If there’s one thing the cryptocurrency community cares about, it ought to be decentralization. Not only is decentralization the cornerstone for the crypto movement, but it has a whole host of benefits for systems as well.
In order to remain decentralized, we need to consider all of the possible consensus protocols available for us to use. Between Proof-of-Work (PoW), Proof-of-Stake (PoS), and now, Delegated-Proof-of-Stake (DPoS), there are a few different options to choose from. With all the talk of the Ethereum platform eventually moving over to PoS, let’s take a look at DPoS and what exactly makes it so much stronger and decentralized than other consensus methods out there.
Decentralized and Distributed
When looking at who is in control of the block production in a given network, we see that there is a lot more than initially meets the eye. Starting off with the Bitcoin network, the idea behind PoW was to keep things decentralized and remain out of the control from a central authority. While that was especially true in the earlier days of bitcoin mining, things have changed a bit today.
The bitcoin network currently has the 5 largest mining operations controlling over 70% of the network if they were combined. In its current implementation, Ethereum is not terribly different either. As more people in the markets get interested, more individuals start mining. Though the largest entities are pools — meaning not one single person mining them — they’re collecting power together and the network still runs the risk of having a select group in control.
Thinking of it like a country with an authoritarian government, does it really make it better to have multiple members in an oppressive regime instead of one dictator? Clearly not (they’re both terrible). And clearly we’re not at that stage at all with either the Ethereum network or the Bitcoin network, but the potential vulnerability is still there for the future.
Then we look to something like DPoS at the top of the graphic. Unlike other consensus models, DPoS ensures that no single party is able to control a disproportionate amount of power in the network. Instead, the number of witnesses (essentially the PoS version of a “miner”) stays distributed and are actually held accountable in a democratic manner.
If witnesses make poor decisions or fail to produce a block, then not only will they not get paid, but stakeholders can actually vote them out as well. This sort of democratic check-and-balance isn’t afforded in a traditional PoW system like we see in the Ethereum and Bitcoin networks.
If a mining pool gets too large and gets out of hand, there is no voting the pool out or checking their power. By the time they’ve monopolized the network, it’s already too late. DPoS solves that.
Faster to Pivot
Not only is the DPoS system designed to be more decentralized, but it’s also much easier to pivot to meet the needs of the network and change gears if need be. Remember, with the traditional Bitcoin and Ethereum networks, there is no way to get rid of block producers in the network. Once a select group of miners controls the majority of the network, there’s no way to counter that (except for maybe sneaking in and breaking a lot of machinery — definitely not recommended).
However, with the democratic system put in place with DPoS, the network as a whole can react much faster to real world changes. Instead of relying on processing power from a centralized authority, bad actors can lose their position and power within the network. Stakeholders keep the network decentralized as well as more agile, nimble, and significantly faster than anything else.
The author is not an attorney or financial advisor. None of the content presented should be construed as investment advice or as legal advice.
Here’s Why DPoS Makes BTS, EOS, and Steemit More Decentralized, Distributed, and Faster to Pivot was originally published in Data Driven Investor on Medium, where people are continuing the conversation by highlighting and responding to this story.