Cardano - a third generation blockchain based on a scientific, peer-reviewed philosophy - utilizes Proof-of-Stake (PoS) for its consensus mechanism to achieve the same security guarantees as Bitcoin - a first generation blockchain. A consensus mechanism is the way a blockchain secures its network and records.
Delegated Proof-of-Stake (DPoS) is another type of blockchain consensus mechanism available today. There are many similarities between DPoS and PoS. Both rely on on-chain resources (i.e. stake in the system) rather than off-chain resources (i.e. hashing power with Bitcoin) to achieve consensus in the network. Consensus is important to securing the network and especially important with a decentralized public blockchain where anyone can join the network.
In this post, we will look at the specific differences between DPoS and Cardano’s PoS system.
Consensus Protocol - A General Overview
A consensus protocol involves a situation where a group of people have to decide what the state of a system should be. All ledgers that involve cryptocurrencies have the notion of changing from one state to another state due to evolving data records as time passes. When one person transacts with another, there must be a process to transfer that value. A consensus algorithm defines how this takes place, and who is involved. First generation Bitcoin innovated a unique way by creating a merit-based lottery system, where parties do work to secure the network and those who do the work get issued a digital lottery ticket. Eventually, the winner of the lottery would progress the network by advancing the network from A to B and receive Bitcoin as a reward for their efforts. However, this method requires the heavy usage of energy and resources such as mining equipment. Both DPoS and Cardano’s PoS achieve this distributed network security without the use of a mass amount of specialized mining equipment or a large amount of electrical power.