Freedom Of Choice: Will Delegated-Proof-of-Stake Replace Proof-of-Work and Proof-of-Stake?
Any person, who finds cryptocurrency interesting, has probably heard of such concepts as Proof-of-Work (PoW) and Proof-of-Stake (PoS). These are the consensus algorithms, one of which underlies the Bitcoin network (PoW), and the second is used in the updated version of the Ethereum network — Ethereum 2.0. Not so long ago, an alternative option appeared on the crypto market. It is called the Delegated-Proof-of-Stake (DPoS) algorithm. Is it better than PoW and PoS algorithms? Let’s find out in this article.
What are consensus algorithms?
Blockchain is a huge system full of data. In order not to get lost in it and not to waste time on an endless search for the necessary information certain rules were developed. All participants in the network obey them: those who receive, those who send, who controls, who observes, who selects data, etc. These rules are called consensus algorithms, and without them, blockchain simply will not exist. They helped to build stable decentralized systems, and also to increase the throughput of blockchains and their scalability.
Creating a Delegated-Proof-of-Stake: How the Algorithm Works
The main developer of delegated-proof-of-stake (DPoS) technology is Daniel Larimer. In 2014, he told about his idea for an improved Proof-of-Stake algorithm, which earlier was introduced as a more profitable alternative to Proof-of-Work.
The goal of developing a new algorithm was to introduce the ideas of democracy among the participants of the blockchain network. The technology uses voting mechanisms, giving each user the right to choose and protect their own position. The votes of the participants with the largest deposit in the account have more weight. This is done primarily to protect the blockchain from centralization, monopolization and malicious use of resources.
Larimer claims that in his development he seeks to minimize corruption and maximize freedom in society. He believes that the same goals were tried to achieve by the creator of Ethereum, Vitalik Buterin.
“My entire mission in life is based upon finding crypto-economic solutions for securing life, liberty, property, and justice for all.” — says Larimer.
Moreover, Larimer is convinced that giving users power over the features of the system leads to healthy competition and, the development of an economic society:
“I, on the other hand, am looking to create tools to be used by competing groups of good people where at least 2/3 are honest. I believe people are fundamentally good. The more effective a group is at maintaining its integrity as it grows, the larger the group will grow. The more corrupt a group is, the faster it will die.”
Some cryptocurrencies are already based on the DPoS algorithm, for example: Cardano (ADA), Steemit (STEEM), BitShares (BTS), ARK (ARK), Tezos (XTZ), Oxycoin (OXY), TRON (TRX), CON (ICX).
Delegated-Proof-of-Stake: advantages and disadvantages
Let’s take a look on advantages of DPoS algorithm:
- Scalability. DPoS tokens are more scalable than PoW coins. They do not require big computing power and are suitable for weak hardware.
- Speed. DPoS algorithms outperform PoW and PoS in terms of speed.
- Smaller investments. The DPoS cryptocurrency is distinguished by its democratic nature — it requires less computing power from the user, and therefore lower financial costs.
- Eco-friendliness. DPoS is more environmentally friendly since users do not need to solve difficult puzzles which require a lot of energy.
- Safety. DPoS algorithms are protected against double spending attacks. This is one of the main problems with crypto, when one token can potentially be spent twice. DPoS technology made it impossible.
The disadvantages of DPoS are:
- Interest of community. For the successful existence of the network, it is necessary that all its participants are really interested in its development, and not just in personal benefits. The management of such a decentralized community will be concentrated in the hands of the users themselves. According to Daniel Larimer, at least “2/3 are all honest and good people”, but is this really so?
- Limit. The number of participants in the DPoS network is strictly limited (from 20 to 100 participants).
- Competition. Since the DPoS system is based on the voting system, it has its issues. The weight of the vote depends on the size of his deposit. So there is a high probability of situations where a user with a small rate is simply afraid to express his opinion. Because he has to compete with holders of larger stakes.
In general, the Delegated-Proof-of-Stake technology has a good potential. It scales quite well, allowing you to process more transactions per second than Proof-of-Work and Proof-of-Stake. But at the same time, it relies too much on the human factor and believes that all participants have good intentions. Will it one day replace Proof-of-Work and Proof-of-Stake? Only the future will tell. Already started to appear mixed versions of DPoS mechanism. For example, Binance coin (BNB) uses Proof-of-Staked-Authority (PoSA) — it’s a combination of Delegated-Proof-of-Stake and Proof-of-Authority (PoA) algorithms. And there are other projects like Binance coin out there. For now it’s just one more interesting option in Crypto World to choose from, which is great!
What consensus algorithm do you find more attractive? Why? Let us know in the comments below! If you want to learn more interesting facts about crypto then check out our blog! You might like our articles like “Is Proof-Of-Stake A Security?” and “Binance Coin Price Prediction”.
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