Since the EOS main network (mainnet) launch is all over the news this week, let’s take a look at what’s powering it: DPoS. Delegated Proof of Stake, or “DPoS,” is another consensus mechanism. Last week, we took a look at PoW and PoS, so today we’re going to cover a new type that’s gained a lot of attention. We know that going over all the different tech behind blockchain can be confusing. Because of that, we’re taking an easy approach to the topic. Let’s break down what exactly DPoS is and why EOS and other projects chose it.
Proof of Stake (PoS) vs Proof of Work (PoW)
Before getting into what DPoS is, let’s just get a quick refresher on PoW and PoS. Remember that PoS uses how much of a currency someone has ‘staked’ in the network to help decide who validates transactions. Compare that to PoW where blocks are ‘mined’ by those running mining machines with high computing power. One of the main points supporting PoS is that it consumes less energy.
Bitcoin mining in particular takes up a lot of energy and computational power. In fact, some estimates put the Bitcoin network power consumption on the same level as a small country! While those estimates may not be entirely accurate, the fact remains that Bitcoin is power hungry.
PoS seeks to cut down on that power consumption and switch to a more efficient model. All we need to know before going into DPoS is that it is a type of PoS. That means DPoS doesn’t have big mining rigs whirling away and ‘mining’ cryptocurrencies. Here’s what it does mean, though.
Reaching a ‘Consensus’
If we remember that all three of these (PoW, PoS, and DPoS) are focused on consensus, then things are easier to understand. ‘Consensus’ is just a fancy word meaning that the network is finding a way for everyone to agree. But what do they need to agree on you ask? Well, that’s a great question!
And there’s actually a pretty simple answer: what happened. The network needs to agree on what transactions took place. We need to know who sent whom ___ amount of a cryptocurrency and who received ___ from whom. Remember that blockchain relies on a big ledger, which is essentially just a long record of all the transactions taking place.
In order to keep the record accurate, the network needs to agree on what happened. After agreeing on the correct information, then the network can continue to build this big, open ledger that everyone can see. So we know that we’re looking for a way to account for everything accurately and we know the main differences between PoW and PoS. Great. But what makes DPoS different from regular ‘ole PoS? Isn’t PoS a new concept as well?
PoS vs DPoS: Simplified
Yes, PoS is a new concept as well. In fact, the Ethereum network is planning on making the switch over to either a PoS or hybrid consensus model in the future, though it started out with PoW. However, as new ideas started coming to the table, others thought of more ways to improve on them.
DPoS is like regular PoS in that it doesn’t require miners and instead forces the people making decisions to “have some skin in the game,” so to say. That means that if a bad actor was to start making poor choices when in power, they would be jeopardizing all the coins they’ve already staked in the system. Crashing a network (and subsequent coin price) isn’t going to be very handy for you if you’re holding a bunch of those coins!
Instead of having ‘miners,” DPoS and PoS have ‘validators.’ The validators are the ones who go about adding new blocks to the blockchain and maintaining the network. Well, DPoS goes a little further and looks to democratize the process a bit more. Basically, that means that people in the network get to vote on who they want the ones maintaining the network to be.
Members of the network in a DPoS model get to vote on delegates/witnesses. Those members get elected to a witness panel where many factors are controlled by the group. Things like transaction sizes and fees typically fall under the control of the panel. From that panel, specific witnesses are chosen (rather than ‘miners’) to confirm blocks.
As the name implies, DPoS is a variant of PoS where delegates are voted into ‘office.’ Once there, it’s in the delegates’ best interest to conform to the rules of the network and be as fair an efficient as possible. Without good behavior, the delegates can easily be voted out by the network and lose their position.
Additionally, all stakeholders have influence related to the amount of stake they have in the system. The more someone has staked in the system, the more their vote counts. While that may seem unfair to some at first, the concept makes sense. Since all one needs to participate is some amount of the currency, the barrier to entry is quite low.
On top of that, there is no incentive for bad behavior by those in power. More so, there is a strong disincentive for bad behavior. If the project suffers, then those in control have a ‘lot at stake.’ Get the idea?