Digital Currency Divide: Bitcoin, Decred and the Virtual Finance Future
Despite false starts, scams and startup crash-and-burns, the digital currency bitcoin is enjoying the tail end of a strong year. According to The Hacker News, however, a number of core developers have now left bitcoin to form their own organization — Company 0 — and develop a new kind of cryptocurrency called Decred. But can this venture succeed where others have failed? And if so, is there enough global elbow room for two digital-dollar giants?
A Shiny Future for Digital Currency?
Predictions from Coin Desk suggested that bitcoin will enjoy a banner year through 2016 as the network begins to scale and the currency shines as a safe-haven asset for investors looking to shore up liquidity. Sidechain technologies — which allow bitcoins to be moved from the main blockchain to higher-level protocols — will also enjoy a boom as they adopt an open-source model.
Of course, successfully mining, trading and commoditizing bitcoins isn’t easy. EconoTimes noted that startup after startup has fallen as bitcoin prices fluctuated and companies weren’t able to stay profitable.
For example, Mining ASIC Technologies got off to a solid start but was bankrupt by the end of 2014. Similarly, bitcoin buying service Brawker, which lets consumers buy products with the digital currency, will shutter its doors in April 2016, citing competition and workload issues. So it’s worth asking: What makes Decred different, and how can it avoid the same pitfalls as bitcoin?
According to Softpedia, the new cryptocurrency is looking to solve what Company 0 CEO Jacob Yocom-Piatt said is the biggest problem with bitcoin: It’s controlled by a small group of external actors who decide how the service will evolve, often in spite of developer objections and to the detriment of users. To address the problem, former bitcoin developers are opting for a decentralized, community-based governance model. The Decred team also plans to introduce a number of features that include:
- A consenus-based system using proof of work and proof of stake;
- Hashing via the Blake-256 algorithm;
- Ed25519/secp256k1-Schnorr or secp256k1 signatures to improve software integration; and
- Potential bitcoin compatibility.
Simply put, Decred wants to eliminate governance and decision-making issues that plague bitcoin while keeping many of the central functions intact. It makes sense: Bitcoin has garnered enough positive attention and investor confidence that there’s no need to reinvent the wheel. Rather, the cryptocurrency aims to coast along on bitcoin’s momentum with promises of improved security and better collaboration.
Is Decred the next bitcoin? Maybe. More importantly, however, is that bitcoin is the current bitcoin — in other words, a digital currency that actually garners public and investor support. The result is a positive outlook for bitcoin and tangent technologies, which encourages two outcomes: increased security for investors and the emergence of strong competition. It’s capitalism at work — if not Decred now, then another competitor in the near future. Bitcoin is up, business is booming and the virtual finance future is just starting to take shape.