More than ten years have passed since the launch of Bitcoin. A thousand other crypto projects have appeared, each with its own purpose, architecture, and governance model. Some projects are more centralized, such as Ripple, which meets a flurry of negativity from supporters of the original idea of cryptocurrencies. Some projects have completely transferred control to their community and are funded by donations. Some projects, such as Cardano, are aware of the importance of involving the community in the decision-making process and are on the way to establishing such a model. The crypto community itself was divided into two camps. Some believe that community-driven projects are exactly how real cryptocurrencies should function. Others, on the contrary, are afraid of such projects, considering that, for the most part, it is a scam that is not worth investing in and does not carry any utility. In order to understand the question of who is right, we suggest that you find out what the concept of “community-driven” means and which projects with such a model successfully function today.
What Does Community-driven Mean?
A community-driven governance model is a form of governance where the power source is community members. It is the community that decides which laws and regulations need to be implemented or maintained for the harmonious development and existence of the crypto project. Thus, each community member gets the opportunity to participate in the decision-making process. This often happens by a general vote in which the votes of each member of the community are taken into account. Roughly speaking, for example, if developers are planning to release a new update, they cannot simply integrate it into the protocol. The decision is made directly by the members of the community. To do this, a referendum is held in which community members vote “For” or “Against” this update. The decision on whether an update will be adopted or not is formed based on how the majority of participants voted. This is just one of many examples of how the community can make decisions about the project’s future.
Another example is when members of the Proof Of Work cryptocurrency community vote for halving. Or when members of the Delegated Proof of Stake community vote for certain block producers. Thus, it is a kind of democracy on the blockchain, where each cryptocurrency is a state, and each community is its people.
Top 5 Community-driven Cryptocurrencies
Dogecoin is one of the most controversial cryptocurrencies on the market. In 2013, the Dogecoin cryptocurrency was released as just a joke, but by 2022 everything had changed, and the coin practically does not leave the rating of the top 10 cryptocurrencies by market capitalization. Dogecoin also has one of the most powerful communities, second only to Bitcoin. For example, the official Dogecoin Twitter account has more than 3 million subscribers. The coin is actively supported by such influential people as Elon Musk and Vitalik Buterin. Dogecoin is widely recognized as a digital currency that can facilitate, accelerate, and reduce the cost of cross-border payments. The developers have always emphasized that Dogecoin does not belong to a particular company, and all decisions on the project’s development are made by the community. In this path, it should be noted that in 2021, the Dogecoin Foundation was created. Its purpose is to reorganize the cryptocurrency. Vitalik Buterin became one of the Dogecoin Foundation’s advisors. Together with Vitalik, the project team began work on a “Community Staking” system with which any participant will be able to contribute to the project’s development.
Hive is a decentralized information storage network within which any participant can receive a reward for generating new content. Due to blockchain technology, all transactions, publications, and votes can be transparently reviewed. It can be videos, texts, and other materials useful to the community. Content creators and consumers can easily earn money by participating in various games, publishing posts, teaching others, participating in discussions, etc. Hive is the development of a group of members of the Steem community who were dissatisfied with the centralized nature of the latter and decided to separate into an independent decentralized project. Thus, the members of the Hive community put decentralization above all else, and the Hive project is entirely community-driven. Hive operates based on a Delegated Proof of Stake consensus mechanism where each member has 100% participation. By voting, members of the community select a block of producers known as Witnesses and can also vote out poorly coping Witnesses.
Monero is the most popular anonymous cryptocurrency on the market. The Monero cryptocurrency was created based on the ByteCoin blockchain, developed in 2014. A cryptocurrency using the CryptoNote protocol, the mechanisms which make the blockchain completely anonymous. CryptoNote utilizes ring-signature and stealth-addresses technologies. Thanks to these technologies, the transaction participants can hide all the information: who, to whom, and how much was transferred. However, due to the high anonymity of the coin, financial regulators from different countries impose bans on its circulation. Because of this, the listing of Monero had to be abandoned by some crypto exchanges.
Monero is a community-driven cryptocurrency where each participant can contribute to the development of the project. On the official website, contributors can find detailed information and explore many ways to help the project. For example, you can join one of more than ten workgroups that contribute to the project. For example, community members who have coding skills can join the Development Workgroup. And participants who want to help the project become publicly available can join the Localization Workgroup and help translate the Monero-related documentation.
Decred is a cryptocurrency launched in 2016, strongly inspired by Bitcoin. One of the problems of the first cryptocurrency is a rather high centralization. Company 0 decided to create its project in which, thanks to the hybrid PoS/PoW consensus, all participants are equal and can influence the development of the ecosystem. Decred is designed to help use blockchain technology to increase the protection of personal data and provide greater freedom in project governance. The emphasis is on decentralization, which is achieved due to the fact that each holder can participate in the voting and influence the development of the protocol. The developers want to prevent a monopoly in governance. Therefore, all holders of native coins have the same powers. In October 2018, the Politeia voting platform was launched. It allowed all the holders to control each direction of the project development. There are two types of participation in governance — on-chain and off-chain:
- Validation of blocks and changing the rules for reaching consensus are discussed on-chain.
- For voting on more complex issues (from the distribution of the treasury to the modification of the principles of the project), the Politeia platform was released. Within it, you can make suggestions, start discussions, and vote “For” or “Against”.
The Verge project was launched back in 2014. It is one of the oldest anonymous cryptocurrencies. It is a decentralized currency that is built on an open-source platform. It was initially called DogeCoinDark and was developed by 11 anonymous programmers. In February 2016, after rebranding, it was renamed. Verge is written using the Bitcoin network’s original code. The main difference between Verge is that it uses TOR and i2P networks for final encryption and IP modification. Thus, complete confidentiality and anonymity during transactions are guaranteed. The community is the main pillar of Verge. In order to expand their community, developers integrate a multilingual environment into their own services, as well as create official pages on social networks in different languages. As part of the project, Ambassador Departments were launched to provide contributors with all the necessary information on how they can contribute to the development of cryptocurrency. In addition, Verge is a project that relies mainly on donations. Thus, Verge is a cryptocurrency from the people and for the people.
Recently, the phrase “community-driven” has begun to appear more and more often in the description of new projects. Many projects use this as just a marketing ploy to attract more users to their projects. The agitation of “community-driven” projects promotes the idea of “We are all a big family”, thereby motivating users to invest in order to become members of this “family”. Therefore, when investing in community-driven projects, it is essential to DYOR and make sure that the crypto project really carries some value and utilities.