A consensus mechanism is a fundamental part of blockchain technology as it helps ensure that all nodes in the network agree to the state of the blockchain. The two most widely used and popular mechanisms are Proof of Work (PoW) and Proof of Stake (PoS). In addition to these, other mechanisms like DPoS have been developed to address specific challenges such as scalability, efficiency, and decentralization. In this article, we’ll talk about what is Delegated Proof of Stake, how it works, and its advantages and disadvantages.
What is Delegated Proof-of-Stake (DPoS)?
Delegated Proof of Stake (DPoS) is an advanced version of the Proof of Stake consensus mechanism. While it uses the same collateral staking system as PoS, DPoS introduced various improvements to address the challenges faced by its predecessor. In the DPoS consensus mechanism, network participants vote to elect a limited number of delegators (aka validators). These delegators are responsible for verifying transactions and producing blocks. And they also share the block rewards with the voters who elected them. This method enhances network efficiency and brings a democratic process into the mix, where all network participants have the right to vote. Unlike PoS, here, all voters can earn rewards through their elected delegators.
History of DPoS
Daniel Larimer conceived the idea of DPoS in 2013 and introduced it as an upgraded version of PoS in 2014. In 2015, DPoS gained practical implementation with the launch of BitShares, a blockchain platform co-founded by Larimer. Furthermore, he later implemented it on a social media platform called Steemit and on a blockchain platform designed for dApps called EOS (Enterprise Operating System).
What is Crypto Arbitrage Trading, and How Does it Work?How Does DPoS Work?
Voters
Voters are token holders or users whose main responsibility is to participate in the voting of delegates and governance proposals. The influence each voter holds is directly proportional to the amount of tokens they hold, meaning voters with large amounts of tokens have greater voting power. They can cast their vote for a single delegate or multiple delegates and earn a share of the rewards for adding the block. This approach not only encourages voter participation but also ensures that voters who don’t validate blocks can still receive rewards. Additionally, voting is not a one-time event; voters can change their votes at any time. This flexibility allows new delegates to be elected if the current ones are underperforming, failing to meet community expectations, or engaging in malicious behavior.
Delegates
Delegates are often referred to as validators, witnesses, or block producers. They are elected by voters to validate transactions, produce blocks, and maintain the security of the network. The number of delegates can be anywhere between 21 – 101, based on the blockchain. Compared with the PoS model, this model allows for higher throughput and efficiency. Delegators take turns solving the transaction, and if a delegator cannot solve it within the set time period, the next delegator will automatically take over to maintain block production and minimize delays. Furthermore, delegates must consistently perform well, as poor performance could lead to their removal from the position. They also share part of their rewards with the voters who voted for them.
Blockchains Using Delegated Proof of Stake
TRON
TRON is a decentralized blockchain platform developed by Justin Sun in 2017. It was designed to attract content creators worldwide to share and monetize their content while retaining full control over it. Furthermore, it also has its own native token called TRX and is managed by Tron Decentralized Autonomous Organization (DAO).
SUI
SUI is a layer 1 blockchain built by Mysten Labs in 2023. It is based on low-latency blockchain transfers with high-speed transaction throughput and instant finality. In SUI, transactions can be processed in parallel with each other and are suitable for various real-world applications like finance, games, and more.
Advantages of DPoS
- Democratic Governance: Users or token holders can participate in electing delegates and voting for proposals.
- Easy Access: As DPoS doesn’t require expensive equipment or large capital, anyone can participate and gain benefit from it.
- Scalability: As the number of delegates for each blockchain is fixed, it allows for easier consensus to be reached, resulting in increased throughput.
- Environmental Friendly: Compared with other consensus mechanisms, DPoS requires very little energy to maintain sustainability, making it environmentally friendly.
Disadvantages of DPoS
- Malicious Act By Delegates: Since a small number of delegates control the entire block production process, the system can be vulnerable to collusion or coordinated attacks. This includes risks like a 51% attack, if most delegates act maliciously or in their own interests.
- Centralization Concerns: Although the consensus mechanism is decentralized and allows all token holders to participate in voting, there are risks of centralization because of the concentration of voting power among large stakeholders. Large token holders have the power to influence the election of delegates, leading to a small group of individuals controlling the network.
- Voter’s Lack of Interest: The DPoS system is heavily dependent on the active participation of voters or token holders. If voters remain uninterested or inactive in the voting process, it could result in the reelection of the same delegate, reducing accountability and potentially consolidating power among a few individuals.
Conclusion
Delegated Proof of Stake offers an innovative and efficient approach to blockchain consensus, combining scalability and democratic governance. By enabling token holders to vote for delegates, they allow voters to earn rewards from the delegates they choose. Although there are certain risks with DPoS, like risks of centralization and voter apathy, it is still a powerful mechanism for enhancing blockchain governance and network performance.
