Delegated Proof of Stake (DPoS) is a consensus algorithm that is quite commonly used today. In this article, we will explore what Delegated Proof of Stake (DPoS) is, as well as its advantages and disadvantages.
What is Delegated Proof of Stake (DPoS)?
Delegated Proof of Stake (DPoS) is a consensus algorithm used in many blockchains today. In this system, token holders elect a number of professional nodes to represent them in running the network. In return, token holders share in the rewards for maintaining network security.
The Delegated Proof of Stake (DPoS) consensus mechanism was proposed by Daniel Larimer, the co-founder of EOS. DPoS is a combination of PoS, PoA, and a voting system based on the number of tokens held (equity). It emphasizes the value of identity and tokens held by participants.
Similar to Proof of Authority (PoA), Delegated Proof of Stake (DPoS) has a limited number of validators, typically ranging from 10 to 100. This allows blockchains using the DPoS consensus mechanism to scale more easily.
What Problem Does Delegated Proof of Stake (DPoS) Solve?
The blockchain trilemma refers to three difficult aspects that blockchains must address. Typically, blockchains can only choose two out of the three. These are:
- Scalability: The blockchain can process more transactions than a node with a typical configuration (e.g., a laptop can participate in the transaction verification process).
- Decentralization: The blockchain can operate without any trust dependencies on a small group of nodes or other centralized actors.
- Security: The blockchain can withstand a large percentage of participating nodes attempting to attack it (ideally 50%; anything above 25% is acceptable).
Early blockchains, including Bitcoin, Litecoin, PoS blockchains, and other similar blockchains, rely on everyone participating by running a full node to verify every transaction on the network. Therefore, they are decentralized and secure but not scalable.
Conversely, security and scalability are the two attributes chosen by blockchains using the Delegated Proof of Stake (DPoS) consensus mechanism. These blockchains rely on a small number of nodes (usually 10-100) to maintain network consensus. Security assumes that users must trust the majority of nodes in the network to operate honestly. This can be scalable and secure, but it is not decentralized.
Advantages and Limitations of DPoS
Advantages
The DPoS consensus mechanism significantly reduces the number of nodes involved in verifying transaction validity. This allows the network to reach consensus within seconds, significantly improving system processing efficiency and solving the scalability problem of blockchains, making it suitable for real-world applications.
In terms of governance, the DPoS consensus model has a clear governance structure where voting rights are limited to validator nodes. This model allows the network to make decisions faster than blockchains running PoW and PoS consensus.
Additionally, blockchains running DPoS consensus typically have a limited number of validator nodes and do not require excessively powerful computer configurations. Furthermore, delegators do not need to keep their computers running 100% of the time; only validators need to do so, significantly reducing the energy consumption of the entire network. Compared to PoW and PoS networks, DPoS blockchains have the lowest operating costs.
Limitations of DPoS Consensus
Delegated Proof of Stake (DPoS) operates similarly to a company’s board of directors, allowing those holding the majority of power to entrust transaction verification to more capable “experts.” They can also share in the rewards for participating in the production of new transaction blocks.
The limitation of this design is that it centralizes power excessively in a small number of validator nodes. If these nodes collude, they can control the entire network. Additionally, DPoS can also reduce nodes’ enthusiasm for participating in the network’s governance decisions.
Summary
We have explored what Delegated Proof of Stake (DPoS) is, as well as the advantages and disadvantages of this consensus algorithm. If you have any other questions related to this topic, please comment below, and Coin98 will assist you immediately!
Disclaimer: All information in this article is for the purpose of sharing market experiences and should not be considered investment advice. Crypto investment is a risky form of investment and should only be participated in with capital that you can afford to lose.
