Proof-of-Stake (PoS) is a consensus algorithm that requires nodes to lock in a certain amount of tokens to validate transactions. In return for validating transactions, they receive additional tokens as a reward. However, if the node acts maliciously, they lose its locked tokens. This process is known as staking.
The PoS system gives holders an equal and random opportunity to mine a new block. Before a new block is mined, a node is selected to validate the transactions within the next block. However, for a node to be selected, it must have a copy of the blockchain downloaded on its device (known as "running a full node"). Additionally, nodes need to be online at all times to validate transactions.
For some people, this can prove inefficient or too cumbersome since they must be running a full node at all times. Delegated Proof-of-Stake (DPoS) can help to solve the staking issue for people who don't want to run a full node and be online 24/7.
Delegated Proof-of-Stake is similar to Proof-of-Stake since users can stake their tokens to validate transactions within a block. However, DPoS uses a voting and delegation system to encourage users to contribute to network security by providing collateral.
So, instead of running a full node and staking their tokens directly, network participants can elect a node to act as a validator on their behalf.
Before validators can create a new block, the network must choose witnesses, sometimes referred to as delegates. Only those elected as delegates and voters can take part in this process.
The precise number of delegates required to create a block varies with every project, but anything between 20 and 100 delegates is typically selected whenever a new block is established. When the block is created, and the data is validated, the delegate receives their reward (additional tokens).
How DPoS Works
In the Delegated Proof-of-Stake system, the more tokens a node has staked, the more influence they have over the voting process. This is because the number of tokens held determines voting power. Delegates can be removed from the DPoS process if they act maliciously or in an untrustworthy manner.
Reputation also plays a part in the DPoS system. A node with a trustworthy reputation is more likely to be selected as a delegate. Nodes that are selected to become delegates are also referred to as "witnesses."
For nodes to vote for delegates in a delegated proof of stake system, nodes must deposit their tokens into a staking pool and vote for their chosen delegate. Once selected, delegates must agree on which transactions to approve and which ones to cancel. Next, full nodes on the network validate the blocks. Validation of new blocks occurs only if the network has reached a consensus on the validity of the transactions.
The block will not be validated if the delegate does not confirm the transactions in time. Only once the transactions have been confirmed promptly can the block be verified, and the delegate receives their block reward.
Conclusion
Delegated Proof-of-Stake is another iteration of the Proof-of-Stake system that uses a voting and delegation system to secure the network. Instead of running a full node, participants in the network can elect other nodes to validate transactions by depositing their tokens into a voting pool.