Staking is one of the most important practices in the world of cryptocurrencies. Its historical evolution is narrated below.
All blockchains have a consensus mechanism which refers to how the nodes of a decentralized network agree on their state. There are numerous of these mechanisms, but two are fundamental in the cryptocurrency arena: Proof-of-Stake (PoS) and Proof-of-Work (PoW). In this work we analyze the evolution of the first of them, staking.
PoS was born as a low-cost and limited energy consumption alternative compared to PoW. Not to go into too much detail, the latter consists of digital mining. In any case, this system allows users to place their coins in a mechanism wallet. With the latter, data is confirmed and the security of the network is guaranteed and in exchange the user is rewarded with new coins.
PoS is the consensus mechanism of some of the main blockchains in the crypto world such as Ethereum, Solana and Avalanche, among others. Taking into consideration the particularities of this mechanism, it is worth setting up the microscope to see a few more things. It is obvious is that not all PoS work in a similar way.
A Look at the Evolution of Staking
The evolution of staking is an interesting process that aims to make the process easier for investors. Likewise, it seeks to improve the performance and security capacity of the protocols. The fundamental principles of PoS are always the same, the difference is in the adaptation to different networks.
This stage is when the so-called delegated staking (DPoS) appears on the horizon. Basically, it is a variety of PoS that features a voting and delegation mechanism. This makes the process much more democratic than the original varieties.
Users vote and elect the delegates (witnesses or block producers) who will validate the next blocks on the network. Just like traditional PoS, DPos uses a collateral staking system. Delegated staking is not a new concept, but dates back as far as 2013, although it was not until 2015 when it was first implemented on BitShares.
Taking into account the evolution of PoS, DPoS is not so much a continuation, but rather a kind of parallel line. Despite this, at the beginning of the change it was not considered the main form of staking.
The Most Striking Feature of DPoS
DPoS takes all the positive elements of the main mechanism and reinforces them with its own advantages. In that sense, the main characteristic of the mechanism is democracy and the limitation of the functions of the delegates.
Thus, depending on the blockchain in question, the mechanism limits the number of delegates that can process a block. Likewise, it limits the participation of the delegates themselves. This means that delegates processing one block are generally not eligible to process the next one.
To elect these delegates, users vote by pooling their tokens into a stake pool. Thus, they are linked to a specific candidate for the delegate. The candidate with the most votes is elected to process the block and receive the corresponding transaction fees. Your next task is to distribute it among users.
The reward varies according to the number of delegated tokens. On the other hand, it stands out that voters always have full control of the process. This means that delegates suspected of wrongdoing may be voted against. With this, the delegates with the highest reputation are the most attractive among voters to become witnesses.
In closing, DPoS have both advantages and disadvantages. Among the latter are high centralization, dependence on delegates, as well as the appearance of malicious delegates.
By Audy Castaneda
