Delegated Proof of Stake (DPoS)

Delegated proof of stake (DPoS) is a consensus mechanism for blockchains in which token holders elect a small, fixed group of block producers to run the network. Holders vote with their tokens, the candidates with the most votes take turns creating blocks, and those who perform badly can be voted out. The approach was designed by the software developer Daniel Larimer and first used on the BitShares network in 2014. Handing a wallet's voting or staking rights to another party is known more generally as address delegation.

DPoS is a variant of proof of stake. In ordinary proof of stake, anyone who locks up enough tokens can become a validator, and the set of validators may run into the thousands. DPoS instead caps the number of producers, often at a few dozen, to gain speed. It should not be confused with delegated staking, which is the broader practice of assigning tokens to a validator for rewards on any proof-of-stake chain.

Think of a residents' association that cannot hold a meeting of every household for every decision. Instead, households elect a small committee. Each household's vote counts in proportion to the property it owns, the committee members take turns doing the daily work, and anyone who slacks off or misbehaves can be replaced at the next vote.

The committee works quickly because it is small. The risk is that the same few members keep getting re-elected, or that the biggest property owners decide who sits on it.

1. Candidates register. Operators who want to produce blocks put themselves forward, usually running professional server setups.
2. Holders vote. Token holders vote for one or more candidates, with voting weight based on the tokens they hold or lock. Votes can usually be changed at any time.
3. Producers are elected. The top candidates by votes form the active set: 21 block producers on EOS and 27 Super Representatives on TRON, for example. Others wait as standbys.
4. Blocks are produced in turn. Active producers create blocks in a fixed rotation, which allows block times of a few seconds or less and quick finality.
5. Rewards are shared. Producers earn newly issued tokens and fees, and many pass part of them back to the voters who supported them.

Because producers are known and few, the network can agree quickly using rules similar to Byzantine fault tolerance, rather than the open competition of proof of work.

• BitShares. The first DPoS network, launched in 2014 as a decentralized exchange platform.
• Steem and Hive. Social media blockchains that grew out of the same design; Hive split from Steem in 2020 after a dispute over control of voting power.
• EOS. Launched its main network in 2018 with 21 elected block producers, after one of the largest token sales of that period.
• TRON. Uses 27 elected Super Representatives and is widely used for transfers of Tether (USDT).

Several other chains use related schemes. Tezos lets holders delegate to "bakers", and Cosmos-based chains let holders delegate to a capped set of validators, though these are usually described as proof-of-stake variants rather than DPoS proper.

Supporters point to high throughput, low fees and predictable block times, which suit payments and consumer applications. Voting also gives holders a direct, ongoing say in who runs the network, a form of on-chain governance.

Critics focus on network centralization. With only 21 or 27 producers, a handful of operators control block production, and in practice large holders, exchanges and whales dominate voting. Exchanges have at times voted with tokens held for customers. Producers can form cartels and agree to vote for each other, and paying voters for support blurs into vote-buying. Low turnout among small holders makes these problems worse. Some DPoS chains have responded by limiting how many candidates one account can vote for or by weighting votes so that rewards reach a wider set of producers, with mixed results. Because producers are identifiable, they are also easier for authorities to pressure, which supporters see as accountability and critics as a censorship risk.

• TRON
• EOS Network Foundation