While Bitcoin reaches an agreement via Proof of Work (PoW), there are a few other ways blockchain networks can come to a consensus. Proof of Stake (PoS) is one of the most common consensus mechanisms.
In a PoS system, validators verify block transactions based on how many coins they have staked in the network. Instead of miners solving complex mathematical equations, like in a PoW consensus method, they stake a fixed amount of coins required by the network that allows them to validate transactions. Delegated Proof of Stake (DPoS) is a consensus algorithm which is an advancement of the fundamental concepts of Proof Of Stake. DPoS consensus algorithm was developed by Daniel Larimer, founder of BitShares, Steemit and EOS in 2014.
In DPoS, token holders elect a group of block producers who are responsible for validating transactions and creating new blocks. These block producers are incentivized to act in the best interest of the network because they receive rewards for their work. DPoS is used by several blockchain projects including EOS, TRON and Cardano.
DPoS is an advancement of the fundamental concepts of Proof Of Stake. In DPoS, token holders elect a group of block producers who are responsible for validating transactions and creating new blocks. These block producers are incentivized to act in the best interest of the network because they receive rewards for their work. DPoS is generally faster than PoS, with the ability to process more transactions per second. DPoS is far more democratic than PoS, as users can choose who exactly validates and creates new blocks on the platform they use. On top of this, DPoS is more energy-efficient than PoS and doesn’t require as much hardware.
Delegated Proof of Stake (DPoS) is a consensus mechanism that is a variation of the classic Proof of Stake (PoS) system. DPoS evolved from PoS and allows users of the network to vote in delegates who then validate blocks. In this article, we take a look at what makes it unique.
Pros of DPOS
Although less decentralized, the pros of DPoS:
- Reputation-based
- Fast
- Scalable/Minimal hardware requirements
- Voting power
History of Delegated Proof of Stake (DPoS)
Proof of Stake (PoS) was first discussed in July of 2011 during a Bitcointalk forum, with the intent of finding a way to process and verify blocks more efficiently. Thereafter, Daniel Larimer conceived DPoS in 2013 and introduced it in 2014 as a modified version of the standard Proof of Stake (PoS) consensus mechanism. The first iteration of DPoS was deployed on BitShares in 2015.
How Does DPoS Work?
Users of the network vote and elect delegates, who validate blocks. Also referred to as ‘witnesses’ or ‘block producers’, only a certain number of these delegates are permitted; and they can change, as others can be voted in instead.
With DPoS, users of the networks can pool tokens into a staking pool and vote for the particular delegate they wish. When staking, users of the network do not need to send their tokens to a particular wallet; instead, there is a staking mechanism or service provider they can operate through.
Delegates are important because they ensure the transactions are accurate; and, if they validate the block correctly, they are then rewarded with the transaction fees, which can be distributed to the individuals who voted them in. The more that a user is able to stake, the larger the allotment they can receive.
A user’s reward from their delegate is related to the portion of the total stake they represent. For example, if a user only makes up 10% of the entire staking pool, they would receive up to 10% of the total reward.
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