Delegated Proof of Stake (DPoS) is a Sybil protection mechanism invented by Dan Larimer and used by certain distributed ledgers, including Radix. In DPoS, holders can delegate their network tokens to validators in exchange for a share of the staking rewards. Usually, inclusion in the approved validator set is conditional upon token holdings.
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Staking
Staking, in the context of distributed ledgers, involves participants committing (or ‘staking’) a designated amount of the network's native tokens to support operations like transaction validation and consensus maintenance. This process is central to Proof of Stake (PoS) consensus algorithms, a contemporary alternative to traditional Proof of Work (PoW) systems.
Benefits
- Validators receive rewards for staking, typically in the form of new coins or transaction fees. These are often termed ‘staking rewards.’
- Staking enhances blockchain security, decentralization, and energy efficiency.
Challenges
- Possibility of network control centralization amongst significant stakeholders.
- Risks of losing staked coins due to network attacks or validator misconduct.
- The network's security is reliant on a high Nakamoto Coefficient (the smallest number of nodes that could disrupt the network).
Radix and Staking
Radix uses a specialized staking mechanism to fortify its network's integrity and security.
Staking Mechanisms
- Radix mandates nodes to have a meaningful stake to deter malicious actors from gaining undue influence over the network.
- Staking rewards on Radix are distributed in proportion to the staked amount, encouraging network security.
DPoS (Delegated Proof of Stake) on Radix
- DPoS in Radix appoints validators responsible for adding new blocks and maintaining transactional integrity.
- Users can delegate tokens to particular validators, who subsequently share block rewards with them.
- Delegation on Radix involves "locking" tokens in trust of certain node operators, signaling trust rather than a physical transfer.