Why DPoS?
With DPoS, crypto holders use their stakes to cast votes for delegates also called witnesses. Votes are weighted by the voter’s stake. The delegates don’t necessarily need to have a significant stake, but they are competing against each other to garner votes. And they do get paid for their work. It is the best option when takes about high-throughput, fast finality, and bank-grade security.
Miners can work jointly to make blocks instead of competing like in PoW and PoS. DPoS is able to run orders of magnitude faster than most other consensus algorithms. A witness is kept in check by threat to its loss of income, locking of stake and reputation score. Witnesses have to lock certain part of their stake which is seized if they act maliciously or try to attack blockchain.
What is Consensus?
A decentralized network like a blockchain needs rules and processes so that multiple nodes can reach an agreement on the true state of the network. These sets of rules and processes are called consensus algorithms. Many different consensus algorithms have came across for various blockchain networks, proof of work and proof of stake variations remain the most widely used mechanisms for reaching consensus.
Some classical consensus algorithms,
Proof of Work
This consensus algorithm is used to select a miner for the next block generation. Bitcoin uses this PoW consensus algorithm. The central idea behind this algorithm is to solve a complex mathematical puzzle and easily give out a solution. This mathematical puzzle requires a lot of computational power and thus, the node who solves the puzzle as soon as possible gets to mine the next block.
It was implemented as a core component of the Bitcoin codes, responsible for generating new blocks and maintaining the network secure (through the process of mining). Bitcoin was proposed as an alternative to the traditional global monetary system, which is centralized and inefficient. PoW introduced a viable consensus protocol that made money transmittance headed by a central authority unnecessary.
Proof of Work system is maintained by a network of mining nodes, and make use of specialized hardware (ASICs) to try and solve complex cryptographic problems.A new block is mined every 10 minutes, on average. The miner is able to add a new block into the blockchain if he manages to find the solution for that block.
Practical Byzantine Fault Tolerant(pBFT)
Byzantine Fault Tolerance(BFT) is the attribute of a distributed network to reach consensus even when some of the nodes in the network fail to respond and when the nodes respond with incorrect information. The objective of a BFT mechanism is to safeguard against the system failures by employing collective decision making both – correct and faulty nodes which aims to reduce to influence of the faulty nodes. BFT is derived from Byzantine Generals’ Problem.
Besides, pBFT can reach consensus at a fast speed as all the nodes are in constant communication with each other, and there’s no need for multiple confirmations. pBFT system is energy efficient, they do need very less energy to operate and does not need high computational resources.
Proof of Stake
The most common alternative to PoW. Ethereum has shifted from PoW to PoS consensus. In this type of consensus algorithm, instead of investing in expensive hardware to solve a complex puzzle, validators invest in the coins of the system by locking up some of their coins as stake. After that, all the validators will start validating the blocks. Validators will validate blocks by placing a bet on it if they discover a block which they think can be added to the chain. Based on the actual blocks added in the Blockchain, all the validators get a reward proportionate to their bets and their stake increase accordingly.
The proof of stake (PoS) seeks to address this issue by attributing mining power to the proportion of coins held by a miner. This way, instead of utilizing energy to answer PoW puzzles, a PoS miner is limited to mining a percentage of transactions that is reflective of their ownership stake.
Delegated Proof of Stakes(DPoS)
Delegated Proof Of Stake (DPoS) is a consensus algorithm which is an advancement of the fundamental concepts of Proof Of Stake. DPoS is a unique method of securing a crypto network. It fixes the issue of both PoW and the PoS system. DPoS is an algorithm for achieving consensus in decentralized ecosystems and implements a layer of professional democracy to equalize the negative effects of centralization.
With DPoS blockchain consensus protocols, coin holders use their coin balances to elect delegates, called witnesses. These witnesses have the opportunity to stake blocks of new transactions and add them to the blockchain. Those who have more coins or tokens will have a greater impact on the network that those with fewer.
How does DPoS works?
In DPoS one can directly vote or give their voting power to another entity to vote on their behalf. Selected witness are responsible for creating blocks by verifying transactions. If they verify and sign all transactions in a block, they receive a reward, which is usually shared with those who have voted for witness. If a witness fails to verify all transactions in the given time, block is missed, all transactions are left unverified and no reward is distributed to that witness. The reward is added up to reward of the next witness which verifies that block. Such transactions are collected by the next witness, and such a block is called stolen.
Witnesses in the top tier is capped at a certain number which is usually in the range of 21-101. These witnesses are responsible for validating transactions and creating blocks, and are in return awarded associated fees. 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.
Witnesses can prevent specific transactions from being included in block but they cannot change information of any transaction which makes them similar to miners in Proof Of Work blockchains. As number of applicants for witness grows, competition grows and reputation becomes critical for each witness to remain competitive.
Users in DPoS systems also vote for a group of delegates who oversee blockchain governance. They do not play a part in transaction control. Delegates can propose changing size of a block, or the amount a witness should be paid in return for validating a block. Once delegates propose such changes, blockchain’s users vote on whether to adopt them.
Block validators in DPoS are full nodes which verify that blocks created by witnesses follow the consensus rules. Any user is able run a block validator and verify network. There is no incentive to be a block validator.