If you have used blockchains like Cardano, Tron, or EOS, you have definitely heard the term “delegated proof of stake”. What is delegated proof of stake and how does it differ from proof of stake? As you may know, proof of stake is an alternative to proof of work that instead of consuming a large amount of energy, uses validators’ assets as a guarantee for the network’s well-being. Delegated proof of stake is also like proof of stake, but with the difference that it doesn’t require all stakeholders to take part in the process of validation. Instead, some nodes are chosen as “delegates” and validate the transactions on behalf of the others. In this article, we are going to take a close look at delegated proof of stake, cover its advantages and disadvantages, and refer to some blockchains using this consensus algorithm. Stay with us.
What is delegated proof of stake or DPoS and how does it work?
Delegated proof of stake is a consensus algorithm that lets users choose some “delegates” using their coins. These delegates then take part in different processes like validating the transactions, building the blocks, and making important decisions on behalf of the other members. As its name suggests, delegated proof of stake is a subcategory of proof of stake. The whitepaper of this algorithm was written by Dan Larimer in 2014. Larimer wished to create an algorithm that was faster and more scalable than proof of work. He had used this algorithm in his blockchain projects including Esteem and BitShares. Today, famous blockchains like Cardano, EOS, Tron, and Tezos use delegated proof of stake.
So, let’s take a look at how this popular consensus algorithm works. As we mentioned earlier, users who have the network’s native coin/token can vote for certain delegates and choose them this way. Therefore, the delegates in delegated proof of stake are chosen democratically. The more coins/tokens a user has, the greater voting power he/she will have. Delegates in delegated proof of stake are also called “block producers” or “witnesses”.
The number of delegates differs in different blockchains. Blockchains that have a smaller number of delegates are generally faster, but they are also less decentralized (we will talk about this issue more completely in the following sections).
After delegates succeed to create a block, they distribute the reward to all members who had voted for them. Again, members with larger coins/tokens receive larger rewards. We have to mention that members are also involved in the punishments. If they vote for delegates who don’t do their tasks correctly, they lose part of their staked assets as a punishment.
Advantages and disadvantages of delegated proof of stake
Delegated proof of stake like other consensus algorithms has its own advantages and disadvantages. The biggest advantage of delegated proof of stake is “scalability” and its most important disadvantage is “centralization”. Delegated proof of stake, due to its smaller number of validators, can process transactions more quickly. However, it is definitely more centralized than algorithms like proof of work and even proof of stake. This is what Vitalik Buterin refers to as “scalability trilemma”. Blockchains that prioritize their decentralization generally have greater security, but they suffer from low speed and decentralization. On the other hand, blockchains that prioritize their scalability are usually less decentralized and secure. So, we can conclude that scalability is of more importance to blockchains like Cardano and EOS that use delegated proof of stake.
Consensus algorithms guarantee the decentralization and security of blockchain networks. Along with the growth of these networks, the need for a faster and more scalable consensus algorithm increased. Delegated proof of stake was a response to this need. Delegated proof of stake is an efficient and democratic consensus algorithm that uses less energy and so is more eco-friendly. One interesting feature of DPoS is that its validators are chosen NOT based on their computing power or their staked assets, but based on the reputation they gain in the community. Besides, not doing the required responsibilities correctly is followed by being removed from the community of validators. Delegated proof of stake can play a key role in the public adoption of blockchain networks and decentralized applications. It lets all users be members of their favorite blockchains, without being involved with technical complexities.