Delegated Proof of Stake

Delegated Proof of Stake (otherwise known as DPoS) is a consensus algorithm maintaining irrefutable agreement on the truth across the network, validating transactions and acting as a form of digital democracy.

Delegated proof of stake uses real-time voting combined with a social system of reputation to achieve consensus. It can be seen to be the least centralized consensus protocol compared to all others as it is the most inclusive. Every token holder can exercise a degree of influence about what happens on the network.

Active delegates are voted into their roles by token holders. The voting power that the token holder has, otherwise known as voting weight, is determined by how many of the base token the account is holding. It is important that the delegates are chosen with the best interest of the network at heart as they keep the network running smoothly and safely. In some DPoS versions, a delegate needs to show commitment by depositing his funds into a time-locked security account (which is confiscated in case of malicious behavior). This version of DPoS is often referred to as deposit-based proof of stake.

The roles of delegates revolve around:
  • Ensuring their node is always up and running.
  • Collecting the transactions across the network into blocks.
  • Signing and broadcasting those blocks, validating the transactions.
  • If there are issues in regard to consensus, DPoS allows these to be resolved in a fair and democratic way.

Delegates do not have the power to change any transaction details. However, as they are validators they could theoretically exclude certain transactions in a block. Nevertheless, this has very little effect as the next created block will include these transactions, giving the next delegate the fees associated with validating them. As such, the transactions will only be slightly delayed. Furthermore, this would inevitably lead to the dishonest delegate getting voted out by the rest of the network. In essence, a DPoS network is self-governed and policed by all of its participants ensuring the best interests of the network remain the priority.

Advantages of DPoS

Not only is DPoS a more democratic system, 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.

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, are 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 token holder can cast a vote for their preference to fill that role.

Whereas in a proof of work system, such as the one employed by Bitcoin, validating blocks is known as “mining”, in the case of delegated proof of stake this process is referred to as “forging”.

This type of consensus uses an inflationary reward system. For each block generated, new tokens are created to reward those who forge.

Debates about the most effective, efficient and secure consensus protocol are common in the blockchain space today, stimulating innovation and an advancement in these systems, the perfect consensus protocol has yet to be created. Blockchain technology is continuously changing, evolving and improving and we have already seen huge progress in a very short amount of time in blockchain, starting from the first protocol utilized in blockchain technology, the Proof of Work consensus protocol.

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