Beginner’s Guide To Crypto DAO Decred In 2022 | DCR Token and Politeia Proof-of-Stake (PoS) Governance Explained

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What is Decred and DCR Coin?

Decred (DCR) is an autonomous digital currency that has been on a lot of people’s minds lately. With the rise in the adoption of decentralized cryptocurrencies, the price of digital currency has substantially risen. Due to its similarity to the Bitcoin codebase, Decred is often compared to this premier cryptocurrency. With so many ways to interact with Decred’s wallet (DCRWallet), almost anyone can participate in Decred-based transactions. In addition, Decred is driven by decentralization. To facilitate this, the project uses a hybrid consensus algorithm, together with the Politeia platform introduced by Decred in 2018. Politica allows Decred DCR coin holders to vote on updates and proposals for the Decred platform.

In this article, we’ll explore Decred’s ecosystem, including applications and use cases. We will also discuss the background of the project and its core values. Furthermore, we will explore what makes DCR coins so special, as well as the different protocols Decred uses to maintain complete decentralization.

The name Decred is a combination of the words ‘decentralized’ and ‘credits’. These are the words the Decred team felt best reflected their philosophy and refer to ‘credit’ being “money as it once was”. 

Decred Origins and Airdrop

In April 2013, a proposal was made within the Bitcointalk forum for a cryptocurrency known as Memcoin2. The user “tacotime” proposed the creation of a new cryptocurrency. The same view was expressed by other Bitcointalk users “_ingsoc” and “Jake Yocom-Piatt”.

As a result, the trio developed a hybrid Proof-of-Work and Proof-of-Stake consensus mechanism for Memcoin2. This led to a new project, Decred. Using the btcsuite codebase, a variant of the Bitcoin codebase, a hybrid PoW/PoS consensus mechanism was constructed. Decred is, however, not a fork of Bitcoin. Rather, it is a sovereign blockchain and an independent cryptocurrency.

In February 2014, Decred began development with the mainnet launching in February 2016. This was achieved using an airdrop and a modest premine to kick-start the Proof-of-Stake (PoS) element of the project while establishing a broad community of investors and compensating early contributors. So, the project began as a highly decentralized and transparent network and has remained so.

Decred’s Hybrid Consensus Model For Governance 

The new Decred hybrid consensus model developed a Proof-of-Stake (PoS) governance system. Using this system, users can opt to lock up their DCR coins for a specified period that will allow them to participate in a lottery to determine who is included in the consensus mechanism for each block. These participants are known as stakeholders.

For each block mined, a new round of lottery winners will be invited to vote on the changes to the consensus mechanism. This helps to create an element of decentralization, allowing stakeholders to make decisions about the future of the project.

Whereas Proof-of-Work (PoW) consensus mechanisms tend to rely on miners for protocol governance, Decred requires the consensus of both miners and stakeholders to maintain the security of the network. This means all token holders gain voting rights, while reducing the chance of ‘whale’ governance manipulation.


The Politeia platform was introduced in 2018 to assist in the long-term governance of the Decred ecosystem. Politeia is responsible for the various governance processes and proposals brought forward by Decred stakeholders. It has allowed Decred to transition to a Decentralized Autonomous Organization (DAO).

The Decred DAO makes it easy for anyone with useful skills and knowledge to be compensated for contributing to the ecosystem. This is achieved by stakeholders voting on proposals on the Politeia platform.

Rather than being evaluated on reputation or academic qualification, Decred community members are judged on their input and contribution to the ecosystem. Members are free to be flexible in their commitments to the project, making it easier to try it out before making any major commitments that might not be sustainable. As such, this creates an on-ramp for new users with mutually minimal risk to the Decred ecosystem.

How Does Decred Blockchain Work?

The Decred blockchain ecosystem is designed to be secure, adaptable, and sustainable. Below are the core values of the Decred ecosystem explained in further detail.

  • Security

The hybrid Proof-of-Work (PoW)-Proof-of-Stake(PoS) consensus mechanism employed by Decred makes it substantially more costly to attack than other PoW or PoS consensus-based blockchains.

  • Adaptability

The governance model adopted by Decred allows proposals to be considered and put into action quickly, and fairly. Furthermore, the Decred governance systems make it easy for the Decred blockchain ecosystem to evolve and adapt in line with the ebbing tides of the blockchain industry. Moreover, these systems make Decred resistant to forks, while making it easy to integrate new features in the future.

  • Sustainability

The Decred ecosystem is geared towards long-term goals and sustainable growth. The project has taken a firm stance from day one about decentralization. This is apparent in the self-funding solution Decred has created to minimize the shortcomings that often come with traditional funding issues for crypto projects. This means that 10% of all block rewards generated on the Decred blockchain are allocated to a treasury created for the future development of the project.

Decred Coin (DCR)

Decred’s DCR coin is at the heart of the Decred ecosystem, with each DCR token representing a voting right. Similar to Bitcoin, there is a maximum supply cap of 21 million DCR coins to be mined. The current circulating supply is just over half of this at 12.7 million, according to CoinGecko

The DCR coin launched in 2016 at a price of around $0.95. During the previous bull market DCR peaked in January 2018 at $139, following a sharp decline to around $9 in the bear market that followed. After bottoming out in March 2020, the Decred DCR coin has since surpassed its previous all-time high of 2018. DCR now sits at approximately $180 at the time of writing.

Decred Decentralized Exchange DCRDEX 

The DCR coin is available to trade on many exchanges, including major centralized exchanges Binance, KuCoin, and Huobi. However, Decred has created its own decentralized exchange (DEX), called DCRDEX. 

DCRDEX uses atomic swaps with Decred, Bitcoin, Ethereum, and Litecoin trading pairs. The permissionless DEX needs to be downloaded to use as a desktop client. DCRDEX offers zero trading fees and makes use of the Lightning Network payment channels to facilitate scaling with future adoption. 

Lightning Network

The Lightning Network is a layer 2 scaling solution built on top of the Bitcoin blockchain, following the implementation of SegWit in 2017. The introduction of the Lightning Network meant developers could build and deploy decentralized applications (dApps) with the security of the Bitcoin blockchain, but with higher throughput and faster transaction confirmation times than the layer 1 blockchain. Among the most prominent use cases for the Lightning Network is payment channels, such as for the Decred exchange, DCRDEX. 

If you’d like to learn more about how the Lightning Network operates and why the layer 2 solution is so fundamental in the next wave of crypto innovation, see the Lightning Network & Lightning App Programming course at Ivan on Tech Academy. Here, you’ll learn about the operational functions of the network and initiating and founding a payment channel. Moreover, this course provides you with the skills to develop your own Lightning Application (LApp) including programming channels and improvements.

Decred (DCR) Wallets

Decred offers desktop and mobile wallets, software compatible with hardware wallets, alongside another crypto wallet in development.


Decrediton is the desktop graphical user interface (GUI) used to interact with the DCRWallet. The wallet application will need to download the entire Decred blockchain (unless specifying SPV mode, explained below) and requires a fair amount of hard drive space on a device. However, doing so creates the opportunity to become a miner, receive rewards, plus voting and governance rights.

Mobile Wallets 

The Decred Mobile Wallet is available as a download app for both iOS and Android. However, unlike the aforementioned desktop Decred wallet, the mobile wallet won’t download the entire Decred blockchain. Instead, the Decred Mobile Wallet operates using SPV mode which reduces the strain on resources and data plans from a phone. At present, users are unable to vote on proposals using the Decred Mobile Wallet.

SPV stands for “Simple Payment Verification” which creates the opportunity to use a Decred wallet without the need to download the entire Decred blockchain. Rather, SPV only downloads blocks relevant to a users’ address. SPV wallets connect directly to the Decred blockchain, removing any element of centralization. This is in comparison to “light” wallets, where the sending and receiving of Decred transactions depends on centralized API (application programming interface) services. 


Kohola, Hawaiian for ‘whale’, has been designed by Decred creators @peter_zen and @bgptr and is intended for expert users. Using Redux and React frameworks, the application is written in TypeScript and Go. Kohola is an alternative front-end graphical user interface (GUI) for the DCRWallet, including features not covered on Decrediton. These include coin control, solo staking support, encrypted configuration, and more!

Why Use Decred?

Decred is whole-heartedly invested in the decentralization of finance and currencies. The project has been designed from the ground up, to remove any centralized manipulation potential, and improve on the world’s number one cryptocurrency, Bitcoin. Similar to Bitcoin, the Decred DCR coin is also designed to be used as a store of wealth. However, Decred has taken this one step further by introducing voting rights to the coin.

Decred is among the most secure and sustainable blockchains in existence. The ethos of the project is to maintain the highest standard blockchain possible that is easy to use and equitable for both users and developers of the Decred ecosystem.

Decred Blockchain and DCR Coin Summary

Decentralization is the heart of the Decred ethos, constructed with security, adaptability, and sustainability as the three pillars upholding the infrastructure. Decred has been compared to Bitcoin many times over for its similar characteristics and store of value. However, Decred has been designed with improved decentralized utility.

This has been achieved through introducing ‘ticket-holder voting’, giving all DCR coin holders voting rights. Moreover, this has been designed so that large companies or high-net-worth individuals can not achieve majority governance. Thus, the Decred blockchain is creating a completely decentralized network with minuscule possibilities of manipulation. The Decred project has seen the ups and downs of the previous bull and bear markets. However, the blockchain has remained strong, seeing increased adoption and development. Moreover, the continuous growth in the community and the adoption of Decred’s applications bodes well for the project’s future.

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Chris Munch

Chris Munch is a professional cryptocurrency and blockchain writer with a background in software businesses, and has been involved in marketing within the cryptocurrency space. With a passion for innovation, Chris brings a unique and insightful perspective to the world of crypto and blockchain. Chris has a deep understanding of the economic, psychological, marketing and financial forces that drive the crypto market, and has made a number of accurate calls of major shifts in market trends. He is constantly researching and studying the latest trends and technologies, ensuring that he is always up-to-date on the latest developments in the industry. Chris’ writing is characterized by his ability to explain complex concepts in a clear and concise manner, making it accessible to a wide audience of readers.