I like to think of Delegated Proof of Stake as technological democracy.

Just think about how many asshole bosses there are out in the world. Have you ever wanted a system in which you, the employee, get to fire your own incompetent boss? Well, there is a new system that is very close to the reality of employees getting to fire their own managers. It’s called Delegated Proof of Stake.

If you’ve spent any time in the Bitcoin rabbit hole, you’ve probably come across the terms Proof of Work, Proof of Stake, Proof of Importance or other consensus algorithms. But guess what, I’m not going to use words like algorithm or consensus in this article. I’m going to attempt to explain what Delegated Proof of Stake (DPOS) is in such a way that anyone, even a 5 year-old could understand it.

Why Was Delegated Proof of Stake Invented?

A blockchain engineer named Daniel Larimer realized that Bitcoin mining was too wasteful of energy. He also recognized that Bitcoin mining would become centralized in the future, with giant mining pools being in control of the Bitcoin network. Additionally, he wanted to build a system that was capable of transaction speeds like 100,000 per second. Bitcoin’s system was too slow due to the way it was designed and the system it used: Proof of Work. He decided to invent and build a new system that used very little energy, was lightning fast and also very secure. Dan named this new system, Delegated Proof of Stake, or DPOS.

What are the ingredients for DPOS?

A cryptocurrency, a blockchain, community of people, computers and rules.

People in a particular cryptocurrency community vote for Witnesses to secure their computer network.

The top 20 Witnesses are paid a consistent amount for their service and the backup Witnesses are paid on a more random manner. A Witness at spot #58 is paid roughly $300 per month. Because many want to become a Witness, there are hundreds of backup Witnesses. The top 100 Witnesses are paid.

People’s vote strength is determined by how many tokens they hold. This means that people who have more tokens will influence the network more than people who have very few tokens.

As the community grows, it gets harder and harder to remain a paid Witness due to increased competition.

If a Witness starts acting like an asshole, or stops doing a quality job securing the network, people in the community can remove their votes, essentially firing the bad actor. Voting is always ongoing.

This system works because it is able to flush out bad actors and at the same time recognize new valuable members. The system is dependent upon active voters in the community, so educating new members about how the system works is essential to the well-being of the system. I’ve been in the Steem community for over a year and I’ve seen Witnesses come and go based on their actions and reputation.

The links below contain more in-depth descriptions of Delegated Proof of Stake for those of you who want to understand it on a deeper level.

Current cryptocurrency projects that use Delegated Proof of Stake:

BitShares: https://bitshares.org/
Steem: https://steem.io/
EOS: https://eos.io/
Lisk: https://lisk.io/
Ark: https://ark.io/

A video that explains DPOS:

Explain Delegated Proof of Stake Like I'm 5