Compared with the previous Proof of Stake (PoS) mechanism, the Delegated Proof of Stake (DPoS) consensus algorithm is considered by many to be a more efficient and democratic version.

Since Proof of Work (PoW) requires many external resources by design, both Proof of Stake and Delegated Proof of Stake are used as alternatives to the Proof of Work consensus algorithm. The proof-of-work algorithm utilizes large amounts of computation to ensure an immutable, transparent and decentralized distributed ledger. Proof of Stake and Delegated Proof of Stake do not require so many resources and are more sustainable and environmentally friendly by design. To understand how Delegated Proof of Stake works, you must first master some basic knowledge of Proof of Work and Proof of Stake.

Proof of Work (PoW)

Most digital currency systems run on a network called blockchain On top of the distributed ledger, proof of work was the first consensus algorithm used. It forms the core of the Bitcoin protocol and is responsible for generating new blocks and securing the network (through mining). Bitcoin can replace the centralized and inefficient global traditional currency system. Proof of Work introduces a viable consensus protocol that eliminates the need for remittances to go through a centralized institution. It provides a decentralized payment system based on a peer-to-peer network and eliminates the involvement of middlemen, greatly reducing transaction costs.

The workload proof system is jointly maintained by mining nodes and other types of nodes. It uses special hardware (ASIC mining machines) to try to solve complex encryption problems, and mines a new block every ten minutes on average. Miners can only add a new block to the blockchain after finding a solution to that block. In other words, miners can only do so after completing a proof of work, which in turn rewards miners with newly mined digital currency and all transaction fees for this block. However, this is extremely costly as it uses a lot of energy and requires many failed attempts. In addition, ASIC hardware is also very expensive.

Beyond the cost of maintaining the system, there are a number of issues that have plagued proof-of-work systems - particularly in terms of scalability (very limited transactions per second). Despite this, proof-of-work blockchains are still considered the most secure, reliable, and fault-tolerant standard solution.

Proof of Stake (PoS)

The Proof of Stake consensus algorithm is the most common alternative to Proof of Work. Proof-of-stake aims to solve the inefficiencies and emerging problems of some proof-of-work blockchains. It looks at the costs (power consumption and hardware) of proof-of-work mining. Basically, Proof of Stake ensures the security of the blockchain in a deterministic way. Without mining in these systems, the validation of new blocks depends on the number of coins that are staked. The more coins a person holds, the higher the probability of being selected as a block validator (also called a coiner or forger).

Proof-of-work relies on external investment (power consumption and hardware), while proof-of-stake solidifies the security of the blockchain with internal investment (the digital currency itself).

Additionally, the proof-of-stake system makes it more expensive to attack the blockchain, as a successful attack requires possession of at least 51% of the total currency in existence. And a failed attack will result in huge financial losses. While proof-of-stake has compelling advantages and significant upside, the system is still in its early stages and has yet to be tested on a larger scale.

Delegated Proof of Stake (DPoS)

The Delegated Proof of Stake (DPoS) consensus algorithm was developed by Daniel Larimer (BM ) was proposed in 2014. For example: Bitshares, Steem, Ark and Lisk are all digital currency projects that use the delegated proof-of-stake consensus algorithm.

Delegated Proof of Stake blockchain has a voting system where stakeholders deliver their work to a third party. In other words, they can vote for several representatives to protect the network on their behalf. Delegates, also known as witnesses, are required to reach consensus in the process of generating and validating new blocks. Voting power is proportional to the number of coins held by each user. Voting systems vary from project to project, but in general each representative brings a personal voice when voting. Typically, representatives collect rewards and distribute them proportionally among their respective voters.

Thus, the Delegated Proof of Stake algorithm creates a voting system that directly depends on the reputation of the representatives. If an elected node misbehaves or fails to work effectively, it will be quickly evicted and replaced by another node.

In terms of performance, compared with proof of work and proof of stake, the blockchain of delegated proof of stake is more scalable and can handle more transactions per second (TPS).

Delegated Proof of Equity VS Proof of Equity

Although Proof of Equity and Proof of Delegated Equity are joint-stock systems in the sense of Similar, but Delegated Proof of Stake proposes a novel democratic voting system to select block producers. Since the Delegated Proof of Stake system is maintained by voters, representatives must act honestly and efficiently or be voted out. Additionally, delegated proof-of-stake blockchains tend to be faster than proof-of-stake blockchains in terms of transactions per second.

Delegated Proof of Stake VS Proof of Work

Different from Proof of Stake which attempts to solve the problem of Proof of Work, Delegated Proof of Stake aims to simplify the block generation process. Therefore, the Delegated Proof-of-Stake system is able to quickly process large amounts of on-chain transactions. Delegated Proof of Stake is used in a different way than Proof of Work and Proof of Stake. Since Proof of Work is still recognized as the most secure consensus algorithm, most financial flows occur here. Because Proof of Stake works more efficiently than Proof of Work, it has more use cases. Delegated Proof of Stake limits the use of stake in the process of electing block producers. Unlike Proof-of-Work systems, which have competing systems, the actual block generation of Delegated Proof-of-Stake is scheduled. Each witness takes turns producing blocks. Some argue that Delegated Proof of Stake should be considered a proof of authority system.

Conclusion

Delegated Proof of Stake is very different from Proof of Work or even Proof of Stake. It incorporates a stakeholder voting mechanism to incentivize and elect honest and efficient representatives (or witnesses). However, the actual block production process is completely different from proof-of-stake systems, and in most cases exhibits higher performance in terms of transactions per second.