our stakeholders,” said Jake.
This adds another component to the stakeholder process, which is the treasury, so that when the treasury draw gets published, people can flip a knob and say I approve spends from this particular key. Instead of there being an amalgamation of funds on-chain, there’s a special account that goes up with every block with the subsidy. It gets drawn down by the spends that occur episodically.
(9:17) “It’s a big departure from how other projects do this. And it effectively uses our existing on-chain infrastructure for stakeholding,” explained Jake.
(9:32) The Decred team always encourages people to show up, engage and participate before they try to get paid. Decred is an open-source project, which tends to rely on free labor. They need to see something out of someone before they pay you.
Having said that, they offer two kinds of paid opportunities. One is someone has an existing proposal that was approved and they bring you in and get paid on something that’s already been approved. That’s referred to as Decred contractor clearance. The other path is to come and make a proposal and propose that to the stakeholders, and the treasury pays you to do some work that you specify. Those are the two ways to get engaged with the project.
(11:17) Decred v1.6 also has a privacy implementation, which they call stake shuffle. The people who are stakeholders drive Decred’s privacy solution. It has the highest fraction of the coins’ total circulating supply opting in to use the privacy feature, at 29%.
The vast majority of stakeholders use privacy to privately buy tickets. It’s called Coinshuffle++, and it’s non-custodial. It’s a coin-join but also a private coin join. Even the server operators and other peers can’t determine whose outputs are whose. Both the privacy feature and the DEX are networks where Decred needs to add server mesh in the near to medium term, said Jake.
Getting delisted as a result of the privacy feature happens. Decred was recently delisted from Upbit for that very reason.
(13:55) “My understanding is that when you’re a privacy project, you run the risk of regulated entities delisting you. And this is also part of the motivation for us to create the DEX, which is that when you have a DEX, the exchange is effectively an email server that anyone can turn on. It’s kind of hard to get delisted from that,” said Jake.
Privacy coins have the risk of inflation bugs where the amounts are blinded. Both Zcash and Monero have to deal with this. In some ways, Zcash has stronger privacy than Decred. In other ways, however, Decred has more privacy than Zcash because more people are opting into the privacy feature.
Monero faces the same problem because they obfuscate amounts. If there is a bug in there, people could effectively be printing Monero all day, Jake said.
(15:14) “We don’t do that. And we don’t have this risk because we don’t obfuscate amounts. And this is actually one of our motivators for not obfuscating amounts. And in fact, we don’t really have any plans to obfuscate amounts because it creates this risk where if there is any kind of inflation bug, you won’t know that it’s happening. Somebody could print 100 million Decred. And in our case it’s actually really risky because it could then break our governance model,” said Jake.
(16:04) As alluded to, Decred in the past built out the BTC Suite. That is an alternative full-node implementation of Bitcoin. They stopped working on it in 2016. Those tools got picked up and used as libraries by Lightning Labs, the folks who work on the Lightning Network.
Decred created an adaption of LND for Bitcoin called DCRLND. They took the code base and poured it over to Decred and added a useful feature to support SPV. So you don’t have to download the full chain and sync it. You just download the headers and make sure they all fit together. It also has compact filters, which Bitcoin doesn’t have. There is a header commitment to these filters. You can also use LN without syncing the whole chain.
(17:13) “Given right now with Decred, there’s not a whole lot of people using Lightning….But I think the thing that’s important to remember about Lightning is it isn’t just about fees, it’s also about use cases. There’s a whole bunch of use cases that you can’t even begin to use on-chain payments for,” said Jake.
For example, at a restaurant, neither the customer nor the restaurant are going to be okay waiting for three confirmations on the Bitcoin blockchain to pay for food, Jake explained, adding it could take another hour and nobody’s got time for that.
(18:18) “There’s a whole lot of things that Lightning Network enables. For example, somebody could give me a bitcoin invoice, and then I could pay the bitcoin invoice using Decred Lightning Network and then it swaps it to bitcoins, and vice-versa” explained Jake.
There’s a whole lot of things that are unlocked once you start talking about off-chain payments.
Decred v1.6 was a huge release, but that doesn’t mean the project isn’t focused on the future of the ecosystem. They don’t solicit institutions or venture capitalists but if they want to show up, that’s great. Decred will continue building from the ground up solution for the future. That’s where you’re going to see Decred realize its potential, Jake said.