Why does it differ from PoS or PoW?
As with decentralization dominating the crypto world, many systems and ideas continue to challenge the dominance of centralized but inefficient mechanisms, seeking to improve ways of life, thoughts, and processes. Even nascent ones do not escape transitional efficiencies and restive minds run the rounds without nay a pat in the back.
The transcending Proof of Stake and Proof of Work which are hallmarks of the great blockchain technology even have not rested on their laurels. The reason being another genius called Delegated Proof of Stake took wings to further eliminate threats to people’s trust. And to better understand how it operates, it is imperative to understand how the concepts of Proof of Stake and Proof of Work really work.
After the economic debacle of 2008, Bitcoin was introduced as everything that the current international monetary structure is not. Blockchain technology was the novel underlying infrastructure upon which runs DLT, or distributed ledger technology. The first digital currency protected by cryptographic language applied Proof of Work as Bitcoin’s core component in the creation of blocks, and to maintain the security of the network through bitcoin mining. The Proof of Work consensus protocol did away with a centralized authority controlling transactions, no third-party interventions, transparent but immutable records, and the reduction of costly transaction fees. The Proof of Work mechanism operates through the ASICS hardware for miners to be able to solve extremely difficult mathematical problems to be able to mine a new block. This is the miner’s Proof of Work that will be rewarded with newly minted coins to include transactional fees within the block. ASICS can be expensive as it requires huge amounts of electricity, scalability problems, and losing out solving mathematical solutions to other miners. But even then, PoW protocols remain to be the default standard for most networks due to security and reliability.
Proof of Stake is an alternative to Proof of Work to improve on the cropping problems of the Proof of Work mechanism. PoS seeks to address the electricity consumption and hardware problems of Proof of Work protocol. It also calls for miners to place a stake to qualify. The more cryptocurrencies are staked, the higher the chance for a miner to be chosen as a block minter or forger. Beyond the ASICS hardware that a miner has to have, the PoS miner should have an internal crypto investment as a stake, virtually eliminating the threat of 51% attacks.
The Delegated Proof of Stake (DPoS) was a product of genius developed by Daniel Larimer in 2014. This consensus algorithm emanated from Proof of Stake consensus that utilizes a voting system to elect a group of delegates as an outsource to validate blocks and secure the network on behalf of all stakeholders. DPoS coin holders use the power of their balances to elect the delegates, called witnesses, to achieve consensus on the validation of newly created blocks. those who have more coins or tokens will, obviously, wield more control on the platform than those with lesser balances. The voting system differs accordingly to every project. Any interested delegate submits a proposal to gain votes. Any delegate rewards are share to a proportion with those who elected them. Being elected requires that a delegate is of good repute. Any misconduct can cause a delegate to be ejected and replaced.
In general, there are 21 up to a hundred delegates elected to represent token hodlers who are not keen on personally validating the blocks. The elected delegates will be the ones to do the validation who undergo periodic reshuffling. These delegates, who are witnesses and miners themselves are given opportunities to collaborate, taking turns at block production. It is a far cry from PoS and PoW where miners compete. This democratic system of creating blocks via DPoS results mostly in higher performance in scalability rates, with faster transaction conversions per second.
It is worthy of note that DPoS is strongly proposed as a Proof of Authority System (PoA).
Wallex is a FinTech company employing blockchain solutions to conform to your escrow, custody, exchange, transfer, and asset management needs. Our AML/KYC/CFT procedures enable us to operate internationally, conforming to each country’s policies in our area of operation. We are at your service wherever you are, whenever you need us. Our advisory team is ever ready to assist you with a wiser way of investing. Call now.