Delegated Proof of Stake (DPoS)

Over the course of last years, you have probably heard of PoW, PoS. You probably heard of and DPoS before as well, but may not have a clear idea of what these meant. We see that a lot of people confused with all this.  It was a lot of articles about PoW and PoS, so today we would like to talk a bit about DPoS. DeepDive will attempt to clear this up for you so you can understand what DPoS consensus mechanism is.

What is DPoS?

Every blockchain protocol uses a consensus algorithm to maintain one and only one list of cryptographically linked blocks — a blockchain. The most famous in the blockchain scene is the Nakamoto consensus from Bitcoin, which is based on Proof of Work (PoW). It achieves a significant degree of decentralization by allowing finality only in a probabilistic manner, where several branches may compete with each other and gradually evolve into one over time. The other extreme in the spectrum is those that originated from the traditional Byzantine Agreement (BA). They guarantee an instant block finality by limiting the degree of decentralization.

The Delegated Proof of Stake (DPoS) consensus is on a middle ground between those above two. It delegates the exceptional right of generating blocks to a set of elected block producers (BPs) — while allowing a reorganization within a limited range. By (a) following a Proof of Stake model (PoS) and (b) maintaining only a limited number of BPs, it addresses both the performance issue as well as the excessive energy consumption problem found in PoW-based consensus.

On the other hand, a DPoS-based blockchain counts with a voting system where stakeholders outsource their work to a third-party. In other words, they can vote for a few delegates that will secure the network on their behalf. The delegates may also be referred to as witnesses, and they are responsible for achieving consensus during the generation and validation of new blocks. The voting power is proportional to the number of coins each user holds. The voting system varies from project to project, but in general, each delegate presents an individual proposal when asking for votes. Usually, the rewards collected by the delegates are proportionally shared with their respective electors.

Therefore, the DPoS algorithm creates a voting system that is directly dependent on the delegates’ reputation. If an elected node misbehaves or does not work efficiently, it will be quickly expelled and replaced by another one. In regards to performance, DPoS blockchains are more scalable, being able to process more transactions per second (TPS), when compared to PoW and PoS.

Advantages of DPoS

Not only is DPoS a more democratic system, but it is also more efficient and effective. The selection of block producers allows for the transactions to be validated in a matter of seconds, rather than the 10 minutes it takes the proof of work system employed by Bitcoin. For example, it currently only takes a few seconds to validate a block of transactions. 
Delegates are incentivized to run the nodes that process and validate the transactions going through the network with transaction fees, as well as monthly rewards for maintaining the network that, with time, is gradually reduced. There can only be a certain number of delegates at any one time, and those are determined by a competitive election system, wherein each and every holder can cast a vote for their preference to fill that role.

Conclusion

DPoS differs substantially from PoW and even PoS. Not only with power consumption difference, but the speed of transactions’ processing is also much different, and in our labs, we were able to clock over 5 thousand transactions per second. As for well-known PoW networks, one transaction on PoW blockchain can take from 10 to 15 minutes each.

DPoS provides us with a fantastic opportunity to truly unleash the real power of blockchain and open the door into corporations that require a fast rate of transactions and enhanced security.