Delegated Proof Of Stake

PoS and DPoS are algorithms that drive sầu blockchains to lớn reach consensus efficiently and democratically.

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SummaryProof-of-Stake (PoS) consensus algorithms make blockchain networks more efficient by eliminating the energy-intensive computational mining process inherent in Proof-of-Work protocols. PoS algorithms incentivize users to lớn confirm network data and ensure security through a process of collateral staking. An iteration of the concept known as Delegated Proof of Stake (DPoS) works similarly, but features a voting và delegation mechanism that makes the process more democratic. PoS algorithms power some of the most innovative sầu và popular blockchains today, và may become the dominant consensus mechanism in blockchain moving forward.

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A central facet of any blockchain is its consensus mechanism, which refers to lớn how all the stakeholders in a decentralized network agree on the validity of shared data (typically some kind of transaction, but not always) and secure that data on the blockchain. Consensus must be achieved before a blockchain network can move on & process new transactions. Proof of Stake (PoS) is an algorithm employed by cryptocurrency protocols to lớn reach consensus. In PoS blockchains, an individual or group is algorithmically chosen khổng lồ verify transactions with computer hardware based on the tokens they have staked, or locked up, in the network as a form of collateral.

To understand the increased efficiency that is achieved from PoS algorithms, you must first understand Proof of Work (PoW), the original blockchain consensus algorithm.

PoW algorithms dem& work from the computers around the world that comprise decentralized networks. In the case of Bitcoin, this work is the computer processing power that solves a computational puzzle & the computers that carry out this process are called miners. When miners solve sầu the computational puzzle, their block of data is deemed valid and added lớn all copies of the blockchain, thus achieving consensus. As a reward for their efforts, miners are granted a bloông xã reward in the form of bitcoin và then turn their attention khổng lồ the next blochồng of data. While this method is energy intensive, it has proven very successful at ensuring the security & stability of various blockchain networks.

History of PoS

The concept of PoS was first theorized on the Bitcointalk forums in July 2011 as a way to lớn make the process of verifying blocks more efficient than employing PoW consensus algorithms. Instead of thousands of computers competing and expending energy to lớn confirm network data, as is the case with PoW, data verification is assigned to lớn network nodes that have sầu staked, or locked, their tokens as collateral in PoS. The concept has been iterated upon by the global blockchain developer community & is widely considered khổng lồ be the successor to lớn PoW as decentralized công nghệ grows.

The Ethereum network is working toward replacing its PoW mechanisms with PoS in its Ethereum 2.0 update, which is expected to lớn launch in 2021. Tezos, Cosmos, Cardano, EOS, Algor&, và Synthetix Network are just a few of the blockchains that currently utilize versions of PoS.

No energy-intensive mining is required on PoS networks. Instead, the PoS mechanism randomly chooses a validator to validate blocks of data where the cost of an intended malicious error is greater than the blochồng reward. PoS algorithms use several methods khổng lồ select who will validate the next blochồng.

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The kích cỡ of the stake: the more tokens staked, the higher the chance of being chosen lớn validate 

The age of the tokens staked: the longer the tokens have sầu been unspent, the higher the chance of being chosen khổng lồ validate (once that stake is used lớn verify a block, its age is remix lớn zero)

Random selection: the lowest hash value (the string of numbers created by a hashing algorithm khổng lồ represent data) combined with the largest stake is chosen khổng lồ validate the next block

Incentives và Disincentives

As a way lớn keep validators from acting maliciously or adding fraudulent transactions into lớn the bloông xã, the total value of tokens staked needs khổng lồ exceed the transaction fees earned. If fraudulent activity is detected, the validator loses their stake & will not be allowed khổng lồ participate in the validation process in the future. This is why larger stakes are favored, since the validator stands lớn thua more from acting maliciously. This system helps create trust between the respective parties.

PoS is particularly notable because it doesn’t require the hardware energy consumption required by PoW networks. On PoS networks, there is significantly less computation required. Further, PoS eliminates the barrier to entry of expensive sầu computer hardware, instead placing priority on tokens locked up in the network. Theoretically, PoS also allows more users khổng lồ participate in the creation of new blocks.

One criticism of the PoS methodology is that its kiến thiết favors the wealthy — those who hold the most cryptocurrency — since it chooses validators with the most tokens staked. To combat this discrepancy, other methods for validator selection & iterations on the concept of staking have sầu been developed: the most notable is delegated PoS.

Delegated Proof of Stake

Delegated Proof of Stake (DPoS) is a popular evolution of the PoS concept, whereby users of the network vote & elect delegates khổng lồ validate the next block. Delegates are also called witnesses or blochồng producers. Using DPoS, you can vote on delegates by pooling your tokens inlớn a staking pool and linking those to lớn a particular delegate. You vày not physically transfer your tokens to lớn another wallet, but instead utilize a staking service provider to stake your tokens in a staking pool.

A limited number of delegates (most protocols choose between đôi mươi và 100) are chosen for each new bloông chồng, so the delegates of one bloông xã might not be the delegates of the next. Elected delegates receive sầu the transaction fees from the validated block, và that reward is then shared with users who pooled their tokens in the successful delegate’s pool. The more you stake, the higher a share of the block reward you recieve sầu. The rewards are shared based on each user’s stake; so if your stake represents 5% of the total staking balance, you would receive 5% of the bloông chồng reward.

The first iteration of DPoS was developed in 2014 by former EOS Chief Technology Officer (CTO) Dan Larimer. Larimer first implemented the consensus algorithm on decentralized crypto exchange platform BitShares in 2015. Today, a number of blockchains, including Cardano, EOS, & TRON, use DPoS.

According to its proponents, DPoS is a more democratic way of choosing who verifies the next blochồng, allowing a more diverse group of people to participate in the process since it’s based on earned reputation as a lawful staker và not overall wealth. Additionally, because there are a limited number of validators, DPoS allows the network khổng lồ reach consensus more quickly.

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Testing and experimentation continue on PoS algorithms, including delegated PoS. This concept has shown immense promise for increasing the efficiency, transaction speed, và throughput of blockchain protocols, which is necessary for more enterprise uses as the industry grows and looks lớn disrupt more complex và larger markets. The switch from PoW to lớn PoS-based consensus mechanisms is a watershed development for blockchain technology, & an iteration of PoS will likely become the dominant size of consensus in the future.