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Understanding Delegated Proof of Stake (DPoS)

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Delegated Proof of Stake (DPoS)

Delegated Proof of Stake (DPoS) was invented by Daniel Larimar in 2015. It is an alternative consensus mechanism and an improvement of the Proof-of-Stake (PoS) model. DPoS is the most flexible, most decentralized, most efficient and fastest consensus model currently available in the blockchain space. This consensus mechanism leverages the power of stakeholder approval through voting to resolve issues in the blockchain through a fair and democratic manner.

Process of delegated proof of stake

In delegated proof of stake, the stakeholders elect what are known as witnesses. The witnesses are responsible for adding blocks to the blockchain and are rewarded with associated fees. The pay rate for witnesses is set by the stakeholders through the elected delegates. These witnesses should be chosen with the best interests of the network at heart since they keep the network running safely and smoothly.

Stakeholders have the ability to vote for as many witnesses as they wish so long as 50% and more of the stakeholders believe that adequate decentralization has been achieved. The witnesses with the most votes are elected. The voting process is continuous and the witnesses have an incentive to carry out their function to the highest standard lest they lose their position. Stakeholders have a reputable scoring system to help them assess the quality of the witnesses.

There are different versions of DPoS. Some of these require that the voted delegates deposit certain amount of funds into a time locked security account as a show of their commitment to the blockchain. The funds are confiscated in case the delegate has any malicious behavior.

Also, different DPoS blockchains replace the witnesses after different durations. A chosen group of witnesses can be replaced once a day or once a week. Each witness has a turn to produce a block at the allocated time with a fixed schedule of one block after every 2 seconds. If a witness fails to produce a block at their allocated time slot, their slot is skipped and the next witness produces the next block. These witnesses who fail to produce a block are not paid and may be voted out.

By selecting block producers, transactions are confirmed in an average of just 1 second. This is very fast when compared to the current system in Bitcoin because of their Proof of Work consensus mechanism. Additionally the delegated proof of stake protocol is designed to protect all participants in a blockchain from unwanted regulatory interference.

Elected Delegates

Delegates are also chosen in a similar manner as witnesses. Delegates are co-signers on a special account which holds the privilege of proposing changes to parameters of the blockchain. These include all aspects of transaction fees, witness pay, block sizes and block intervals. Once delegates have submitted the changes, the stakeholders then have a time period within which they will decide whether or not these changes should be implemented.

This method of approval ensures that the delegates do not have power over the system and cannot change anything in the blockchain. The changes to the network parameters are only made by the stakeholder. Additionally, this system protects the delegates from regulations that may apply to administrators of cryptocurrencies.

Advantages of a delegated proof of stake mechanism

  • They save on energy costs as compared to PoW which require large amounts of energy to decide who adds the next block in the network. In PoW, there is a high competition for the addition of a block while in DPoS, witnesses have a specific amount of time to do so. With this, energy costs are reduced for adding a single block on the blockchain.
  • DPoS promotes decentralization. Centralization of mining is prevalent in PoW consensus mechanism because ASICs are required. Only a few people who can afford the specialized ASIC computers stand a chance of adding a block. In DPoS, stakeholders select the witnesses to add blocks, who can be shuffled regularly.
  • ASIC specific computers are not required for one to be a witness, user or delegate under DPoS. Therefore, anyone with a computer can be able to get into these roles and make changes and decisions as to the direction of the blockchain.
  • Transactions under delegated proof of stake consensus models are much faster when compared to PoW and PoS. this is because the transactions are validates faster and there is a specified time period for a block to be added to the network.
  • DPoS networks are less likely to suffer a double spend attack. This is because the network can monitor its own health and immediately detect a loss in communication as a result of witnesses failing to produce blocks as scheduled.

Conclusion

Delegated proof of stake blockchains can never really achieve decentralization because they need to strike a balance between the number of witnesses and scalability. With many witnesses, the network risks having scalability issues hence they may want a smaller number of witnesses.

There are many cryptocurrencies currently using DPoS and others being developed to use this consensus mechanism. Some of these include; BitShares, EOS, Lisk, Ark, Nano, Steem, CardanoTezos, Rise and  Oxycoin.

 

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