In a blockchain, there are several ways to secure the network and Delegated Proof of Stake (DPoS) is one of them.
What is Delegated Proof of Stake (DPoS)?
Delegated proof-of-stake (DPoS) is a consensus mechanism used in a blockchain to determine who the validator of each block will be and what data should be added to the blockchain.
Dan Larimer (blockchain engineer) invented it when he was working on Bitcoin’s scalability and energy problems.
After that, he wanted to build a system that consumes less energy and with high TPS.
Dan named his system, Delegated Proof of Stake (DPoS).
How does DPoS works?
In DPoS systems, users ‘vote’ to select ‘witnesses’ (transaction validators).
The top tier of witnesses (who gets most votes) earn the right to validate transactions.
If a user trust to another one, he/she can delegate his/her voting power.
Votes are weighed according to the size of each voter’s stake.
To be a top tier witness, large amount of stakes are not necessary.
Votes from users with large stakes can result in users with relatively small stakes being elevated to the top tier of witnesses.
The number of witnesses in the top tier is limited.
Witnesses are responsible for validating transactions and creating blocks, and are in return awarded the associated fees.
Votes are dynamic which means delegates can be voted in or out at any time.
If a delegate lose his/her reputation or act suspiciously, he/she can be replaced by a user who gets more votes. As a result, there is a big competition in this area.
Delegates are responsible for distributing the block rewards they receive to their voters in a proportional manner based on voting power.
“The delegates oversee the governance and performance of the entire blockchain protocol, but do not play a role in transaction validation and block production.” In addition, they can propose changes on the system, such as the amount a witness should be paid in return for validating a block.
“BitShares Blockchain implements an industrial-grade technology focused on businesses, organizations or individuals, with the free-market economy.”
In addition, the DPOS algorithm has two sections: electing a group of block producers and scheduling production.
BTS has $163.867.271 market cap.
EOS is the 4th cryptocurrency right now with $3.832.761.167 USD market cap.
It is another cryptocurrency who implemented DPoS as consensus model.
ARK provides users, developers, and startups with innovative blockchain technologies. It utilizes DPoS consensus mechanism with 51 delegates which are responsible from running the network and getting rewards from block rewards just like miners.
ARK has $72.643.226 USD market cap.
Loom Network (Loom)
One of my favorite coins, Loom Network’s DPoS sidechains allow for truly scalable blockchain games and DApps with the security of Ethereum mainnet.
Loom Network (Loom) has $52.819.636 USD market cap.
PROS-CONS of DPoS
As less nodes needed to confirm transaction, DPoS consensus mechanisms allow for higher throughput which means more scalability
- Less Energy Consumption
As there are no miners or mining activity, DPoS is very energy efficient system. Moreover, for most DPoS chains, users don’t need expensive hardware to run a node.
- Incentives for Honesty
Delegates has to be reliable as any malicious act would risk getting voted out.
In theory, it is easy to organize a 51% attack as there are less number of people for block validation.
- Concentrated Voting Power
The more tokens you hold, the more power you have. As a result, it will directly affect the voting system.
- Need Participants
Without a large number of users, the system will not work as intended.
DPoS vs PoS
First of all, as I mentioned in this post,in a PoS consensus mechanism, there are two parts of selection of a forger (In a PoS system, there are no miners, there are “forgers”).
In a DPoS system, users vote to elect a number of witnesses.
Secondly, DPoS is much faster as there are smaller number of users that verify transactions and create blocks. As a result, DPoS is more scalable.
Finally, a fork needed to change the system in a PoS consensus, on the other hand, in a DPoS consensus, delegates can propose changes to the protocol but the changes must be approved by the users.
In conclusion, there is no BEST consensus. It depends on the needs of the project. For more scalability oriented projects, DPoS will be a solid choice.