The Delegated Proof of Stake (DPoS) consensus algorithm is considered by many to be a more efficient and democratic version of the previous Proof of Stake (PoS) mechanism.

Since Proof of Work (PoW) requires many external resources by design, both Proof of Stake and Delegated Proof of Stake are used as alternatives to the Proof of Work consensus algorithm. The Proof of Work algorithm uses a lot of computation to ensure an immutable, transparent and decentralized distributed ledger. Proof of Stake and Delegated Proof of Stake do not require so many resources and are more sustainable and environmentally friendly by design. To understand how Delegated Proof of Stake works, you must first master some basic knowledge of Proof of Work and Proof of Stake.


Proof of Work (PoW)

Most digital currency systems run on a distributed ledger called a blockchain, and proof of work was the first consensus algorithm to be used. It is the core of the Bitcoin protocol and is responsible for generating new blocks and ensuring the security of the network (through mining). Bitcoin is an alternative to the centralized and inefficient global traditional currency system. Proof of work introduces a viable consensus protocol that eliminates the need for remittances to be made through a centralized institution. It provides a decentralized payment system based on a peer-to-peer network and eliminates the involvement of middlemen, greatly reducing transaction costs.

The proof-of-work system is maintained by mining nodes and other types of nodes, which use special hardware (ASIC miners) to try to solve complex cryptographic problems, mining a new block every ten minutes on average. Miners can only add a new block to the blockchain after they have found a solution to that block. In other words, miners can only do so after completing a proof of work, which rewards miners with newly mined digital currency and all transaction fees for this block. However, this is extremely costly because it uses a lot of energy and requires many failed attempts. In addition, ASIC hardware is also very expensive.

Besides the cost of maintaining the system, there are also some issues that plague the proof-of-work system - especially in terms of scalability (transactions per second are very limited). Despite this, proof-of-work blockchains are still considered the most secure, reliable, and fault-tolerant standard solution.


Proof of Stake (PoS)

The Proof of Stake consensus algorithm is the most common alternative to Proof of Work. Proof of Stake aims to address inefficiencies and new issues that arise with some Proof of Work blockchains. It looks at the cost of mining (power and hardware) for Proof of Work. Basically, Proof of Stake secures the blockchain in a deterministic way. In these systems there is no mining, and the validation of new blocks depends on the number of coins held as a stake. The more coins a person holds, the higher the probability of being selected as a block validator (also called a minter or forger).

While proof of work relies on external investment (power consumption and hardware), proof of stake underpins the security of the blockchain with internal investment (the digital currency itself).

Additionally, proof-of-stake systems make it more expensive to attack a blockchain, as a successful attack requires the possession of at least 51% of the total currency in existence. A failed attack would result in huge financial losses. Despite the compelling advantages and potential upside of proof-of-stake, the system is still in its early stages and has yet to be tested on a larger scale.


Delegated Proof of Stake (DPoS)

The Delegated Proof of Stake (DPoS) consensus algorithm was proposed by Daniel Larimer (BM) in 2014. For example: Bitshares, Steem, Ark, and Lisk are all digital currency projects that use the Delegated Proof of Stake consensus algorithm.

Delegated Proof of Stake blockchains have a voting system where stakeholders delegate their work to a third party. In other words, they can vote for several delegates to protect the network on their behalf. Delegates are also called witnesses, and they are required to reach consensus in the process of generating and validating new blocks. Voting power is proportional to the number of coins each user holds. Voting systems vary from project to project, but in general, each delegate gives a personal opinion when voting. Usually, delegates collect rewards and distribute them proportionally to their respective voters.

Therefore, the Delegated Proof of Stake algorithm creates a voting system that directly depends on the reputation of the delegates. If an elected node misbehaves or does not work efficiently, it will be quickly expelled and replaced by another node.

In terms of performance, Delegated Proof of Stake blockchains are more scalable and can process more transactions per second (TPS) compared to Proof of Work and Proof of Stake.


Delegated Proof of Stake vs. Proof of Stake

While proof of stake and delegated proof of stake are similar in the sense of a shareholding system, delegated proof of stake proposes a novel democratic voting system to select block producers. Since the delegated proof of stake system is maintained by voters, representatives must behave honestly and efficiently, otherwise they will be voted out. In addition, delegated proof of stake blockchains tend to be faster than proof of stake blockchains in terms of transactions per second.


Delegated Proof of Stake vs. Proof of Work

Unlike Proof of Stake, which attempts to solve the problems of Proof of Work, Delegated Proof of Stake aims to simplify the block generation process. As a result, Delegated Proof of Stake systems are able to process a large number of on-chain transactions quickly. Delegated Proof of Stake is used in different ways than Proof of Work and Proof of Stake. Since Proof of Work is still recognized as the most secure consensus algorithm, most financial flows occur here. Since Proof of Stake works more efficiently than Proof of Work, it has more use cases. Delegated Proof of Stake limits the use of stake in the process of electing block producers. Unlike Proof of Work systems with a competitive system, the actual block generation of Delegated Proof of Stake is predetermined. Each witness takes a turn to produce blocks. Some people believe that Delegated Proof of Stake should be considered a Proof of Authority system.


in conclusion

Delegated Proof of Stake is very different from Proof of Work or even Proof of Stake. It incorporates a stakeholder voting mechanism to incentivize and elect honest and efficient representatives (or witnesses). However, the actual block production process is completely different from proof-of-stake systems, and in most cases exhibits higher performance in terms of transactions per second.