In recent years, the capacity of blockchain technology to change global technological infrastructures and processes has been abundantly visible.
Regarding the energy efficiency of Proof of Work or PoW-based blockchains, however, the environmental effect of blockchain networks sparked the considerable dispute.
PoS blockchains, which use Proof of Stake rather than proof of work, become a practical alternative. What is a proof of stake for blockchain networks that is delegated?
Considering that a Proof of Stake consensus method already exists, it is logical to question the need for a DPoS consensus mechanism.
The benefit of the delegated PoS consensus system is that it allows users to spend coins for multiple delegates.
After selection, the delegates may execute crucial network-wide choices. So what Is Delegated Proof Of Stake (DPOS)? This section introduces the delegated proof of stake algorithm and its operation.
Delegated Proof of Stake: What It Means
As with any topic, the definition of “delegated proof of stake” should be the starting point for any in-depth discussion.
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Delegated Proof of Stake, or Delegated PoS, is a consensus mechanism with certain functional similarities with the protocol of Proof of Stake, or PoS.
Voting and delegation are important to delegated PoS, which also incentivizes participants.
Collateral investment by users aids in network security thanks to the incentive mechanism.
To take part in Proof of Stake and delegated Proof of Stake consensus procedures, users must stake their cryptocurrency or tokens.
Is there a workable alternative to proof-of-stake consensus mechanisms, such as delegated proof-of-stake? Delegated proof-of-stake (PoS) differs from centralized PoS in that it requires nodes to choose witnesses or delegates to participate in the creation of blocks.
Delegated proof of stake restricts transaction validation to only voters and their chosen representatives.
The chosen delegates construct blocks in a delegated proof of stake consensus process.
Nodes can cast votes on the delegates by staking all their tokens in a single pool and associating each of those tokens with a specific delegate.
When attaching to a delegate, users using delegated PoS do not need to move their tokens from one wallet to another physically.
The chosen delegates need a mechanism through which they may unanimously decide whether or not to approve a transaction.
History of Delegated Proof of Stake (DPoS)
The concept of Proof of Stake (PoS) was initially brought up in July 2011 on the Bitcointalk forum to discover a faster and more reliable method of processing and verify blocks.
After that, in 2013, Daniel Larimer came up with the idea for DPoS and released it the following year as a tweaked take on the traditional Proof of Stake (PoS) consensus process.
BitShares introduced the first version of DPoS in 2015.
How Does DPoS Work?
Participants in the network cast votes to choose delegates who check the blocks’ integrity. These delegates, often called “witnesses” or “block makers,” might vary over time and are subject to replacement by popular vote.
Through DPoS, token holders on a network may combine their holdings into a staking pool and cast votes for a representative of their choosing.
Users of the network may stake their tokens without transferring them to a specific wallet; instead, they can utilize a staking mechanism or service provider.
Delegates play a crucial role in ensuring the integrity of the blockchain by verifying each and every transaction in a block before redistributing the transaction fees to the voters who elected them.
One’s allocation corresponds to their ability to stake. Therefore, a higher stake means a bigger share.
The amount of a user’s payout from their delegate is proportional to the stake they’re responsible for.
If a user contributes 10% of the overall staking pool, for instance, they are eligible for up to 10% of the total payout.
Pros
Reputation-Based. Users are more likely to vote for delegates who have established a track record of trustworthiness via the democratic election process than those with the highest investments.
Fast. To reduce the time it takes to establish an agreement, DPoS limits the number of delegates who may participate in the network. The minimal number of delegates (20-100, depending on the blockchain) allows the network to establish consensus more quickly than in PoS systems and PoW networks.
Highly Minimalistic and Scalable Hardware. Unlike PoW, which requires hardware for hashing power, the DPoS consensus technique may scale better. As a general rule, staking coins is all required to join a DPoS network.
Voting Power. Staking users have the power to elect new block producers, and this gives delegates an incentive to do their jobs well. If they don’t, they might be removed from office. This ensures that only the most successful and trustworthy delegates are selected or kept on.
Cons
Holders of Malicious Tokens. A DPoS system is vulnerable to a 51% assault since there aren’t thousands of delegates to prevent it.
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In this attack, at least 51% of delegates intentionally inflict harm to the network to get their way. Since DPoS blockchains often have fewer delegates, it is easier to organize such attacks on these networks.
Lower Decentralization. Despite this problem’s infrequency, it does affect certain DPoS-based projects. It has been reported that as much as 26% of a project’s token supply is allocated to venture capitalists and other insiders.
The issue of whether or not a DPoS system is genuinely decentralized arises since such systems often have just a fixed number of delegates. A network with less than 30 delegates is an example of one that is not considered fully decentralized.
Engagement Is Needed. For the network to function properly, DPoS relies on user votes for delegates. Therefore, users must keep contributing to the network.
Conclusion
The issues that have been plaguing Proof of Stake and Proof of Work algorithms have been creatively addressed by the Delegated Proof of Stake consensus mechanism.
Improved transaction times are only one of many advantages that adopting new blockchain networks based on delegated PoS consensus may be gained.
The idea of delegated PoS also enhances the democratic viewpoint in blockchain network governance.
A further perk of delegated PoS consensus processes is better energy efficiency with low hardware requirements.
Therefore, it is logical to assume that delegated PoS will be the consensus algorithm of choice for future blockchain networks.
While the benefits of the new consensus technique are obvious, it is essential to investigate any potential drawbacks.
