The power of blockchain technology for transforming technical infrastructures and systems worldwide has become clearly evident in recent times. However, the environmental impact of blockchain networks caused some controversy regarding the energy efficiency of Proof of Work or PoW-based blockchains. Therefore, Proof of Stake or PoS blockchains emerged as a viable solution. What is a delegated proof of stake for blockchain networks?
With a Proof of Stake consensus algorithm already in place, it is reasonable to wonder about the necessity of DPoS consensus mechanism. The delegated PoS consensus protocol comes with the advantage of helping users spend coins for different delegates. After selection, the delegates can implement critical decisions for the whole network. The following discussion offers you an introductory guide on delegated proof of stake algorithm and how it works.
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Need for Consensus Algorithms
Before you learn about delegated PoS consensus algorithm, you must know the importance of a consensus algorithm in blockchain networks. Consensus algorithms are an essential requirement for ensuring decentralization in blockchain networks. Every node in the network must verify the transactions before adding them to the blocks.
The blockchain network must use a method for ensuring that the nodes agree on the validity of transactions, and the method is the consensus algorithm. Any delegated proof of stake blockchain would follow the delegated PoS consensus mechanism for verifying transactions. Similarly, other blockchain networks also have their own consensus algorithms. For example, Bitcoin uses the traditional Proof of Work consensus mechanism.
Definition of Delegated Proof of Stake
The first thing in any discussion on delegated proof of stake explained comprehensively would obviously focus on its definition. Delegated PoS is similar to the Proof of Stake or PoS protocol, with a subtle difference in how they function. Delegated PoS features a voting and delegation process that also includes incentives for users. The incentive mechanism helps in securing the network with the collateral staked by users.
Users have to stake their cryptocurrency or tokens for participating in the Proof of Stake and delegated PoS consensus mechanisms. Is there any viable answer to the proof of stake vs. delegated proof of stake comparison? Yes, the working of delegated PoS is different in the fact that nodes elect witnesses or delegates for the block production process. In delegated PoS, only voters and elected delegates can participate in validating transactions.
The elected delegates in delegated proof of stake consensus mechanism serve the role of block producers. Nodes can vote on the delegates by pooling all their tokens in a centralized staking pool, followed by linking the tokens to a particular delegate. Another important highlight of delegated PoS is the fact that users don’t have to transfer their tokens physically from one wallet to another while linking to a delegate. The elected delegates must have the ability to agree on the rejection and approval of transactions.
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Working of DPoS
The most reasonable way to understand the delegated proof of stake algorithm would point to a detailed impression of its working. You must notify the different components associated with delegated PoS, which makes it an effective consensus algorithm than others. As of now, majority of blockchain networks use the Proof of Work and Proof of Stake algorithms. However, the stake-delegated proof consensus has been tailored for resolving the problems with Proof of Work and Proof of Stake consensus mechanisms.
As a matter of fact, you can learn more about PoS vs. DPoS with an overview of how delegated PoS works. The stake-delegated proof consensus algorithm features a unique election method for selecting nodes, which can help in block verification. The primary criterion for voting in delegates is their reputation. Any owner of native delegated proof of stake coins can vote for the nodes they want to be elected as delegates.
Here is a detailed overview of different aspects of the working of delegated PoS consensus mechanism –
The foremost highlight in a proof of stake vs. delegated proof of stake comparison would point at the voting method. Delegated PoS uses the voting mechanism to elect witnesses for transaction verification. Every delegated PoS network features a distinctive voting system. However, most of the delegated PoS blockchains allow users to vote directly or delegate their voting power to another user.
The nodes for which users vote in a delegated proof of stake consensus are known as witnesses. The witnesses are responsible for validating transactions and creating blocks. Upon successful verification of all transactions in one block, the witnesses receive special rewards. Subsequently, the rewards are shared with the users who voted for the witnesses.
On the other hand, if a witness fails to verify all transactions in the allotted time and misses a block, they would not receive any reward. Generally, the reward for a failed witness may pass on to the next witness if they verify all transactions. Such a process would imply that the block is stolen.
As discussed frequently, delegates are an integral part of every delegated proof of stake blockchain network. They are basically users responsible for governance in the blockchain network. Other users of the network vote in for the delegates. The special privileges of delegates include proposing modifications in the size of a particular block. In addition, delegates can also modify the share of rewards paid to witnesses for validating blocks. Users in the blockchain network vote on the proposals put forward by delegates.
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The difference between witnesses and delegates can be quite significant for any individual seeking a detailed account of delegated proof of stake explained carefully. Witnesses take over the responsibility for security and validation of transactions in the blockchain network. Interestingly, users don’t need cryptocurrency to become a witness.
On the contrary, the reputation of the user helps them in obtaining votes to be elected as a witness. The successfully completed transactions by a witness are recorded officially on a ledger. At the same time, the number of witnesses on a single server can fall somewhere between 21 and 101. The voting process is continuous, and witnesses can be kicked out when voters choose other witnesses.
The transaction time is also another important highlight in the working of delegated proof of stake consensus. Stake-delegated proof consensus can emerge as a better alternative to existing algorithms only if it offers better efficiency. Delegated PoS has been designed as a more efficient technology in comparison to Proof of Stake and Proof of Work consensus algorithms. It is important to note that transaction times vary from one delegated PoS network to another.
A delegated proof of stake example can offer some clarity regarding transaction time on different networks. The TRON blockchain network leverages the delegated PoS network and features a transaction time of almost one minute. On the other hand, the PoS-based USD Coin takes around 5 minutes to process a transaction. However, TRON blockchain network completes the necessary 20 confirmations in consecutive order when one block falls chronologically after the other.
Another notable aspect in the working of delegated proof of stake algorithm refers to validators. The validators or block validators are basically full blockchain nodes capable of validating blocks created by other witnesses. Block validators ensure that the blocks created by witnesses comply with consensus rules. Any user selected as a block validator would have to run the validator node to verify the network. However, validators don’t have any financial incentives like witnesses.
Want to know the differences between PoW and PoS algorithms? Check the detailed guide on PoW Vs. PoS: A Comparison Between Two Blockchain Consensus Algorithms
How is Delegated Proof of Stake Different?
The discussions on DPoS generally paint it as a better alternative than the Proof of Stake consensus algorithm. However, it is important to note the differences between PoS and delegated PoS before making any assumptions. The overview of a PoS vs. DPoS comparison with an outline of the advantages of delegated PoS over proof of stake consensus can clear your doubts.
First of all, you must notice how stake-delegated proof offers a more efficient and democratic variant of Proof of Stake. Proof of Stake blockchain users develops blocks on the basis of the stake they have in the blockchain platform alongside the time they stay invested in the network. On the other hand, delegated proof of stake brings in elected witnesses and delegates to do the heavy work. The democratic selection of witnesses and delegates alongside an incentivized approach for transaction verification serves as striking value advantages in delegated PoS mechanisms.
Advantages and Limitations of Proof of Stake
The Proof of Stake vs. Delegated Proof of Stake comparison must have offered a viable impression of its advantages. Here is an outline of the benefits you can notice clearly in delegated PoS blockchain networks.
- Delegated PoS enables faster validation of transactions within seconds. Block producers can showcase better transaction speed in comparison to PoW and PoS protocols.
- Delegate PoS also ensures better energy efficiency in comparison to Proof of Stake consensus. On top of it, delegated PoS also implies the use of limited hardware.
- The democratic voting system for delegates and witnesses ensures that every token holder has a contribution to developing the network.
- Block producers or delegates can be voted out anytime if they are suspected of any malicious actions within the network.
- The flexibility for voting out delegates on the basis of malicious conduct also plays a vital role in enhancing security.
The advantages of DPoS paint it as an obvious alternative to Proof of Stake consensus. However, it is also important to note the limitations of delegated PoS. One of the foremost risks of delegated PoS consensus refers to the formation of delegate cartels wherein delegates allocate validation power to limited witnesses. As a result, it can centralize the network and improve vulnerability to attacks.
Top DPoS Blockchain Examples
The introduction to delegated PoS is incomplete without a discussion on delegated proof of stake example such as TRON and EOS. The TRON blockchain network uses Super Representatives as delegates and holds elections for witnesses every 24 hours. EOS blockchain refers to all delegates as block producers, and elections happen at an interval of every two minutes and six seconds. The efficiency of delegated PoS is evident in the fact that EOS blockchain requires minimum hardware requirements for block producers.
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The Delegated Proof of Stake consensus mechanism has come up with innovative solutions to the challenges with Proof of Stake and Proof of Work algorithms. New blockchain networks based on delegated PoS consensus can capitalize on numerous benefits such as better transaction speed. In addition, the concept of delegated PoS also improves the democratic perspective in governance of a blockchain network.
Furthermore, delegated PoS consensus mechanisms can also offer better energy efficiency with minimal hardware requirements. Therefore, it is reasonable to predict that future blockchain networks would use delegated PoS as their choice of consensus algorithm. At the same time, it is also important to look for the setbacks associated with the new consensus algorithm. Learn more about consensus algorithms and delegated PoS to enhance your knowledge.
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*Disclaimer: The article should not be taken as, and is not intended to provide any investment advice. Claims made in this article do not constitute investment advice and should not be taken as such. 101 Blockchains shall not be responsible for any loss sustained by any person who relies on this article. Do your own research!