Note: Placeholder is an investor in Decred.

Decred (DCR) is a cryptocurrency with hybrid proof-of-work/proof-of-stake consensus that enables on-chain governance. Its proof-of-work mining is similar to Bitcoin’s, except each block has to be approved by a randomly-selected group of users who “stake” their DCR. In addition to approving a block, these selected stakers can also vote on changes to Decred’s consensus protocol, allowing them to influence the long-term evolution of the network. This architecture creates a fair system of checks and balances between users, miners and developers.

To stake, users can purchase “tickets” with DCR using a Decred client. Every time a block is produced, five random tickets are chosen from the “ticket pool” to vote on the block’s validity. It requires at least 3 of 5 stakers to approve the block and add it to the chain, or alternatively, veto and discard it (in which case, the miner receives no reward).

Tickets are also used to vote on potential upgrades to the Decred protocol. Votes are tallied over 8,064 blocks (about 30 days) to allow for the entire ticket pool to participate, and it takes 75% approval for a change to go into effect.

A market internal to the network determines the ticket price using a “stake difficulty algorithm,” which modulates the price of newly purchased tickets to maintain a target pool size of 40,960 tickets. The more people want to participate in Decred’s governance by purchasing tickets, the higher the price of a ticket.

After voting, tickets are destroyed, and their owners receive the purchase price back plus a share of the block reward as compensation for participating in the consensus process. If a ticket isn’t called, or fails to vote after 40,960 blocks (about 142 days), its owner receives a refund, but no reward.