What Is Delegated Proof Of Stake (DPoS)?
Delegated Proof of Stake (DPoS) is a variation of the Proof of Stake (PoS) consensus algorithm that introduces delegates in addition to validators. DPoS’s primary objective is to enhance token holders’ democratic participation in the blockchain’s governance and validation process.
DPoS was developed by computer scientist Daniel Larimer in 2014, evolving from the original PoS algorithm. In DPoS, each token holder can participate in the voting process to elect delegates, also known as witnesses or block producers, who are responsible for validating transactions and securing the network. While token holders have the power to vote, the actual validation and block production is carried out by the selected delegates.
Key Takeaways
- Delegated proof of stake is a type of consensus mechanism that helps validate transactions. It is a subset of proof of stake (PoS) algorithms.
- This concept was pioneered by computer scientist Daniel Larimer in 2014. A few examples include EOSIO, BitShares, Steemit, Tron, and others.
- Here, the token holders vote and select 30 block producers, where 21 delegates govern the protocol. Also, block producers validate the transactions and add 6-12 blocks at a time.
- After each cycle, again, producers get elected. However, block validators receive no reward for block validation.
How Does Delegated Proof of Stake Work?
Delegated Proof of Stake (DPoS) is a derived version of the Proof of Stake (PoS) algorithm that involves the participation of delegates, or block producers, who help validate transactions and add them to blocks. Unlike PoS, DPoS does not entirely depend on validators for consensus. Instead, network participants who stake their tokens earn rewards for their contributions to the network.
Examples of cryptocurrencies that use the DPoS algorithm include Solana, BitShares, EOS, Steemit, Tezos, Tron, and Cosmos. The DPoS process begins with the election of delegates through a voting system where each token holder can participate. Token holders vote on nodes capable of validating transactions. After one cycle ends, voting occurs again to select the next set of block producers. Typically, token holders vote for 30 block producers, and the top 21 are chosen to act as delegates. These delegates produce and sign blocks on behalf of the stakeholders and make decisions on block size, block rewards, and other platform upgrades. No single delegate remains consistent across all blocks.
Additionally, witnesses (block producers) are present to secure and govern the network. Each producer can create 6 to 12 blocks at a time. If they add a block, they can avoid losing their chance to be re-elected as future delegates. This motivates block producers to remain consistent with the DPoS algorithm.
Witnesses receive rewards for validating transactions. On a single server, there can be around 21 to 101 witnesses. Block validators then verify the blocks created by producers through consensus. Anyone can be a validator operating on any node, but validators do not receive rewards.
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Examples
Let us look at some examples of delegated proof of stake algorithms to comprehend the concept in a better way:
Example #1
Suppose Sam works as a software developer at a popular conglomerate firm and is a blockchain enthusiast in the crypto space. After analyzing different blockchains, he realized that many forks were present and that the governance protocol was centralized around validators. Therefore, he created a DeFi product named “SUMM” that works on the Delegated Proof of Stake (DPoS) protocol. This means all transactions conducted within the ecosystem will be validated by a group of delegates.
Through an Initial Coin Offering (ICO), investors received pre-mined tokens, enabling them to vote for their delegates. Around 3000 investors elected their delegates, who will govern the network on their behalf. The validation process involves two verification checks: first, 24 block producers verify transactions and add blocks. Then, a separate group of block validators rechecks these blocks before they are added to the SUMM blockchain.
Example #2
According to crypto updates as of October 13, 2023, the digital asset platform LBank Exchange enabled the listing of Ethereum Express (ETE). As a result, users can trade the ETE/USDT pair on the platform. Ethereum Express aims to address the limitations of DeFi apps and crypto assets by leveraging a delegated proof of stake (DPoS) protocol called “Chaos Consensus.” This unique consensus mechanism combines elements of DPoS and Byzantine Fault Tolerance (BFT), introducing a random selection process for validating nodes. Additionally, Ethereum Express supports cross-chain communication to enhance interoperability within the blockchain ecosystem.
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Pros And Cons
Following are the advantages and limitations of the DPoS protocol. Let us look at them:
| Pros | Cons |
|---|---|
| DPoS avoids the risk of double-spending. | The appointment of honest block producers is necessary for the protocol. |
| The protocol allows equal voting power to all stakeholders. | Self-interest of some delegates may hamper the ecosystem. |
| It leads to less staking amount for validating transactions. | A limited number of witnesses can centralize the protocol. |
| This algorithm supports more decentralization through distributed consensus. | At times, users with fewer tokens may refuse to take part in voting. |
| It works on a sustainable network, which means it does not require much computational power. | The protocol is also prone to invasion of malicious actors in case of improper governance. |
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Delegated Proof of Stake vs Proof of Stake
Although DPoS is a subset of PoS, they have varied differences. Let us look at them:
Frequently Asked Questions (FAQs)
Is Cardano delegated proof of stake?
Cardona does include a DPoS algorithm that utilizes the consensus mechanism called “Ouroboros.” Thus, users with any number of ADA tokens can participate in the validation process and receive block rewards in return.
What is the role of witnesses in a delegated proof of stake?
The primary role of a witness is to monitor the entire network. They search for loopholes or loss of income in the blockchain or during block creation. And for this, they must preserve specific tokens as collateral. If they miss adding blocks, other witnesses may record proof of it. As a result, the stake gets reduced, and the latter receives a reward.
Does Ethereum 2.0 use delegated proof of stake?
Ethereum 2.0 does not utilize the DPoS algorithm. Instead, it works on the proof of work (PoW) consensus model. However, the earlier version did work on the staking mechanism.
Can a witness change data on the DPoS ledger?
Once a block is uploaded, the witness cannot change it on the ledger, as it is a public ledger. They can also not risk missing any block.