Delegated proof of stake, or DPoS, is a consensus algorithm that was developed by Daniel Larimer – an American software engineer famous for founding BitShares, Steemit, and EOSIO. The algorithm is similar to the proof of stake consensus algorithm, but carries a few key differences.
Proof of stake and delegated proof of stake were created as better alternatives to proof of work (PoW), which is the consensus algorithm currently used by the most popular of digital assets, including Bitcoin and Ethereum. Substantial electricity consumption generated by large proof-of-work blockchains such as Bitcoin, which now rivals countries such as Switzerland, is largely the reason why we are seeing more and more research and application of proof-of-stake consensus algorithms, including DPoS.
What you’ll learn
- What proof of stake is in a few words.
- What delegated proof of stake is.
- How delegated proof of stake works.
- How delegated proof of stake differs from proof of stake.
- Examples of cryptocurrencies already using DPoS.
Proof of stake in a few words
To lay the ground for this delegated proof of stake guide, we first need to understand what proof of stake is. In one sentence, PoS secures a blockchain by allowing people to become validators of blocks by staking their coins.
For example, when Ethereum moves to a proof-of-stake algorithm, which is expected to happen later this year, anyone who holds ETH will be able to stake their holdings and then start validating blocks. That way, Ethereum will be able to scale easier in terms of network security, while simultaneously keeping its consensus operations off the electricity books.
We won’t delve into the details of proof of stake as we have already done that in this guide.
What is delegated proof of stake?
Just like proof of stake, DPoS also avoids those hefty PoW electricity bills. However, unlike proof of stake, where anyone who holds coins can become a block validator, only a select few are allowed to do so in DPoS. The idea is the following: people can vote for delegates using their coins and the more coins someone holds, the heavier their vote.
Through these votes, delegates are selected, which’s number is finite and fixed. These delegates become block producers i.e. are allowed to create new blocks and append them to the blockchain. A good example is EOS, where there are 21 block producers. Notice that here we used the term block producers instead of block validators.
In DPoS, the word block validator has a different meaning than in proof of stake. To make that clear, here are the two main roles in a DPoS system:
- Block producers – those are the elected entities who create and append blocks to the blockchain.
- Block validators – people who verify that block producers are abiding by consensus rules. Any user can be a block validator.
A great way to look at DPoS is by comparing it to Congress. Congressmen and Congresswomen are voted in office by the public. And they preside over Congressional hearings, representing the people’s voice (presumably). Similarly, block producers in DPoS represent the voice of the public. If some of the delegates perform actions that are deemed unacceptable by the public, they are voted out of “office”.
Proof of stake VS delegated proof of stake
Though the differences between PoS and DPoS should be quite obvious if you read thus far, here’s a short list that compacts them all into a few sentences:
- DPoS has a cap on block producers.
- Block producers are elected through a public voting process.
- In DPoS, there are block producers and validators.
- Block producers vote on core protocol changes.
Projects using delegated proof of stake
Projects where Daniel Larimer is involved all use DPoS, including EOS, BitShares, and Steemit. Respectively, these networks employ 21, 101, and 21 delegates. Other notable projects that take advantage of delegated proof of stake include Lisk (101 delegates) and Ark (51 delegates).
Delegated proof of stake is a version of proof of stake that allows people to vote for block producers who, if elected, are the only ones allowed to create new blocks and append them to the blockchain. In DPoS, there is always a limit on the number of block producers, thus only the ones with the most votes get elected.
People vote for block producers by using their tokens. The more tokens one holds, the heavier their vote. In turn, block producers vote on core protocol changes, representing the people’s voice. If a block producer acts maliciously as identified by the public, they are voted out of the network and replaced by a new, more competent delegate.
A good example of a DPoS-based blockchain is EOS, where there are 21 block producers. Though there has been heavy criticism of delegated proof of stake, specifically in the case of EOS and how some situations were handled, the algorithm still remains a viable option for projects looking for a consensus solution that emulates a democratic political system.