Public blockchains often face scalability issues. To tackle these issues, some blockchains (such as Lisk, EOS, Steem, BitShares and Ark) have adopted the Delegated Proof of Stake (DPoS) consensus mechanism. DPoS seeks to by speed up transactions and block creation, while not compromising the decentralized incentive structure at the heart of the blockchain.
In the traditional Proof of Stake consensus mechanism, a user can put their coins at stake, thereby earning the right to validate transactions, forge blocks, and earn associated rewards. DPoS, a variation of the Proof of Stake consensus, seeks to reach consensus more efficiently.
In DPoS systems, users ‘vote’ to select ‘witnesses’ (other users they trust to validate transactions), and the top tier of witnesses (who have collected the most votes) earn the right to validate transactions. Users can even delegate their voting power to other users, whom they trust to vote for witnesses on their behalf.
Votes are weighed according to the size of each voter’s stake. A user need not have a large stake to enter the top tier of witnesses. Rather, votes from users with large stakes can result in users with relatively small stakes being elevated to the top tier of witnesses.
The number of witnesses in the top tier is capped at a certain number. These witnesses are responsible for validating transactions and creating blocks, and are in return awarded the associated fees.
Though witnesses in the top tier can prevent specific transactions from being included in an upcoming block, they cannot change the details of any transaction. They are thus equivalent to miners in a Proof of Work system.
Voting is a continuous process and each witness in the top tier is always at risk of being replaced by a user who gets more votes and is therefore considered more trusted. As a blockchain grows, it becomes increasingly competitive to become or remain a witness in the top tier. Users can also vote to remove a witness in the top tier who has lost their trust.
For a witness in the top tier, threat of loss of income and reputation is the primary incentive against malicious behavior.
Users in DPoS systems also vote for a group of ‘delegates’ (trusted parties responsible for maintaining the network). The delegates oversee the governance and performance of the entire blockchain protocol, but do not play a role in transaction validation and block production.
For example, the delegates can propose changing the size of a block, or the amount a witness should be paid in return for validating a block. Once the delegates propose such changes, the blockchain’s users vote on whether to adopt them.
Advantages of DPoS systems:
· They are much faster than tradition Proof of Work and Proof of Stake systems.
· Their incentives and structures enhance the security and integrity of their blockchains, and each user has an incentive to perform their role honestly.
· No specialized equipment is required to become a user, witness, or delegate. A normal computer is enough.
· They are energy efficient compared to power-hungry Proof of Work hashing algorithms.
DPoS is the next step in the evolution of consensus mechanisms. It builds on the original Proof of Stake consensus mechanism and drastically increases speed and scalability.