Decred — An economic breakthrough – Ammar Naseer

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The differing tokenomics of Bitcoin, Ethereum, and Decred

Tokenomics covers the economic incentives of digital tokens, as incentives dictate their value capture. Here’s a comparison of how Bitcoin, Ethereum and Decred apply varying approaches in their protocol design:

Bitcoin is the current gold standard for cryptocurrencies. It is an apolitical scarce monetary asset much like a digital gold, but with greater divisibility and portability. Bitcoin has a fixed maximum supply of 21 million tokens, each of which are subdivisible into 100 million units.

Software products need mechanisms for upgrades. Bitcoin is the most secure public blockchain today, but it will need technical feature upgrades over the coming decades, many of which will be major decision points. If Bitcoin adoption reaches a billion plus people, it’s lack of governance will present risks whenever there are diverging decision gates. Bitcoin’s network has already seen community forks over different approaches for speediness, and the near future will require upgrades to privacy, with no clear preferred solution.

From an economic sense, Bitcoin’s apolitical fixed supply makes it an inflation and seizure proof store of value. Where Bitcoin is highly divisible and portable, it does not provide incentives for day to day use. While Bitcoin is great to protect against inflation and property rights confiscation, it doesn’t generate ongoing yield or solve for near term applications as a medium of exchange. The lack of ongoing yield has given rise to an emerging market of secondary providers who provide interest bearing services in exchange for custodial risk.

Bitcoin’s lack of yield has interesting implications. Where Bitcoin derives value by addressing confiscation and counter party risk, Bitcoin users are already seeking alpha by staking their $BTC with centralized third parties.

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Cloud Mining: HashflareGenesis MiningIQ Mining

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