DPoS meaning is Delegated Proof of Stake, which is a consensus algorithm considered by many as a more efficient and democratic version of the PoS mechanism.
Proof of Work (PoW)
Proof of Work was the first consensus algorithm to be used. It was implemented as a core component of the Bitcoin protocol, responsible for generating new blocks and maintaining the network secure (through the process of mining). Anyone could be a miner, hence contributing to the decentralization of the blockchain.
A Proof of Work system is maintained by a network of mining nodes, which make use of specialized hardware (ASICs) to try and solve complex cryptographic problems. On average, a new block is mined every 10 minutes. The miner is only able to add a new block into the blockchain if he manages to find the solution for that block. In other words, a miner is only able to do so after completing a proof of work, which in turn rewards him with newly created coins and all transaction fees of that specific block. Nevertheless, this comes at a high cost because it requires a lot of energy and failed attempts. Moreover, the ASIC hardware is quite expensive.
Furthermore, PoW is considered to have limited scalability due to the low amount of transactions per second.
Proof of Stake (PoS)
The Proof of Stake consensus algorithm is the most common alternative to Proof of Work. PoS systems were designed to solve some of the inefficiencies and emerging problems that commonly arise on PoW-based blockchains. It specifically addresses the costs and limitations associated with PoW mining (power consumption and hardware). Basically, a Proof of Stake blockchain is secured in a deterministic way. There is no mining in these systems and the validation of new blocks is dependent on the number of coins being staked. The more staking coins a person holds, the higher the chances of being picked as a block validator (also known as minter or forger).
PoS systems are considered to be less vulnerable to attack, as a successful attack would need an ownership of at least 51% of the total existing coins.
Delegated Proof of Stake (DPoS)
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. Typically, the rewards collected by the delegates are proportionally shared with their respective electors.
Delegates and witnesses are essentially putting their reputation at stake. If an elected node misbehaves or does not work efficiently, they are quickly expelled for another node. DPoS systems are seemingly more scalable, with a better transactions per second rate.
In Conclusion
DPoS stands for “Delegated Proof of Stake”, which is a consensus mechanism that was upgraded from its predecessors, Proof of Work and Proof of Stake.
