Delegated Proof of Stake

DPoS. A consensus mechanism that has a blockchain's nodes vote on the correct version of the blockchain. 

You may have read about Proof of Stake blockchain systems. This is the next step, and it’s considered as a more efficient and even more democratic version.

Both PoS and DPoS were developed as alternatives to Proof of Work since PoW needs lots of external resources. DPoS requires far fewer resources -- if any -- and is designed to be more sustainable and eco-friendly. 

The Delegated Proof of Stake (DPoS) consensus algorithm was developed in 2014 by Daniel Larimer. Since then a number of projects such as Bitshares, Steem, and Lisk make use of the DPoS consensus algorithm.

A DPoS-based blockchain works by using a voting system where stakeholders outsource their work to a third-party. These stakeholders vote for a few delegates to secure the network on their behalf. These delegates are responsible for achieving consensus during the generation and validation of new blocks. 

If you’re thinking of becoming a delegate or a “witness” then consider that your voting power is proportional to the number of coins each you hold. The voting system varies from project to project, but in general, the rewards collected by the delegates are proportionally shared with their respective stakeholders who elected them to the roll.

This DPoS algorithm stays secure through this voting system by emphasizing a delegate’s reputation. If an elected delegate/witness does not work efficiently, the system and voters can quickly expel and replace them with another one.

Thanks to their lack of reliance on resources, DPoS blockchains are more scalable and capable of processing more transactions per second (TPS).

DPoS vs PoS

PoS and DPoS may look similar by way of stakeholding, but DPoS presents a new way to think about the democratic voting system. DPoS systems are maintained by the voters and the voters can kick off the delegates, the delegates are motivated to be honest and efficient. 

DPoS vs PoW

DPoS systems are engineered to process large amounts of blockchain transactions, whether they are smart contracts or otherwise. 

Nevertheless, PoW is still considered the most secure consensus algorithm -- that’s why the majority of blockchains that deal in money transmittance choose to use PoW.

Also, DPoS block production is predetermined and not competition-based like PoW. In fact, if you’re a witness, you’ll like to know that every witness gets a turn at block production and claiming the rewards.

The bottom line is that DPoS is better in some ways from PoW and even PoS. The stakeholder voting serves for motivating honest and efficient delegates and presents a higher performance in terms of transactions per second.