Decred — An alternative contender

Table of Contents:

  • Cryptocurrencies — Digital free market money in its early stages
  • Bitcoin has some unanswered questions. Decred offers interesting alternatives.
  • Decred is bootstrapping a war chest without external investors.
  • Exit, Voice and differing paths to sound money
  • A financial premium for security and peace of mind
  • Conclusion

Cryptocurrencies — Digital free market money in its early stages

Bitcoin has some unanswered questions

Durability for the next 100 years

Decred is bootstrapping a war chest without external investors.

  • Inputs (the number of tokens in the treasury times the token value)
  • Outputs (the operating expenses required to draw down and support the project).

How much cash could Bitcoin have had, if Bitcoin had Decred’s design and a Treasury Fund? Up to $18 Billion.

  1. We will use Decred’s known supply schedule to show the treasury inflows by 2025. Using its 10% allocation design, 1.74 million DCR tokens will have been allocated to the treasury fund.
  2. Since it’s impossible to predict the token value of DCR five years from now, we take the position that if cryptocurrencies are not a fad in the next half decade, they will be more valuable in 2025 than they are in 2019. We will use 3 sensitivity points for our model: Decred’s 2019 low price, Decred’s 2019 September price, and Bitcoin’s 2019 September price. Checkmate has done some great analysis to show the stock to flow parallels between these projects, and how Decred is mirroring and exceeding Bitcoin’s early performance.
  3. In order for Decred to continue funding its ecosystem development, the cash on hand needs to account for operating expenditures. Decred has already managed to launch a functioning blockchain protocol by drawing 20 to 25% of its Treasury funding in the first 3 years of its existence. For conservative sake, we will assume a 30% draw down rate.
  4. This model assumes a linear growth in operating expenses and the DCR Treasury. In reality, the treasury fund is denominated in DCR, which will multiply in line with DCR value appreciation, while expenses will be incurred in USD. This will be offset by periods of market fluctuations where the value of DCR drops, and expenses continue to be incurred.
  • Decred’s Treasury has the potential to bootstrap billions of dollars, and its design creates a perpetual cash flow mechanism.
  • Decred as a whole today is valued at below the future cash potential of its treasury fund. Being priced under cash represents a current market inefficiency.

Governance: Exit, Voice and differing paths to sound money.

  1. In the medium term, if Bitcoin needs to upgrade its cryptography, who gets to decide the process of changes?
  2. In the long term, will nation states cede monetary policy making to the Bitcoin network without a governing constitution?

Bitcoin’s approach to resolve community differences is for people to exit the network. Decred’s approach to resolve community differences is for people to buy more $DCR, so that they can have a bigger voice at the decision making table.

A financial premium for security and peace of mind

Fixed interest rates are more expensive, but people are willing to pay for predictability and peace of mind.

The real flippening will be if another network overtakes Bitcoin in the cost of double-spending. Decred’s design gives it that shot.

A bullish future

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Ammarooni

Technology, Media, and Crypto. I have some thoughts on a few things.