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What Is Delegated Proof Of Stake (DPoS)? - The Ultimate Guide 

 

By Nerly Shammah Jan 6, 2023

 

Delegated Proof of Stake (DPoS) is an example or type of consensus mechanism used by some popular blockchain networks to attain a distributed and decentralized consensus.

 

 

In a delegated proof of stake blockchain, users who hold tokens on the network can choose to "delegate" their voting rights to others, who are then able to participate in the decision-making process on their behalf. This shares great similarity with the way that a representative democracy works, where citizens elect representatives to make decisions on their behalf, so delegated proof of stake is often considered to be the most democratic consensus mechanism. 

 

There are two main groups of users in a DPoS blockchain, the token holders and "delegates" (also known as "witnesses" or "block producers"). Token holders can choose to delegate their voting rights to a delegate by "voting" for them which in turn makes the voted party a representative of the voter. Delegates are then responsible for maintaining the blockchain and validating transactions. They do this by running nodes and participating in the consensus process by producing and adding new blocks to the blockchain.

 

Characteristics that distinguish DPoS from other consensus mechanisms:

 

Voting: In a DPoS system, token holders can use their voting power to choose the delegates who will represent them and participate in the consensus process. This allows token holders to have some influence over the direction of the blockchain, even if they are not directly participating in the consensus process themselves.

 

Limited number of delegates: In a DPoS system, there is typically a limited number of delegates who are allowed to participate in the consensus process. This is in contrast to other consensus mechanisms, such as Proof of Work (PoW) or Proof of Stake (PoS), where anyone can participate. The limited number of delegates means that the system is more efficient, as there are fewer participants to coordinate. However, there may be more nodes running which can become beneficial in situations where the top witnesses are perhaps offline, these backup nodes can then step in to produce blocks and maintain the blockchain, this makes the network more efficiently managed. 

 

Stake-weighted voting: In a DPoS system, the weight of a vote is proportional to the number of tokens that a voter holds. This means that token holders with a larger stake in the blockchain have a greater say in the decision-making process.

 

Inflation control: In a DPoS system, the number of new tokens that are created (inflation) is typically controlled by the delegates or witnesses. This allows the blockchain to effectively regulate the creation and supply of new tokens, which can help to maintain the value of the ecosystem over time.

 

DPoS is a popular consensus mechanism for blockchains because it is relatively efficient and allows for a high degree of decentralization. However, it has also been criticized for potentially allowing a small group of wealthy token holders to wield disproportionate influence over the direction of the blockchain.

 

Pros and Cons of using Delegated Proof of Stake (DPoS) as a consensus mechanism:

 

Pros:

 

Efficiency: DPoS is generally considered to be more efficient than other consensus mechanisms, such as Proof of Work (PoW) or Proof of Stake (PoS). This is because there are typically a limited number of delegates participating in the consensus process, which reduces the amount of coordination required.

 

Decentralization: DPoS allows for a high degree of decentralization, as token holders can delegate their voting rights to a wide variety of delegates. This helps to ensure that the blockchain is not controlled by a small group of individuals or entities.

 

Inflation control: In a DPoS system, the delegates are typically responsible for controlling the supply of new tokens, which can help to maintain the value of the tokens over time.

 

Cons:

 

Centralization risk: While DPoS allows for a high degree of decentralization, there is still a risk that a small group of wealthy token holders will be able to wield disproportionate influence over the direction of the blockchain. This is because the weight of a vote is proportional to the number of tokens that a voter holds, meaning that those with a larger stake have a greater say in the decision-making process.

 

Dependence on delegates: In a DPoS system, token holders are reliant on the delegates to maintain the blockchain and validate transactions. If the delegates are not performing their duties effectively, this could lead to problems with the blockchain.

 

Vulnerability to collusion: Because DPoS relies on a limited number of delegates to validate transactions, there is a risk that these delegates could collude to manipulate the blockchain for their own benefit. This could undermine the integrity of the blockchain and the trust of its users.

 

Comparing Proof Of Work(PoW), Proof of Stake(PoS) and Delegated Proof of Stake(DPoS) 

 

Proof of Work (PoW) and Proof of Stake (PoS) are both types of consensus mechanisms that are used by blockchains to achieve distributed consensus. Delegated Proof of Stake (DPoS) is a variant of PoS that includes some additional features.

 

Here is a comparison of the three consensus mechanisms:

 

Proof of Work (PoW):

 

In a PoW system, users (also known as "miners") compete to solve a computationally difficult problem. The first miner to solve the problem is rewarded with a block reward, and their solution is added to the blockchain.

 

PoW requires miners to invest a significant amount of resources (e.g. electricity and computing power) in order to participate in the consensus process. This makes it relatively expensive to participate in the network, which helps to ensure decentralization.

 

PoW is popularly used by Bitcoin, the first successful cryptocurrency and decentralized public blockchain. 

 

Proof of Stake (PoS):

 

In a PoS system, the probability of a user being selected to validate a block is proportional to their stake (i.e. the number of tokens that they hold). This means that users with a larger stake have a greater chance of being selected to validate a block.

 

PoS is generally considered to be more energy-efficient than PoW, as it does not require users to invest in expensive hardware and consume large amounts of electricity.

 

PoS is used by blockchains like Ethereum. 

 

Delegated Proof of Stake (DPoS):

 

DPoS is a variant of PoS that includes some additional features. In a DPoS system, users who hold tokens on the blockchain can choose to "delegate" their voting rights to others, who are then able to participate in the decision-making process on their behalf.

 

DPoS allows for a high degree of decentralization, as token holders can delegate their voting rights to a wide variety of delegates. However, there is still a risk that a small group of wealthy token holders will be able to wield disproportionate influence over the direction of the blockchain.

 

Overall, each of these consensus mechanisms has its own trade-offs and advantages, and the best choice will depend on the specific needs of the blockchain in question.

 

Who Validates Blocks In Delegated Proof of Stake(DPoS)? 

 

Witnesses validate blocks in Delegated Proof of Stake and are responsible for the integrity of the blockchain. Each witness is elected by token holders via a voting system that enables individuals to influence the governance of the network using its native asset - the governance token. 

 

Which Blockchain Uses Delegated Proof of Stake(DPoS)? 

 

EOS: EOS is a decentralized operating system that uses DPoS to enable the development and deployment of decentralized applications (dApps). EOS uses a complex voting system to choose its block producers, who are responsible for maintaining the blockchain and validating transactions.

 

Hive: Hive is a decentralized social media platform and decentralized blockchain that uses DPoS to enable users to create and share content, as well as to reward content creators with tokens. Hive uses a voting system to select its block producers, who are responsible for maintaining the blockchain and validating transactions.

 

Steem: Steem is a social media platform that uses DPoS to enable users to create and share content, as well as to reward content creators with tokens. Steem uses a voting system to select its block producers, who are responsible for maintaining the blockchain and validating transactions.

 

Lisk: Lisk is a platform that enables developers to build and deploy their own blockchain applications. Lisk uses DPoS to secure its network and select its block producers, who are responsible for maintaining the blockchain and validating transactions.

 

BitShares: BitShares is an exchange and financial platform that uses DPoS to secure its network and select its block producers, who are responsible for maintaining the blockchain and validating transactions.

 

Telos: Telos is a decentralized platform that enables the development and deployment of decentralized applications (dApps). Telos uses DPoS to secure its network and select its block producers, who are responsible for maintaining the blockchain and validating transactions.

 

Is Delegated Proof of Stake(DPoS) better than Proof of Stake? 

 

Many people believe that delegated proof of stake(DPoS) is a better consensus mechanism to proof of stake(PoS) as it allows far more flexibility in the governance of a blockchain network. This is because, in proof of stake, token holders directly govern the blockchain, but with the delegated proof of stake, representatives are voting in for this purpose, making it an open governance system where anyone can become a witness or block producer simply by earning votes from the community or token holders.