In early 2018, the market of crypto assets radically changed direction. A to-the-moon rocket was never able to reach the moon, having landed inexperienced players somewhere in the stratosphere, and continued its descent on the nerves of the most seasoned and tested. But the immunity of the latter is not unbreakable, either, as now the market is in the phase of an ice age. Traders no longer believe that “it is falling now, only to rebound later,” and the miners are just tired of pedaling to generate electricity for their farms. This is the best time to learn new ways to mine and support blockchain technologies. DPoS is probably the best choice of those known today.
And, oddly enough, amid global events, the general mood of the community and financial organizations remains at a sufficient level so that they can once again speak out in support for new technologies. And somewhere under cover of permafrost, something is being prepared that will show the possibilities of cryptocurrencies from a new angle. Any secret is revealed sooner or later, so let us open the veil of these very secrets and shed a little light on the future of the crypto market.
And the Future Is Nigh
Since recent times, mining can be considered an endangered type of blockchain support. PoW algorithms have played a positive role in the era of the gold rush, but they will soon sink into oblivion, and new, more modern and ergonomic ways of developing the electronic money of the future will replace them.
Thinking where the world is heading and how crypto technology will develop in the near future is like divining on coffee muck. Experience suggests, however, that in such situations, it is better to listen to those who understand the topic. And this is not about those who predicted Bitcoin at $100,000 by 2018. Even if we make a venture feat and try to jump onto the new to-the-moon train, one should look at those who are already starting to work in a promising direction.
PoW and PoS: Who’s Next?
The fact that even at the time of the price drop interest in the cryptos as technology continues to grow makes one wonder of whether maybe we are again missing the beginning of something grandiose. After all, PoW mining on video cards and ASICs also began in times of financial recession and misunderstanding of the technology. And now, the situation is being repeated, so one needs to try to find the truth and jump onto the departing train.
Throughout the year, the network users tormented Buterin with questions about whether Ethereum would switch to PoS and when they would activate new protocols. Recently, however, these hot topics have cooled down a bit under the influence of significant price drops on the crypto market. This is where the fun begins. Meet the new generation of mining—DPoS.
Freedom, Decentralization, and Independence
Currently, PoW, PoS, and DPoS are considered the most well-known transaction confirmation algorithms.
PoW is long, expensive, and uninteresting. Energy consumption, complexity, and negative impact on the environment grow exponentially. It is necessary to change the approach to technology support so that the concept of cryptocurrencies and blockchain technologies can compete with fiat money and traditional financial services.
The PoS consensus of confirming transactions is designed to abandon the usual mining in favor of energy efficiency and higher resistance to attacks by intruders. Some nuances are forcing developers to abandon this technology, though. Theoretically, PoS is subject to monopolization and centralization of the system. That is, anyone who can seize a large number of coins on the network will have a weighty voice and the ability to make attacks.
DPoS is a consensus mechanism that gives the community equal rights to vote and also allows users to hold free elections, set their own rules in the community (by consensus), and do it all within the law.
The principles of the algorithms can be briefly explained as follows:
PoW miners increase computing power.
PoS miners are chasing volumes.
DPoS miners monitor the quality and speed of their service (for example, nodes).
The main task of the DPoS algorithms is to get out of the power race and make the confirmation of transactions on a blockchain as independent from a single node as possible. Thus, the quality and speed of the payment system will depend not on the number of coins the validators hold but on their integrity and diligence.
In the DPoS system, voting is constantly open, so if the owner of the node violates the rules, does not monitor the quality of the services provided, or completely abandons the project, the community (delegators) has the right to withdraw their votes (withdraw the coins delegated to the project), effectively “firing” the bad validator. Therefore, they must follow the rules set by the community, maintain the network at a high level, and provide the best service. In other words, the validator always works for the community.
PoS or DPoS: That Is the Question
Many projects now support the PoS consensus. For example, the Callisto blockchain uses a PoW/PoS hybrid. Users support the network with both traditional mining and cold staking. This approach motivates users to steadily accumulate coins. But why should networks exist at all if the primary task of the user is to constantly stack the coins in one basket? It is boring, archaic, and hopeless, and also poorly protected from monopolism.
One of the DPoS projects has already started gaining momentum. This is our Russian Minter. Any member of the system can become a delegator or validator. Validators handle blockchain processing. They confirm transactions, write information into blocks, and maintain the network operability, that is, act as miners. The main task is to take as many transactions as possible in one step and process them as quickly as possible. The validators collect block rewards and transaction fees for their work.
For the validator to faithfully relate to their task, delegators are involved. They offer a certain amount of coins for a project in order to get a voice to participate in its development. The participants thus work together and try to choose the best service, promote promising ideas, and weed out scam projects. In other words, in such a system, there is constant progress and a race for the idea. A project is implemented on Minter only if it represents something interesting for the society and has the built-in ability for constant regeneration.
It Is People Who Decide Now, Not the Machinery
DPoS is a worthy move in the world of blockchain technologies. We still call it mining. But such mining is no longer associated with the smell of burnt radio components and molten wiring.
While the old PoW is sinking to the bottom by leaps and bounds, cryptocurrencies must somehow develop or be reincarnated into something more breakthrough that meets the requirements of modern society. We have seen how the mere mention of this technology (the EOS project) can affect the crypto market. And what hides in the charts of asset prices? That’s right, the mood of society. Therefore, the conclusion is self-evident: DPoS is designed to raise the crypto industry from its knees and set a new development vector.