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Consensus mechanisms like proof-of-stake and delegated proof-of-stake offer efficient and equitable alternatives to proof-of-work for blockchain technology. But what exactly is DPoS, and how does it work?
Join us in this blog as we explain the ins and outs of DPoS, from how it works to its advantages and limitations. By the end, you'll have a solid grasp of this important consensus mechanism powering many popular blockchain networks. Let’s start to explore!
Delegated proof-of-stake (DPoS) is a type of the classic proof-of-stake (PoS) consensus mechanism. Validators stake tokens in PoS networks to secure the network and validate new blocks through random selection. DPoS takes this a step further by introducing democratic delegation.
Network participants can elect delegates, known as witnesses or block producers, to validate blocks on their behalf through a decentralized voting process in DPoS.
Rather than all token holders participating directly in block validation, stakeholders delegate this responsibility to third parties they deem trustworthy.
Elected delegates group transactions into blocks and add them to the blockchain much faster than solitary validators could alone. In turn, delegates are rewarded with transaction fees for their work in securing the network.
In DPoS networks, the total number of delegates that can validate transactions at one time is limited, usually ranging from 20 to 100. Token holders vote on which witnesses they want to delegate their stake to by assigning their crypto tokens to candidates.
Each validation round elects the top vote-getters to validate new blocks, although the specific delegates may change with each new block. Delegating more tokens to a validator increases their chances of being selected for block production.
A delegate with 10% of the total network stake has a 10% chance of producing the next block. Once selected, the delegate groups transactions and adds the new block to the blockchain.
Afterwards, they distribute a portion of the block reward back to stakeholders based on how much each user staked toward them. This is how delegated proof of stake works, mainly.
Several major blockchain protocols utilize the DPoS consensus mechanism. Popular examples of DPoS include:
The DPoS mechanism allows these blockchains to achieve rapid transaction times and scalability compared to standard PoS networks.
While DPoS aims to decentralize block validation through stake-weighted voting, some argue it can potentially enable more centralized control than standard blockchain proof-of-stake.
If a small number of large stakeholders dominate the voting process, they could elect delegates that form a cartel or work together against the interests of smaller users.
However, others note that decentralization is not a binary state and that most real-world networks involve some degree of centralization.
As long as no single entity controls over 50% of network voting power, DPoS networks can still achieve an acceptable level of decentralization for their needs compared to traditional centralized systems.
Continued improvements to voter participation and game theory may help optimize the trade-off between efficiency and decentralization over time as well.
DPoS and PoS differ in how they conduct block validation duties. Validators in proof-of-stake randomly select stakeholders to add new blocks. But in DPoS, stakeholders elect a limited set of trusted block producers or witnesses through a delegated voting process.
This introduces democracy while keeping block times shorter than potential random selection in PoS. In addition, because only a small group of approved delegates validate each block in DPoS, this accelerated block time helps drive higher transaction throughput.
However, concentrating power in the hands of a few can also enable more centralization over time if voting participation remains low or leaders consolidate control.
To sum up, PoS overall maintains a more decentralized validation process, while DPoS trades some decentralization for greater efficiency and throughput.
If you need further comparison between consensus mechanisms, make sure to check out “Proof-of-Work vs. Proof-of-Stake” and “PoS vs. PoA vs. PoW." By exploring our guides, you can expand your knowledge about blockchain consensus mechanisms and understand each type better.
There is no definitive answer to whether DPoS or standard PoS is superior, as they represent different points along the scalability-decentralization tradeoff curve.
DPoS achieves significantly faster block times and higher transaction capacity through its concentrated validation process. This increased efficiency makes it suitable for applications requiring rapid throughput, like decentralized exchanges.
However, PoS maintains a more decentralized distribution of block production duties across all staked participants rather than a select group of delegates. This helps preserve the core decentralized nature of blockchain.
For less bandwidth-intensive use cases where decentralization takes priority, the increased randomization of PoS may be preferable.
Ultimately, the optimal consensus mechanism depends on the unique scalability and decentralization priorities of each specific network. Both PoS and DPoS have merit for various blockchain applications.
The core reason DPoS can achieve faster block times and higher throughput than PoS lies in its limited number of designated block producers. The random selection of validators in PoS networks to add the next block leads to variable time periods between new additions to the chain.
By contrast, DPoS keeps block production centralized among a stable and predictable group of approved witnesses through the democratic election process. Specialized blockchain nodes standing ready to validate 24/7 enable the almost instant addition of blocks once the previous one is complete.
This consistent block time model enables DPoS blockchains to optimize performance for low-latency use cases requiring rapid confirmation, like decentralized exchanges, helping drive broader adoption of the blockchain ecosystem.
Delegated proof-of-stake presents an innovative spin on the original proof-of-stake concept by introducing democratic delegation of block validation duties.
Blockchain DPoS networks see prominent real-world use through major protocols by offering a unique blend of throughput, scalability, and participation.
While potential centralization remains an ongoing risk to monitor, the continued evolution of the DPoS model shows promise for further advancing blockchain performance.
Whether you're building on DPoS chains or simply want to better understand this influential consensus mechanism, it is better to partner with a secure crypto service provider such as Cryptobunq. CBQ is a one-stop-shop crypto service provider that you can trust for your different crypto projects.
From tokenization to node as a service, exchange API to custody and wallet solutions, Cryptobunq offers expert services for you to grow your business with the power of blockchain technology. Security, efficiency, and expertise all together! You can explore our case studies first, or contact us directly!