Delegated Proof of Stake

The Complete Blockchain Professional Course Different types of Consensus Algorithms
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Transcript

The proof of stake consensus algorithm helps us to solve the problem of massive computing power and energy required for confirming the blocks over the blockchain. On the other hand, it creates another major problem that if you are holding a good percentage of clients over the network, only then you will receive a good amount of transaction fees. To summarize, in a way it's dictating, that rich will get richer and the poor will get poorer. To act again such drawback another concept came into being which is delegated proof of stake. delegated proof of stake is based upon voting. Instead of holding stake inside the blockchain network.

Users are holding percentage of votes inside the blockchain network. Users put these words on top of the miners based on this Security and availability of the miners. The other name for the miners or validators in delegated proof of stake are witnesses. Block chains running delegated proof of stake may also contain policies for awarding the witnesses, such as only top hundred witnesses with votes will receive the part of the transaction fees. These kinds of policies will create a healthy competition between the witnesses where witnesses try to be secure and available at all times. Moreover, witnesses not present in top hundred will also try to get in the reward range, first creating backup nodes for the network.

Now let's imagine a situation in order to understand delegated proof of stake. Suppose you have started a blockchain network Within that network, you are maintaining a voting based approach. You have provided a policy setting only the top hundred witnesses or miners, having the most votes will be paid for their services. Moreover, only the top 20 miners or witnesses having most votes will receive a regular salary in the network. Now let's again consider a scenario that your blockchain network is running with 100 coins and the users A, B, C, and D are holding 40 coins, 30 coins, 20 coins and 10 coins respectively. This blockchain network is running with delegated proof of stake consensus algorithm.

So the users A, B, C, and D are having voting privileges as per their share. User a has fought Words corresponding to 40 coins. User B has 30 votes corresponding to 30 coins. User C has 20 votes corresponding to 20 coins, and user D has 10 votes corresponding to 10 coins they are holding in the blockchain network. Witnesses are also connected to the chain and they are making sure that the blockchain is verified and available at all times. These users who are holding the votes will give their votes to the witnesses.

It could be a situation where they are providing all their votes to a single witness, or they are distributing their votes in such a way that they provide some percentage of the votes to one witness and some other percentage of votes to some other witness. How is voting beneficial for our system. It helps us to create a healthy competition between the witnesses Because now every witness wants to be ranked in the top 20 or top hundred to earn rewards over the blockchain. It makes the network more secure and available. Moreover, it safeguards us from the corrupted parties. If our witness acts like a non secure entity, and not provide a quality work, then the users who are voting for the witnesses can remove their votes and essentially fire the lousy actor.

Voting is a continuous process in delegated proof of stake consensus algorithm. Apart from witnesses, delegated proof of steak also provides another role known as delegates. delegates are elected as per the votes given to them by the users. The primary functions of the delegates is to maintain the blockchain delegates will maintain all the parameters required for the network including the transaction fee. Witness pay, block size and block intervals. Now let's understand the delegated proof of stake using visual representation.

As you can see in the image, it is a voting based process. Anyone who holds the base currency in the blockchain network can vote for a witness. witnesses who have received the most votes will receive the salary and rewards as per the blockchain rules and policies. Moreover, delegates will also be elected as per the voting, and the delegates who have the most votes will have the power to maintain the blockchain. This kind of process creates a healthy competition between witnesses and witnesses try to be more secure and available all the time. One of the examples of blockchain delegated proof of stake is Liske blockchain network.

Liske is a blockchain which is very similar to Bitcoin and aetherium but provides a simplified implementation of delegated proof of stake consensus algorithm. Lists token holders can vote for maintaining the delegates who secure the network. But they have a significant condition on their blockchain, which states that there can only be 101 active delegates for the network at a time. These active delegates will earn rewards on the blockchain ration. Every other delegate is on the standby for the list blockchain where they try to be more available and secure so that the users recognize their services and give them votes to be elected as an active delegate and be eligible to earn the rewards. There are many more consensus algorithm in the market.

Are trying to solve multiple kinds of problem. The fourth important type of consensus algorithm is proof of authority. Now let's go and understand about proof of authority consensus algorithm.

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