This document makes the case that Decred is a perfect match for cryptocurrency custody providers.
Key points for custody clients:
- Client funds secured by robust tech
- Stakeholder voting rights, have a say in project direction
- Earn DCR rewards for voting
- Store value
Key points for custody provider:
- Attract clients by offering a unique service
- Earn voting fees on top of custody fees
- Developers: competent, easy to reach, proven track record
- Low risk: working product, live 2+ years, hard fork resistance, clean and tested codebase, active development
- Good PR for supporting innovative projects that solve hard problems, deliver and stay around
For the Clients
Client funds secured by robust tech
Decred is not a utility token, its domain is store of value. Therefore its top priority is the security of value storage and transmission.
Clients who prioritize security of their funds will appreciate the following technical properties:
- Network is secured by Proof of Work ASIC miners from 4 manufacturers. Hashrate went from 0.4 to 60 PH/s this year. 4 more manufacturers to come.
- Proof of Stake layer makes it even more expensive to attack the network. Unlike pure PoW currencies like Bitcoin, Decred blocks require confirmations from coin holders.
- No complex error prone smart contracts are involved.
- Mainnet is working for 2 years with no major issues.
- High code quality. Codebase is well tested and documented, written in modern programming language (Go) that eliminates a whole class of memory-related bugs.
Voting rights and rewards
Holders of Decred may choose to participate in the project’s governance by time-locking DCR to buy tickets. Ticket-voting is Decred’s way of making decisions about how the network evolves technically, and in the near future how the project fund is spent.
Tickets are called to vote randomly but on average this happens in 30 days. When a ticket votes, the DCR locked to buy it is released, along with a reward. Some tickets will take longer to be called. After 142 days, tickets that were not called expire and also return their DCR, this happens to around 0.5% of tickets.
Participation requires holders to educate themselves, temporarily lock their DCR for tickets, and decide how those tickets should vote on open issues. In return they receive rewards in DCR. The rewards mitigate supply inflation to a degree, unlike pure Proof of Work coins where all inflation goes to miners.
As of writing the annualized rewards are ~14%. This number is not fixed. The more tickets one buys, the more predictable are the rewards. The percentage slowly decreases, but even 2 years from now 5-10% annual DCR rewards are possible.
Ticket price is set by market forces, a ticket currently costs 95 DCR or $3,300. To maximize influence and rewards one should buy new tickets as soon as old ones have voted. Large holdings result in high ticket turnover that requires action every day. Users have a choice: either have a hot wallet running 24/7 that buys new tickets automatically, or manually buy new tickets periodically. The latter removes the need to maintain an always running computer and is more secure, but at the cost of increased inconvenience or reduced participation.
A custody provider is in the perfect position to maintain always running wallets that continuously buy tickets and cast votes on behalf of clients.
For clients, this system is an opportunity to increase the value of their holdings by making good decisions about the future of Decred.
Decred is consistently in top positions in % down from all-time high chart.
Clients of custodian services are likely to look for long term storage. Even if the service is perfectly executed, the health of the underlying asset is fundamental. In addition to technical factors noted above, these social and economic factors contribute to Decred’s long term existence and prosperity:
- The project is self-funding, 10% of the block rewards go into a project fund. As of writing, the project fund holds $18 M worth of DCR, which is more than 80% of DCR that has accrued thus far.
- There was no ICO and no money was collected from investors.
- Dozens of active developers.
- One of the least controversial projects in the space by the count of hacks, dramas or lawsuits.
- The community is organically growing and helping each other.
- More reasons why people choose Decred are collected in this compilation of community feedback.
For the Provider
Attract clients by offering a unique service
The custody provider is in the position to offer a unique service that is only possible in Decred.
Implementing custodial voting requires more engineering effort compared to just custodial storage, but there are many developers that can help with advice and some software already exists that can be used as a starting point.
Earn voting fees on top of custody fees
There are two actions that Decred holders could delegate to a custody provider.
Continuously buy new tickets as old ones vote.
Maintain the always-online wallet needed to vote (quickly) once a ticket is called. Currently many Decred holders pay 1-5% of their voting rewards to services that run non-custodial voting wallets 24/7 for them.
Custody provider could perform both actions on behalf of clients in exchange for a service fee.
The developers of Decred have first-hand, proven experience of building blockchain software since 2013 when they developed btcsuite, a from-scratch Bitcoin implementation written in Go language.
They can be easily reached almost any day. In addition, there is an active support channel for non-development questions.
- Decred mainnet is live since Feb 2016 and several fundamental promises are already delivered. It is not a whitepaper or promiseware temporary token.
- It is in active development with dozens of developers around the world.
- It is resistant to hard forks not approved by holders.
- Clean, tested and documented codebase.
Decred tackles hard problems: secure store of value and decentralized trustless decision making. Supporting innovative projects that deliver and stay around is a contribution to the whole space, and therefore a good basis for positive public perception. Decred itself has this philosophy of preferring approaches that benefit the space.
Thanks to @davecgh, @Haon and @richardred for their feedback.