Delegated Proof of Stake (DPoS) - How does it work?

8
Jun

Delegated Proof of Stake (DPoS) – How does it work?

The Delegated Proof of Stake (DPoS) system is also a consensus algorithm similar to the preceding PoS system but is considered to be a more democratic and efficient version.

Both the PoS and DPoS consensus algorithms are used as better alternatives to the Proof of Work (PoW) mechanism. The PoW mechanism, by design, requires a lot of external resources or lots of computational works before it can secure a transparent decentralized, and immutable, distributed ledger. But unlike the PoW system, PoS and DPoS consensus algorithms, by design, require less external resources or computational works. They are more eco-friendly and sustainable.

What is Delegated Proof of Stake (DPoS)?

Delegated Proof of Stake (DPoS) is a consensus algorithm designed in 2014 by Daniel Larimer. DPoS is a fast, highly flexible, decentralized, and efficient Blockchain design that is mainly designed to protect all participants in a transparent, free and fair environment. Some cryptocurrency such as Lisk, Ark, Steem, and Bitshares have already adopted the DPoS consensus algorithm. DPoS system acts as a form of digital democracy as it maintains an immutable agreement on the truth across the system. In a nutshell, DPoS can be considered as a technological democracy.

How the Delegated Proof of Stake (DPoS) Works?

A DPoS consensus algorithm counts with a voting system where stakeholders are able to vote for a few delegates (witnesses) who will protect the network on their behalf. During the generation and validation of new Blockchain blocks, these delegates are responsible for achieving consensus. Stakeholders’ voting power is proportional to their stake (the number of cryptocurrency coins each stakeholder holds). Though the voting system varies from project to project, each delegate generally presents an individual proposal when seeking votes from stakeholders. And the rewards received by the delegates are usually shared proportionally with the stakeholders that elected them – their electors.

Hence, the DPoS system creates a real-time voting system that depends directly on the delegates’ reputation. As a result, if an elected delegate does not work efficiently or misbehaves, it is quickly ejected and replaced by another delegate. This makes the DPoS blockchains to be of better performance, the most inclusive, able to handle more transactions per second (TPS), the least centralized consensus algorithm, and more scalable when compared to PoS and PoW.

Just like in the PoS system, delegates are also required in some versions of DPoS system to show commitment by making some funds deposit into a time-locked security account. These funds would be confiscated in case the delegates engage in malicious behavior. These versions of DPoS system that requires commitment deposits from delegates is often referred to as deposit-based PoS.

Generally, the functions of delegates are to:

  • Ensure that their node is always up and running.
  • Collect the transactions across the DPoS network into Blockchain blocks.
  • Sign (validate) and broadcast these Blockchain blocks and validate the transactions.

However, in case any issue arises in regard to consensus, the DPoS network will allow this issue to be resolved in a free, fair and democratic way. Though the delegates are not empowered to alter any transaction details, they have the power to exclude certain transactions in a block as they are validators. However, excluding certain transactions from a block has very little effect because the transactions would be included in the next created block. As such, the excluded transactions will be only slightly delayed and the next delegate would collect the fees associated with validating these transactions.

More so, the dishonest delegate will be voted out by the rest of the network. In summary, the DPoS consensus protocol is a self-governing system that is monitored and controlled by all of its participants to ensure that the best interests of the system remain the main concern.

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