What is Decred Cryptocurrency? How Does it Work?
Bitcoin is the first-ever cryptocurrency and with it came the reliable blockchain technology that all crypto enthusiasts love and appreciate. However, for early Bitcoin adopters, the technology had some inefficiencies. As mining operations grew, the decision-making process fell into the hands of large mining companies. This kind of hash power held by miners and institutional users over the Bitcoin improvements was rather counterproductive. A few developers worked on Bitcoin’s codebase and modified it to create Decred cryptocurrency.
But, what is Decred cryptocurrency? Let’s find out.
Connecting your Decred Address to ZenLedger For Your Crypto Tax Forms
- To import your Decred transactions into ZenLedger for your crypto tax forms, all we need is your public address.
- Select the proper blockchain or wallet from the dropdown list.
- Paste your address into the address field in ZenLedger.
- Select if the wallet is based in the USA or not.
- Then hit the ADD COIN button
What is Decred Cryptocurrency?
Decred (DCR) is a cryptocurrency that emphasises decentralisation of governance and decision-making on the blockchain network. Decred’s ultimate goal is to create an ecosystem that runs autonomously with voted improvements and direct implementations by the holders and the miners of the currency.
Officially launched on February 8, 2016, Decred received a lot of mixed reviews from the crypto community. Some see Decred as the accurate representation of what Bitcoin was supposed to be from the beginning. These supporters believe it to be the pinnacle of a decentralised decision-making peer-to-peer network that responds to attacks quickly and accepts community requests for new features.
Now that we’ve touched upon what is Decred Cryptocurrency, let’s explore how it functions.
How Does Decred Cryptocurrency Work?
As we’ve already established, Decred’s underlying technology is Bitcoin’s open-source codebase and therefore the cryptocurrency offers everything that Bitcoin has to offer but with varying modifications.
Differences Between Decred and Bitcoin
Hybrid Consensus: PoW/PoS
DCR is a combination of proof-of-work (PoW) and proof-of-stake (PoS) consensus algorithm that effectively synchronizes the distributed network of computers on the blockchain.
With the PoW mechanism, DCR miners use their resources to solve complex mathematical puzzles to verify transactions and then add blocks to the blockchain. Further, the PoS mechanism allows DCR stakers to confirm those transactions encouraging participation in Decred’s network governance.
When DCR holders stake their coins, they receive a ‘ticket,’ a non-transferable asset native to the Decred blockchain. Each block has 20 tickets and five such tickets are randomly selected and then their owners validate the blocks proposed by the miners. Once the block is settled and added to the network, all the parties involved in the effort receive a reward: miners receive 60%, stakers get 30%, and treasury gains 10%.
Decred implemented Politeia to encourage new ideas from all the parties involved in the blockchain and create a fair voting system that accepts and implements said ideas.
Users can use the Politeia public proposal web platform to suggest potential upgrades or changes to the policy. This platform allows users to submit, track, and discuss the suggested changes to the Decred ecosystem.
Lightning Network for Instant Transactions
Decred is on its way to implementing the Lightning Network, an improvement that several other cryptocurrencies have researched. Basically, Lightning Network is a way to settle payments off-blockchain, which reduces network congestion and transaction processing speeds. Two users who regularly transact have to open a third account, which is a locked box where they each deposit an equal amount. When these parties wish to transact, they have to simply send promissory notes to each other, changing the funds' balance in the box.
Let’s understand this with an example. David and Micheal each deposit 10 DCR in the Lightning Network box, making it a total of 20 DCR. If David wants to pay Micheal with 2 DCR, he can send Micheal a note that updates the distribution of the DCR to 8 David, 12 Micheal. David and Micheal can transact back and forth in the box within the limits of 20 DCR without sending a note to the blockchain.
As the Lightning Network is based on promissory notes, the transactions are instant and don’t require block time for validation. These transactions can also be considered micropayments of a coin’s fraction. In addition, it allows greater scalability of the blockchain as it has to process fewer transactions.
How to Buy Decred (DCR)?
As Decred is a well-known and ubiquitous cryptocurrency, it is available on almost all crypto exchanges. If you want to buy DCR, here are 3 simple steps:
Step 1: Open an Online Account
Now that you understand what Decred cryptocurrency is all about, you can buy the coin after a thorough analysis of the market. Although it is a popular coin, it isn’t available on Coinbase. If you only have a Coinbase account then you’ll need another crypto exchange account. Binance and Bittrex are two of the best exchanges that support DCR. Provide your details such as full name, age, address, government-issued ID, and a few more details to verify your identity.
Step 2: Buy a Wallet
To save your coins from being stolen from hackers that can breach a crypto exchange, you should get a crypto wallet. You can choose a software wallet (free to use desktop and mobile applications) or a hardware wallet (offline physical devices) to store your coins. From these two, hardware wallets are more secure as they are not connected to the internet.
Step 3: Buy DCR
After opening an online account and choosing a wallet, you can buy DCR by adding sufficient funds to the crypto exchange. After the purchase, store your coins safely in your wallet.
Finally, let’s have a quick recap of what is Decred cryptocurrency? It is a cryptocurrency that emphasizes on decentralization of the blockchain with its biggest strength: its community. It was developed by a team of developers and if they continue to build new features that serve the community well, it will grow in the future.