Decred’s Jonathan Zeppettini: The Industry Is Going To Be Displacing Wall Street

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Decred is an open source token that was created by some of bitcoin’s original developers to solve one of blockchain’s biggest issues: governance. Unlike other altcoin projects, the focus at Decred is around community input and open governance. Decred ensures that a small number of people cannot dominate the network by using a hybrid Proof-of-Work and Proof-of-Stake model. The company offers a wallet, mining, and a community.

The community quickly caught on. Decred rose from a low of $0.42 in January 2017 to a high of $108.32 in December on various exchanges. It is now at the $63 level for its DCR token.

Jonathan Zeppettini is international ops lead and chief evangelist for Decred. He talked with Block Tribune about the cryptocurrency market and Decred.

BLOCK TRIBUNE: The beginning of the year has been a rough one for cryptocurrency. What do you blame for that?

JONATHAN ZEPPETTINI: Probably the irrational exuberance of a lot of people who are just in the game to gamble, make quick money, and don’t really care about the fundamentals or what crypto is supposed to be all about.

BLOCK TRIBUNE: Okay. These are people who are first-timers, or are they big boys, or what?

JONATHAN ZEPPETTINI: I think it’s a bit of both. There’s a lot of first-timers that have seen what’s going on in the space, the huge price gains, and think that crypto is a moneymaking machine. Then you have some old-timers who call themselves traders, who basically make a living promoting this kind of stuff and this behavior. Pumping coins, and jumping from one coin to another, and having people follow on that. And, the community, it’s kind of disappointing to see it, but it’s not surprising.

BLOCK TRIBUNE: Is this a trend you expect to see reversed at some point?

JONATHAN ZEPPETTINI: Yeah. I expect a lot of these crap projects to eventually die and for regulators to crack down on the whole unregistered issuing of securities thing. Once some people go to jail, once you have some [inaudible 00:01:21], I think people will be a lot more careful, and the industry will mature. I think that ICOs as a whole are an interesting tool. The industry is going to be displacing Wall Street, and this is the way that capital is going to be raised in the future. However, this whole Wild West thing, where people get tens or hundreds of millions of dollars dumped on them and have no responsibility, and they do whatever they want. That’s going to be going away.

BLOCK TRIBUNE: You’re somebody who is in favor of more government regulation, not less?

JONATHAN ZEPPETTINI: Not necessarily more, just enforcing the laws we already have to protect people. I’m not a big fan of government regulation, but I do acknowledge that we have some regulations for a reason. You can’t go around making claims that have no substance and raising money from random people who might not be educated about what they’re investing in.

BLOCK TRIBUNE: Are there too many tokens in the market right now?

JONATHAN ZEPPETTINI: I believe so. The fact that I don’t know how many there are, probably lends credence to that.

BLOCK TRIBUNE: Okay. What can be done about that? Just time and waiting for that to wither away from the market?

JONATHAN ZEPPETTINI: Yeah. Market forces are going to take care of this. Right now, people chase the flavor of the month. Eventually, the market is going to consolidate around the ten, or hundred, or couple hundred coins that actually have some future, some potential there. I don’t believe the numbers [inaudible 00:02:50] very large, but other people can disagree. It’s just, I know that it’s not going to be a situation where every week, dozens more of [inaudible 00:02:59] coming out with lofty promises, but no ability to deliver on it.

BLOCK TRIBUNE: India, China, and Pakistan are now out of the cryptocurrency game, at least according to their governments. What effect is that going to have on the market?

JONATHAN ZEPPETTINI: Probably none. Regulating this stuff is really hard. I think the U.S. has taken the right approach here. You’re not going to put the genie back in the bottle, so you have to work with it. It’s the same thing like China [inaudible 00:03:28] China. How many times did China ban or claim [inaudible 00:03:30] a softball on crypto. That actually, the price was rallying while that was happening. I think people understand that if they want to invest in crypto, government’s not going to really be able to stop them.

BLOCK TRIBUNE: Okay. What’s your take on ethereum? It seems to be melting like an ice cube in the sun.

JONATHAN ZEPPETTINI: Not terribly excited about ethereum. I come to crypto from an investor background. It’s not something I invested in for a number of reasons. I think it was largely fueled by these ICOs [inaudible 00:04:08] demand side. That seems to be decompressing a little bit as the ICOs are waning. Technologically, it’s not something that excites me so much that I want to talk about it.

BLOCK TRIBUNE: All right. Decred, let’s talk about that for a second. Network governance-

JONATHAN ZEPPETTINI: That I could talk about all day.

BLOCK TRIBUNE: Network governance is your edge. Why is that important?

JONATHAN ZEPPETTINI: It may sound really boring, but it’s important because, by the time you realize you need governance, and everyone is going to need it at some point as a project matures. By the time you realize you need it, if you don’t have it, you’re already screwed. Our guys were bitcoin developers who came to realize, after two-and-a-half years, pretty much, of developing for bitcoin, that bitcoin had some serious fundamental issues if it was going to be developing as a protocol. So, our guys built something called btcsuite, which is a golang implementation of bitcoin. The idea there is, if you’re going to have a protocol-

They built that. The idea was, if bitcoin is going to be a protocol, you’re not going to have one implementation. You don’t have one HTTP server, or one PCP IP server out there, you’ve got a bunch. That’s how protocols work, to have stability, to make sure the whole thing doesn’t collapse when there’s a bug in one of these things, you’ve got to have a bunch of them.

While they were doing that, they had some experience with other bitcoin developers. They realized that there wasn’t a robust marketplace of ideas, and it wasn’t that welcoming as a community. After two-and-a-half years of building that, they pivoted into Decred, because they realized that the most important things, in terms of problems that they were trying to fix, were governments. How do you make decisions as a group? Because, conflicts are bound to arise. Proof of work having too much power and not that much skin in the game relative to the people who actually own the coins.

Then the other one is the funding mechanism. You got bitcoin, you need money to run something like bitcoin. You have to hire developers. People need to be paid for their work, ideally. Well, if they’re being paid by third parties, well, the incentives are kind of misaligned again. What do those third parties want them to do? And, why are those third parties, who may or may not actually own bitcoin, deciding the future of bitcoin? Decred sought to solve all those problems.

BLOCK TRIBUNE: All right. Right now, we’re having congressional hearings on Facebook. While that’s not a blockchain project, it’s certainly raising some issues that face the blockchain community and privacy. What do you make of it all? Is it going to be ruining things for everybody that’s trying to build a business in blockchain?

JONATHAN ZEPPETTINI: I think the whole Facebook debacle highlights the importance of privacy. That’s something that we’re really serious about at Decred. One of the things that we’re getting ready to launch pretty soon is privacy in the coin, so that the coin actually has fungibility. One of the shortcomings of bitcoin is your coins on the blockchain are transparent. You can see the provenance of them. You can know that, “I paid you. You paid Lindsey.”

That shouldn’t be the case. If you want something that’s going to potentially replace cash, it should be fungible. Because, if I pay somebody, they shouldn’t know my total net worth or be able to figure out what charities I donate do. Likewise, if you’re paying your employees, your employees shouldn’t be able to say, “Hey, Bruce is giving to this charity. Bruce does business with that person.” It shouldn’t be so easy to track these types of things. So, we see fungibility as part of the privacy issue. That’s fundamental, in our views.

BLOCK TRIBUNE: Is that going to sit well with the law enforcement agencies that want to be able to track things?

JONATHAN ZEPPETTINI: Well, you know how these things are. Ideally, they like everything to be transparent, but the technology is just going in the opposite direction, at this point. For cryptocurrencies to have the type of utility that we want them to have, this is a feature that they need. I believe even bitcoin, though it’s going to move extremely slowly and it might take an additional three years after we’ve done it, they eventually will probably have this feature, as well.

BLOCK TRIBUNE: How does your algorithm work?

JONATHAN ZEPPETTINI: Basically, the way our incentive model works is we’ve flipped it around. Instead of proof of work miners being in charge, we’ve said, “Okay, who’s got the most skin in the game?” [inaudible 00:09:52] We believe it’s, essentially, the coin holders. They put up the money. They’re the ones who are going to have to deal with the consequences if everything catches fire. The whole idea behind hybridized proof of work/proof of stake, is you still have proof of work doing the hashing, building the blocks. It’s like a production line. They build the blocks, then proof of stake, the people like you and I, let’s say, who own the coins, get to look at those blocks and validate them, and say whether or not we like this. It’s like being on a production line, and we’re doing quality control.

Through that, we’re able to have governance that looks a lot like what people would relate to corporate governance. If you’re a shareholder in Google, well, you can sit a board meeting, theoretically, or sit at a shareholder meeting and vote your shares. Because, you’re an owner, essentially. We’re flipping a model where most projects have a benevolent dictator. That works really well sometimes, and sometimes it doesn’t.

I think with bitcoin, we’ve seen the case where it doesn’t. For the first few years it was great. We had the Satoshi team, then Gavin. Then when that started to break apart, yhad all these other competing interests. Proof of work miners, developers acting as high priests and gatekeepers. The idea that you’re switching … You’re in a decentralized project. You’re creating something that goes against the whole idea of central banks. And, you’re replacing one group of central planners with another group of central planners who are developers. How do you even know if they own coins or not? Some people think it’s not relevant, but we think it is, in terms of the skin in the game.

That’s, basically, what we’re about. If I had to put it into a little 10 second pitch, I’d say Decred is about skin in the game.