I know that it is a consensus algorithm that is different from Proof of Work (PoW) and Proof of Stake (PoS) which is used in a few blockchains including but not limited to STEEM, BitShares and ARK, but how does DPoS work?
Important distinction of DPoS from PoS is that in DPoS, there is no minimum stakeholder token requirement to participate and instead of stakeholder tokens proportionately representing their ability to produce blocks, users cast votes proportional to their stake to select block producers.
The process for reaching consensus in a round can be broken down into the following basic steps.
Block producers are elected by the stakeholders in a round of voting.
Once the producers are selected, they are deterministically given a
round-robin rotation for a round of blocks equivalent to the number
of producers selected.
This creates a competitive market within the round, ensuring reliability.
- Block producers validate and broadcast blocks to the network. Consensus is reached and the next round begins.
For their services, block producers receive a reward. If they do not produce a block, then there is no reward and the reward is transferred to the next block producer if a successful block is produced. Producers do not have the ability to change transaction details, however, they could collude to prevent specific transactions from being included in blocks.