Delegated proof of stake (DPoS) is a consensus algorithm in which transactions are validated by a delegation of users who have been elected by those with stakes in the network.
In a DPoS model, stakeholders in the system (generally meaning token holders) elect “witnesses,” who are responsible and rewarded for validating transactions and adding blocks to the blockchain.
Stakeholders have the ability to vote for witnesses at any time, and they can be replaced on a regular basis, thus incentivizing the witnesses to validate transactions in a trustworthy way, or risk losing their position and the rewards that come with it. DPoS-based projects leverage reputation scoring systems that can help stakeholders keep witnesses accountable.
One of the primary differences between DPoS and proof of stake is that the former has stakeholders yield their validation power to elected parties. Many critics see this as a greater form of centralization, reducing value in the most critical property of a blockchain. Proponents, however, argue that this is a truly democratic means of block verification and one that will consistently incentivize good behavior.
Proponents of DPoS also point to that it offers some potential advantages to proof of work, the consensus algorithm that fuels the Bitcoin network. Proof-of-work systems require large amounts of energy to determine who will add the next block to the blockchain, with miners running specialized programs as they compete to validate transactions. Meanwhile, in DPoS systems, no such competition exists, nor does the associated energy use.
The concept of DPoS was originated by Daniel Larimer, the developer behind the decentralized projects BitShares, Steem and EOS. All of these projects use DPoS.
Other notable projects that use some form of DPoS to validate transactions include Lisk, Cardano and Tezos.