Delegated Proof of Stake

Consensus Algorithms

glen elkins
4 min readAug 28, 2018

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Proof of Work, Proof of Stake, Proof of Importance

Bitcoin uses a shit load of energy. Bitcoin’s energy footprint has surged along with it’s dramatic rise in popularity. With “mining” hubs popping up locations all over the world, the power needed to execute the complex algorithms within Bitcoin’s Proof of Work system take a tool on the grid.

Already confused? No problem, let’s play some catch up:

The Bitcoin network is a distributed ledger of transactions (of Bitcoin). Each computer on the network is called a “node”. Every Bitcoin transaction is sent to the network, where it is verified, and then distributed to each node in the network. Proof of Work is the algorithm the network uses to verify those transactions.

People call this “mining” because the computers that are used to verify the transactions on the network are rewarded for their efforts with new coins that are created along the way.

For a primer on blockchain and Bitcoin, check out this article I wrote earlier this year.

A few years ago, Daniel Larimer, a blockchain developer, set out to design a new system that used a fraction of the energy, and was extremely fast.

He invented a way to verify transactions and called it “Delegated Proof of Stake (DPOS).” It improved on Bitcoin’s “Proof of Work” system, which is used to “mine” Bitcoins (and is subsequently the reason Bitcoin uses so much energy).

What is Proof of Work (PoW)?

Without getting to far into the weeds, Proof of Work relies on the combined might of a lot of computers to crack complicated math problems. The math problems that are solved use the information on the blockchain, and if there’s consensus among all the computers that have done the math, the transaction is “verified” and the new “block” is added to the chain.

This is why transactions on the Bitcoin blockchain often take 10–20 minutes to complete. The network needs enough time to sort out the math and reach a consensus.

In this way, the network protects itself from fraud. Without relying on the consensus of a Proof of Work protocol, it would be easy for a bad actor to alter the blockchain and pass their alteration as the new “truth.” Like, you could just alter the number of coins in your wallet from .001 to 200 million, and without any verification process, no one could tell you that’s wrong.

How is Delegated Proof of Stake Different (DPOS)?

DPOS relies on a smaller number of computers/representatives to do the verification of transactions. By limiting who can do that work of verification, they speed up the process considerably, with some “block times” reaching speeds of under five seconds.

Additionally, this reduces the overall power consumption, because not only are there far less representatives, but also they don’t need to solve complex mathematics to verify transactions.

Instead, transactions are verified by selected representatives, or witnesses as they are called, who are voted in by the community. These Witnesses are rewarded for their work with new coins on the network (just like PoW), or a regular salary.

Because this subset is uniquely able to earn rewards on the network, their spots are coveted, with a backlog of potential witnesses vying for a spot at the top. If a Witness starts doing a bad job, or acting in bad faith, they can be voted out by the community and someone will slide in to replace them.

Each Witness votes whether a transaction on the network is valid or not. Their voting strength is equal to how many coins they own on the network (or according to their “stake”).

The big fish have more power, but the community can give them the boot. This novel approach to consensus-building is seen by many people in the space as the “next gen” protocol. As the popularity of blockchain increases, companies and consumers in the space are realizing that the energy consumption of “proof of work” technologies are too high to scale efficiently, and therefore, DPOS is a much better alternative.

In fact, DPOS is being adopted by an increasing number of blockchain companies, including EOS, Steem, DECENT, and Bitshares.

As blockchain technologies are applied to more industries and are molded to solve new problems, the speed of the network, and energy consumption will become increasingly important.

For example, DECENT is a blockchain company focused on digital media and entertainment. They’ve created a powerful blockchain platform, called DCore. By using DPOS, the network can move quickly and have a light footprint.

DECENT’s focus on media brings an interesting perspective on issues of censorship, since nothing on the blockchain can be removed completely. Once something is published, it cannot be unpublished. That could be extremely valuable in a number of industries — namely journalism around the world.

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