Delegated Proof of Stake

Delegated proof of stake mitigates the potential negative impacts of centralization through the use of witnesses (formally called Delegates). A total of N witnesses signs the blocks and are voted on by those using the network with every transaction that gets made. By using a decentralized voting process, DPOS is by design more democratic than comparable systems.

Rational Behind DPOS

• Give shareholders a way to delegate their vote to a key (one that doesn't control coins 'so they can mine')
• Maximize the dividends shareholders earn
• Minimize the amount paid to secure the network
• Maximize the performance of the network
• Minimize the cost of running the network (bandwidth, CPU, etc.)

Background

The questions that must be answered by any consensus process include, but are not limited to:

• Who should produce the next block of updates to apply to the database?
• When should the next block be produced?
• What transactions should be included in the block?
• How are changes to the protocol applied?
• How should competing transaction histories be resolved?

The goal is to find answers to these questions that ensure the consensus process is robust against an attacker who wishes to gain control over the network. In practice, gaining control means acquiring the ability to unilaterally censor transactions. The process should also be robust against an attacker wishing to take advantage of a temporary inconsistency in the database state on different computers.

The fundamental feature of DPOS is that shareholders remain in control. If they remain in control, then it is decentralized. As flawed as voting can be, when it comes to shared ownership of a company it is the only viable way. Fortunately, if you do not like who is running the company you can sell, and this market feedback causes shareholders to vote more rationally than citizens.

Every shareholder gets to vote for someone to sign blocks in their stead (a representative if you will). Anyone who can gain 1% or more of the votes can join the board. The representatives become a "board of directors" which take turns in a round-robin manner, signing blocks. If one of the directors misses their turn, clients will automatically switch their vote away from them. Eventually these directors will be voted off the board and someone else will join. Board members are paid a small token to make it worth their time ensuring uptime and an incentive to campaign. They also post a small bond equal to 100x the average pays they receive for producing a single block. To make a profit a director must have greater than 99% uptime.

The responsibilities of the role of delegates:

• A witness is an authority that is allowed to produce and broadcast blocks.
• Producing a block consists of collecting transactions of the P2P network and signing it with the witness' signing private key.
• A witness' spot in the round is assigned randomly at the end of the previous block