Delegated Proof of Stake (DPoS)
Introduction
Introduction
Delegated Proof of Stake is a consensus mechanism that is a variation to the popular Proof of Stake (PoS) system. It’s similar to PoS but with the addition of a community-based system. In DPoS, the community (users) votes to appoint delegates to run the network.
DPOS: History, Tech & Governance
Blockchains use different mechanisms to reach consensus. For example, the popular blockchain network Ethereum, which used Proof of Work (PoW) before, now uses Proof of Stake (PoS) to reach agreement.
A PoS system is different from a PoW system in that in PoS, validators verify blocks based on how many coins they have staked in the network, unlike in PoW, where miners solve complex mathematical equations to verify and produce a block.
History
In July 2011, during a Bitcointalk forum, the idea of Proof of Stake was first discussed. It was brought up as a solution for how to validate blocks effectively. Two years later, in 2013, Daniel Larimer brought up the idea of a better version of PoS — DPOS — and introduced it in 2014. A year later, it was deployed to BitShares in 2015.
DPoS was formed to be a more scalable alternative to other consensus mechanisms. As it validates transactions to avoid the need for much energy consumption, validating transactions across levels of the network here is relatively fast.
Technology
The community (users) of the network elects witnesses and delegates to produce and verify blocks and govern the network. The positions of witnesses and delegates differ, and one role can eliminate or absorb another’s.
Witnesses are responsible for producing and validating blocks. A certain number of witnesses are permitted to do this, usually 100 delegates. The top 20 witnesses with the biggest stake have the most control over the network.
Fees are awarded to the top 20 witnesses (more or less depending on the network) for each transaction validated. The DPoS network doesn’t allow witnesses to prevent transactions from happening, and if a witness misses a block, the next active witness validates it and claims its reward. In the case of a malicious witness, active voting (DPoS allows users to vote out malicious actors) and financial damages help prevent a malicious act from occurring.
Governance
Users of the network can vote for specific delegates by pooling their tokens in a staking pool. This governance process, or election, is what maintains the DPoS system. Delegates are elected by the community by placing a stake in their name; the stake or tokens are not spent, but they represent the user’s claim and remain the user’s property.
Delegates do not propose core changes and are not in charge of block production and validation. They oversee parameters such as transaction fees, block sizes, network block intervals, and witness payments.
Some DPoS blockchains offer limited opportunities to elect delegates. Election voting is a continuous process in this type of network, so delegates or witnesses are tasked with performing well. The number of tokens a voter has determines their voting power in a DPoS network. Although “Size is Size,” there’s no rule restricting users with small stakes to vote. Hence, enabling all range of users to vote. This makes DPoS the most democratic approach to blockchain consensus algorithm.
Blockchains using this consensus mechanism
Conclusion
A DPoS network allows users with limited financial resources to participate in governing decisions, in contrast to PoW, which does not allow users with limited computing power to influence the network, such as Bitcoin, and most PoS networks exclude small stakeholders from participating in governance, such as 32 ETH Ethereum.
However, DPoS isn’t perfect because of its shortcomings — some cons, like centralization, affect a DPoS network because the number of witnesses is limited. For example, Justin Sun’s antics on Tron.
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Please remember to do your research. None of this is financial advice.