Leased Proof of Stake

Leased

The effective consensus mechanism is the core of any blockchain. It is needed in order to get rid of the trust problem between anonymous users and direct their actions in a single direction. Initially, Proof of Work (PoW) was used for this, then Proof of Share of Ownership (PoS). However, in recent years, alternative confirmation mechanisms have begun to appear. For example - Leased Proof of Stake.

What it is?

This consensus algorithm was first tested in practice in 2017 as part of the Waves lite blockchain platform. Prior to this, 100 million WAWES tokens were issued as part of the ICO (initial coin offering). This quantity is fixed and unchanged. As the name implies, this algorithm is based on the same principle as in PoS, but with one significant difference.

Token owners have the right to lease them to other nodes, which thereby increase their steak and, accordingly, a chance to become the next validator of a new block. At the same time, the original owners can unblock these assets at any time and use them at their discretion. Technically, the forger node does not receive the tokens themselves, but the right to use them, which he can lose at any time.

This solved several problems at once. On the one hand, it made the entire network more resistant to 51% attacks due to partial consolidation of capital around large forger nodes. On the other hand, it enabled individuals with a small number of tokens to count on regular payments of a part of the remuneration received by the validator node, to which they lent their assets. On the third, the wallets of users leasing their assets are not required to be constantly connected to the network, which significantly increases their security.

Differences between DPoS and VLOS

In fact, these consensus algorithms are quite similar to each other - instead of personally participating in the validation process, users delegate this opportunity to a trusted node, counting on some part of the reward if the node is still selected by the validator. However, if in LPoS everything is decided by the specifically given amounts of money, then with DPoS, a "reputation mechanism" is connected. And this mechanism is already indirectly dependent on the stake of each participant. Honestly, LPoS is simpler and more intuitive, plus any blockchain can be adapted for it, using proof of stake as a consensus algorithm.

An additional way to increase efficiency

So, we have a forger node, to which a large number of people lent their tokens. Due to this, it is this node that is regularly selected by the validator and receives a reward in the form of a commission for transactions. And each of the lenders has the right to apply for a portion of the fee, proportional to the amount paid. Which means that after each award, the node must make many small transfers. And this seriously reduces the overall capacity. However, this problem has a solution.

In 2015, in order to improve the efficiency of the Bitcoin network, a new Bitcoin-NG protocol was proposed. Its meaning was as follows. If earlier miners competed in deciding the hash of the new block, now the “decisive” was chosen in advance. He also created the initially empty key block, which was then added to the blockchain. However, this empty block was filled with "microblocks", which fit into various small transactions. The closest analogy is filling the trolley from the supermarket (key block) with products (microblocks) and instant payment for this business at the checkout (adding to the blockchain). That means, people which make small transactions did not need to wait for those very 10 minutes until a new block was produced. A similar system was adapted for the PoS algorithm - in the form of Waves-NG, for example.

MassTransfers addition also proved to be effective. It allowed to pack up to 100 microtransactions within one transaction. This reduced the commission and increased the speed of work. So, the validator node got the opportunity to send the required share of remuneration to all those who lent their assets to it almost instantly. This was facilitated by the fact that it became possible to add wallet addresses to files with the JSON or CSV extension.

As a result of these useful additions, the bandwidth and efficiency of the Wawes network has increased significantly. In 2018, a stress test was conducted and demonstrated that this blockchain is capable of supporting up to 6.1 million transactions per day, which is approximately equal to 71 transactions per second. And the maximum throughput was 100 TPS.

Conclusion

The bandwidth of the upgraded Leased Proof-of-Stake consensus algorithm turned out to be much higher than the majority of the other algorithms used. However, the developers believe that it can be improved - up to 1000 TPS. And this is a real solution to the scalability problem without using additional sidechains. So this idea has excellent prospects for further development and wider implementation.