Delegated Proof of Stake Consensus Mechanism

By November 22, 2018LaLa World
Proof of Stake

Blockchain technology has emerged as the go-to solution for transactions that are trustless, immutable, secure, and above all, decentralized. The Blockchain creates each block after reaching a consensus among participants without relying on any trusted intermediary such as banks. This consensus is arrived at via different mechanisms based on different ideologies on different blockchains. 

What is Proof of Work?

The most popular Consensus Mechanism is ‘Proof of Work’ (PoW) where miners race to solve mathematical puzzles to earn the right to add a new block to the blockchain. The winning miner who ‘mined the block’ earns the block reward and the right to validate the transactions submitted to be committed to the Blockchain. Bitcoin and Ethereum use the Proof of Work consensus mechanism to incentivise their miners to validate and commit new transactions to the Blockchain.

 

Mining via the solving of mathematical puzzles requires computation power and wastes a lot of electrical energy. ASICs (Application Specific Integrated Circuit) computers, designed for the sole purpose of mining cryptocurrencies consume a little less energy but require computation power nevertheless, and on top of it all, are expensive.

Limitations of Proof of Work

Such prohibitive costs and barriers to entry discourage a large part of the population from mining cryptocurrencies. This goes against the principle of decentralized control as only a handful of large conglomerations end up as the only miners on the Blockchain and drastically reduce its authenticity and accountability as a decentralized and distributed ledger.

 

Proof of Stake’ (PoS) and ‘Delegated Proof of Stake’ (DPoS) are newer consensus mechanisms that eliminate the limitations of the PoW consensus mechanism and improve the Blockchain’s scalability, reduce operational costs, transaction times, and improve incentives for the miners.

What is Delegated Proof of Stake?

PoS is a consensus mechanism to enable real-time voting to elect the transaction validators instead of making miners solve mathematical puzzles. The immediate benefit of such a voting based validation of transactions saves a lot of computation power and electricity.

Overview

Delegated Proof of Stake takes this consensus mechanism and improves it further to prevent people with large stakes from calling all the shots. DPoS creates a distinctive set of users and calls them Witnesses. These witnesses are elected on the basis of the votes received. Each voter has a voting power in proportion to the stakes held by the voter.

 

These top-tier witnesses (those who got the most votes) are called Delegates and are given the responsibility of validating transactions. The duties of the Delegates include all the important decisions of governance of the Blockchain such as:

 

  1. How much should the witnesses be paid for validating blocks
  2. Size of the Blocks

 

For their services and duties, the Delegates are paid a regular income (like a salary) while the witnesses get paid for validating transactions. The witnesses do not have the rights to alter the details of the submitted transactions

Benefits of DPoS

Since DPoS does not require intensive computation power, all computer systems, irrespective of their processing power begin on equal footing for validating transactions. Witness elections are based on reputations of the the candidates and the delegation of voting rights by other users to those who they trust to make the right decision. This prevents wastage of voting power and the absence of large sections of stakeholders will not automatically mean the loss of their votes.

 

Similar to the election procedure, the Users can vote out their existing Witnesses and the Delegates if the majority of the votes deem that a particular Witness/Delegate is not acting as per their mandate. Voting is a continuous process and all delegates are disincentivized from acting dishonestly due to the risk of losing their salaries and reputations.

 

As the number of users increases, the voting process becomes more intense and leads to the development of a fluidic state where non-performing witnesses/Delegates are immediately voted out and prevented from affecting the functioning and reputation of the entire Blockchain.

Conclusion

Since the Blockchain itself is a novelty, the consensus on the best consensus mechanism is still some time away. Until then, the proponents of the PoW, the PoS, the DPoS, and several others will continue. Maybe that’s a good thing for the increasing adoption of Decentralized protocols and technologies.