What is Delegated Proof-of-Stake (dPOS)?

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Delegated Proof of Stake (DPoS) is an evolution of the popular consensus mechanism — Proof of Stake (PoS).

Holders of the tokens are issued voting rights to select specific delegates, also known as block producers or witnesses, who will validate the new block. Delegates with the highest number of votes after a voting round becomes the block producers.

A delegate is expected to stake a certain amount of the blockchain’s token to keep them accountable to the security and operation of the network. Any malicious act by a delegate is publicly visible to all stakeholders with a penalty of losing all staked coins or tokens. Ultimately, stakeholders initiate another voting round to elect a new delegate.

Why was Delegated Proof of Stake (DPoS) created?

The Proof of Stake (PoS) consensus algorithm was created as a more energy-efficient solution to the pre-dominant Proof of Work (PoW) consensus protocols widely used on major blockchains, including Bitcoin and Ethereum. The PoW consensus model requires that “work” is done using vast amounts of computing power, consequently leading to high energy consumption.

In contrast, the PoS consensus protocol requires that “miners” stake a minimum amount of the blockchain’s token or coin locked away in a security account and are selected at random by the system to validate a new block. The more tokens staked on the network, the more the chances of getting selected to validate blocks by the system. Blockchains such as Cardano, Cosmos, EOS, Tezos, Synthetix Network and Algorand are some of the networks to have implemented the PoS protocol.

Proving to be a more energy-efficient solution as no “mining” activity is required, PoS appeared to have solved all existing issues. However, many argue that the protocol favours the “wealthy” as large holders of the tokens or coins are at a clear advantage of being selected.

Amongst many other proposed solutions, the DPoS protocol truly positions itself as an improvement to existing PoS and PoW blockchains alike. DPoS blockchains run mainly on delegates’ perceived trustworthiness and reputation, with the voting power solely on coin holders.