What is Delegated Proof-of-Stake (DPoS)? How does DPoS work? (2022)

Two of the most common consensus mechanisms are Proof of Work and Proof of Stake. While PoS network nodes that have locked up or "staked" tokens as collateral are randomly assigned the task of verifying transactions, PoW uses a large number of computers to perform "work" to confirm transactions.

PoS has been developed in recent years and is becoming more widely used in the worldwide blockchain community. Delegated proof of stake is one of many variations on the original PoS concept (DPoS).

What is Delegated Proof of Stake (DPoS)?

Delegated Proof Of Stake (DPoS) is a consensus algorithm which is an advancement of the fundamental concepts of Proof of Stake. DPoS was developed by Daniel Larimer, an American software developer, cryptocurrency entrepreneur, and founder of BitShares, Steemit, and EOSIO software. 

Instead of functioning in the same way as Proof of Stake, DPoS is intended to be a technology-based democracy implementation. To defend blockchain against centralization and malicious use, the system includes a voting and delegation mechanism, as well as incentives for users to secure the network with their staked collateral.

In addition, DPoS was also designed to provide a more scalable alternative to classic consensus algorithms. Since every block is verified in order to prevent wasting a lot of energy, processing power, and other resources, all transactions may be completed very quickly at any stage of the network's growth. 

How does DPoS work?

Delegated Proof of Stake has several distinct components that allow it to be successful and efficient at verifying transactions. Despite the fact that Proof of Stake and Proof of Work are now being adopted by an increasing number of blockchains, Delegated Proof of Stake is aimed to address the majority of the limitations that these two processes have.

Each DPoS-based network has its own voting mechanism that selects node owners who can verify blocks. In most cases, delegates are chosen based on their reputation. 

Each user who owns coins on a DPoS blockchain can vote on which nodes are allowed to validate transactions on the network. The number of coins a user stakes determines their voting power. Users who stake more coins have more influence on which nodes are elected.

Learn more: How does blockchain work?

Voting

Users can vote directly or give their voting power to another entity to vote on their behalf in the system. Selected witnesses are in charge of verifying transactions and constructing blocks.

They earn a reward if they verify and sign all transactions in a block, which is generally divided with people who voted for a witness. If a witness fails to verify all transactions within the required timeframe, a block is missed, all transactions are left unconfirmed, and the witness receives no reward.

The payment is combined with the award of the next witness who confirms the block. The next witness collects similar transactions, and the block is referred to as stolen.

Each voter's share in the election is proportionate to their vote. To get into the top tier of witnesses, a user isn’t required to have a lot of money. Rather, votes from high-stake users can propel low-stake users to the top of the witness list.

Witnesses

The number of witnesses in the top tier is limited to a specified amount, generally between 21 and 101. These witnesses are in charge of validating transactions and constructing blocks, and  are in return awarded associated fees. 

Witnesses can prohibit certain transactions from being included in blocks, but they can't modify any transaction's content, which makes them similar to the miners in Proof Of Work blockchains. 

Voting is a continual process, and each top-tier witness is constantly at risk of being replaced by another user  who receives more votes and is therefore seen as more trustworthy. As the number of candidates for witness increases, competition intensifies, and each person's reputation becomes increasingly important in order to remain competitive.

Threats of loss of income, locking of stake, and reputation score are used to keep a witness in check. Witnesses must lock a portion of their share, which will be confiscated if they act maliciously or attempt to hack the system.

Delegates

DPoS systems allow users to elect delegates to supervise blockchain governance. Except for any responsibilities in the transaction control mechanism, delegates can advise modifications to a block's size or the amount a witness should be awarded for validating a block. When delegates propose changes, blockchain users vote on whether to adopt them.

Block validators

In DPoS, block validators are full nodes that ensure that blocks generated by witnesses conform to the consensus rules. A block validator may be executed by any user to check the network. There is no incentive to be a block validator.

Pros and cons of Delegated Proof of Stake

Advantages

• DPoS coins are far more scalable than POW cryptocurrencies since they never require a large amount of computer power and are often accessible to users with less resources.
• DPoS blockchains outperformed PoW and PoS-based blockchains in terms of speed.
• DPoS vs PoW does not require as much processing power and, as a result, is less financially demanding for the user.
• As the threshold to enter is very low, DPoS is largely considered to be the most decentralized approach to consensus mechanism.
• DPoS is energy efficient and environmentally friendly.
• DPoS networks have strong protection from double spending attacks.
• DPoS systems are vulnerable to centralization as the number of witnesses is strictly limited.

Disadvantages

• Delegators must be well informed and appoint honest witnesses in order for a network to operate and make decisions effectively.
• The DPoS blockchain is vulnerable to weighted voting issues. Users with a minor interest in the outcome can opt out of voting if they believe their vote is inconsequential.
• Concentration of Voting Power: A small number of witnesses might cause the network to become centralized. Furthermore, these stakers continue to get a bigger share of the block rewards that delegates award to their voters. 
• Censorship: In a DPoS network, because there are only a few nodes responsible for transaction validation, nodes (delegates in this case) may easily block valid transactions and freeze accounts.
• Delegate costs.

Conclusion

This article has provided a comprehensive overview of what Delegated Proof of Stake is, as well as some fascinating information for this topic! If you find it useful, please share it with your friends! 

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