The Delegated Proof of Stake (DPoS) consensus algorithm was developed by Daniel Larimer, in 2014. Bitshares, Steem, Ark, and Lisk are some of the cryptocurrency projects that make use of DPoS consensus algorithm.
A DPoS-based blockchain counts with a voting system where stakeholders outsource their work to a third-party. In other words, they are able to vote for a few delegates that will secure the network on their behalf. The delegates may also be referred to as witnesses and they are responsible for achieving consensus during the generation and validation of new blocks. The voting power is proportional to the number of coins each user holds. The voting system varies from project to project, but in general, each delegate presents an individual proposal when asking for votes. Usually, the rewards collected by the delegates are proportionally shared with their respective electors.
Therefore, the DPoS algorithm creates a voting system that is directly dependent on the delegates’ reputation. If an elected node misbehaves or does not work efficiently, it will be quickly expelled and replaced by another one.
In regards to performance, DPoS blockchains are more scalable, being able to process more transactions per second (TPS), when compared to PoW and PoS.
DPoS vs PoS
While PoS and DPoS are similar in the sense of stakeholding, DPoS presents a novel democratic voting system, by which block producers are elected. Since a DPoS system is maintained by the voters, the delegates are motivated to be honest and efficient or they get voted out. In addition, DPoS blockchains tend to be faster in terms of transactions per second than the PoS ones.
DPoS vs PoW
Where PoS attempts to solve the faults of PoW, DPoS looks to streamline the block production process. For that reason, DPoS systems are capable of quickly processing larger amounts of blockchain transactions. Now, DPoS is not used in the same way as PoW or PoS. PoW is still considered the most secure consensus algorithm, and as such, is where most money transmittance occurs. PoS is faster than PoW and potentially has more use cases. DPoS limits the use of staking to the election of block producers. Its actual block production is predetermined in contrast to the competition-based system of PoW. Every witness gets a turn at block production. Some claim that DPoS should be considered a Proof of Authority system.
DPoS differs substantially from PoW and even PoS. Its incorporation of stakeholder voting serves as a means for deciding and motivating honest and efficient delegates (or witnesses). However, the actual block production is quite different from PoS systems and, in most cases, present a higher performance in terms of transactions per second.
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