 Welcome to the Daily Decrypt, where currency competition is hot, hot, hot! I am your host, Amanda B. Johnson, and today's episode is brought to you by Bank to the Future. Some cryptocurrencies use proof-of-work to generate their blockchain, their ledger. And others use proof-of-stake. The point of either proof-of-work or proof-of-stake is to incentivize actors to generate a record of the truth. The truth being which funds belong to which addresses, and then to allow everyone else on the network to agree with that version of truth. This is called reaching consensus, which is why proof-of-work and proof-of-stake are dubbed consensus algorithms. There exists a third kind of consensus algorithm, however, called delegated proof-of-stake. And it's currently being used in the BitShares network and is intended to be used in the Lisk network, which you may have heard raised a good chunk of change recently. To learn more about the delegated proof-of-stake consensus algorithm, I called up Ulphabian Shoe, a BitShares developer. Witnesses are the block producers. They get paid for collecting all the transactions in the network and modeling them together in a block and signing them. There are currently 23 witnesses elected to produce blocks in BitShares. In fact, here's a recorded live feed of the witnesses doing just that about 20 minutes ago. Now, these 23 witnesses were voted upon by BitShares stakeholders, and the existence of more witnesses or fewer witnesses could be decided in any future vote. Now, this is where delegated proof-of-stake is hugely different than either proof-of-stake or proof-of-work. In the latter two networks, anybody can join. In proof-of-work, if you've got a mining machine, you can join. In proof-of-stake, if you've got some monetary capital, you can join. Not the case with delegated proof-of-stake, where, regardless of capital, one is only allowed to submit one's version of the truth, blocks, if one is elected to do so. If I wanted to destroy the BitShares network, if I wanted to defraud it and double-spend, would I need to get a majority of witness positions voted to my possession? Basically, would I need to trick the stakeholders that I was a nice trustworthy person and then get them to vote me to have a lot of witness notes? Or how would that work? Actually, you could do that. You could either convince others to vote for you and obtain 51% of the voting power. For instance, a proxy could achieve 51% or more voting power. Then he decides essentially anything in the network. So he could replace the whole committee. He could replace all the witnesses. On the other hand, if he has that kind of power, then it's okay because he owns the network. Why would anyone want to become a witness in the first place? A witness is basically just you create an account on the blockchain and then you install the witness, like the application that's a little more technical savvy. It's a little more involved than just opening a browser. Then you can just launch a simple call that states create witness. You state your name and then that's it. When you have the witness account created that you could use to deploy your service. You could get paid or you get paid one and a half BTS per successfully signed and approved block. But you need to be approved by the shareholders as an active witness. So you need to run a campaign and say, okay, this is maybe you stay anonymous, but you at least show that you can manage the network, like participate in the test network, show that your hardware is stable and reliable. And then you just need to tell people that they should give you a chance for voting. All right. So when when witnesses are elected and bid shares there, would you, is it is it true to say there is a degree of trust involved? Yes, I would say so. Yeah, I think it's also that witnesses are constantly monitored. So if they do something that's not okay, shareholders can be alerted by that and then they lose their reputation. And when if you ever looked into reputation, it is very hard to gain reputation and very, very easy to lose all of it instantly. So you probably don't want to mess it once you have been approved as a witness as a trustworthy person. And would you say, so that's in delegated proof of stake. Would you say that in regular proof of stake or proof of work that there is any trust involved? In the original idea of proof of work, there is no trust involved because the consensus mechanism just involves work. Unfortunately, there is now pooled mining, so pooling of work, which is like pretty much like delegating work. Like I'm heading my miners towards one pool, which is like I'm delegating my working power towards a pool. And then what I do is I trust the pool operators. And we all know that essentially it's like it's less than five people that control it, like 60 or 70% of the mining power in Bitcoin. If they decided to do something weird, it will take some time until miners will redirect their mining power to something, some other pool. So in proof of work, intrinsically, there is no trust involved, but because of the technology, how the work is bundled together today to achieve a profit out of it. It becomes centralized. It becomes pooled mining, it becomes centralized, and then it becomes also a degree of trust involved. With the power to delegate, stakeholders have the power to keep mining or witnessing it decentralized. But to do that, they must perhaps place a higher degree of trust in the individual witnesses they elect. Yes, and also in Bitcoin, the power that the mining pool has is proportional to the percentage of the mining or hashing power it has. So in BitShares, let's say there are 30 witnesses. Once you are an active witness, you get the exact same responsibility, exact same power as all the other 29 witnesses. There are no way to get the tools. There's at least no different weights in them, right? They all have the same power. And so we see that delegated proof of stake is quite different from proof of work or proof of stake in that shareholders can decide exactly who is allowed to produce blocks and furthermore those block producers cannot ever pool their resources together to share in power. This gives stakeholders complete control over decentralization, so to speak. So how might these consensus algorithms play out against one another in this great and grand new thing we now have called currency competition? I have no idea. It's like watching the most entertaining movie ever except its real life. Leave your thoughts in the comments below. Oh, my AMA on March 26th draws ever near. Not only will you find out what three things I traded for three bitcoins in December 2013, but in the spirit of threes, I'll also tell you which three cryptocurrency news outlets I wrote for before deciding to start the daily decrypt. That'll all be going down at reddit.com slash r slash the daily decrypt this Saturday, March 26th. Be there or be square. Bye. Well, are you familiar with Daniel Larimer's critique of proof of stake that is not delegated? And what would your response to his critique be? So I actually think that the important thing when you're thinking about any of these markets is basically you have to look at the dynamics of the market and ask whether people who are not in the majority will be represented.