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Delegated Proof of Efficiency: How the Metabase dual consensus mechanism achieves maximum efficiency

Both PoW and PoS have their pros and cons. Metabase strikes a balance between the two to deliver increased efficiency.

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Both PoW and PoS have their pros and cons. Metabase strikes a balance between the two to deliver increased efficiency.

There are many forms of consensus models, namely Proof of Work, Proof of Stake, Proof of Activity and Byzantine fault tolerance models like BFT and PBFT. These models can be classified into two categories –  centralised and decentralised models.

Proof of Work and Proof of Stake

When it comes to decentralised consensus models, Proof of Work (PoW) and Proof of Stake (PoS) are the two popular models.

Proof of Work

Proof of Work is the first and the most popular decentralised consensus model. It involves applying computing power to derive a proof and seal the validity of blockchain records. The positives of PoW are:

It works

In the blockchain ecosystem, we have seen ample examples where proof of work works without any fallout. The best live example of it is the Bitcoin blockchain.

It’s mathematically sound

The Proof of Work consensus is mathematically sound and its security has been formally proved.

It’s not aristocratic

Anyone with sufficient computing power can join in at any stage. Hence, as a political construct, it is not aristocratic in nature.

However, there are significant practical cons of Proof of Work.

War of attrition and wasted resources

A PoW system is incentivised with finite reward mechanics. These incentive structures create a war of attrition for resources to mine on proof of work based systems. This leads to wastage of resources. Actual energy consumed because of the attrition war is orders of magnitude higher than the minimum amount of energy required to secure the network.

Miner centralisation

Miners in PoW based consensus mechanics tend to aggregate resources. Hence allowing centralisation of power in the hands of few. This goes against the notion of decentralisation.

Proof of Stake

In Proof Of Stake, validators stake their tokens and sign on the validity of the blocks. Consensus is based on stake which is taken as a vote for determining the validity of the blocks.

PoS is more energy efficient as block generation doesn’t require “computational work done” to establish the validity of blocks. Also PoS can have a faster turnaround. As part of a secure design,  PoW intentionally establishes a “wait time” between blocks – for, e.g. the Bitcoin blockchain establishes an average “wait time” of 10 minutes between blocks. In comparison, a PoS block generation time can be less than a minute, and increasing security doesn’t require increasing this time period.  

On the flip side, PoS is not as theoretically sound as PoW and has many game theoretic challenges. It is also aristocratic – where the hereditary ruling class is the early majority token holders – and they continue to get richer token-wise and hence politically – as the PoS rewards are proportional to the tokens.

Metabase and Consensus – Delegated Proof Of Efficiency (DPoE)

Both PoW and PoS have their merits and demerits. In Metabase, we are taking a hybrid approach for consensus. We utilise both PoW and PoS – in such a way that a balance is achieved between the two and their respective pros and cons.

The Metabase Consensus Protocol, called DPoE –  will iterate over two stages starting off with PoW and then to a dual consensus mechanism of dPoS (delegated Proof Of Stake). dPoS is a variant of PoS in which token holders vote to elect delegates who in turn validate blocks of the blockchain.

Between PoW and PoS – PoW is mathematically sound and more proven technology.

Starting off with PoS means the early token holders keep getting more staking rewards and keep getting richer. This further skews the power centralisation as the rich keep getting richer. However, in a scenario where the tokens are roughly fairly distributed, PoS can act as a more energy efficient consensus algorithm.

On the other hand, starting off with PoW doesn’t suffer from the aristocratic issues of PoS. Mining is more democratic up-front and also miners have to keep selling tokens to pay for electricity bills. This leads to a more even token distribution pattern (compared to PoW). However, over time, the mining power centralisation issues catch up with PoW leading to a war of attrition and excessive energy wastage.

With Metabase, we plan to start off with PoW which would lead to a more even token distribution pattern (than starting off with PoS) and then to gradually introduce PoS as the difficulty / ‘war of attrition’ effects start to come in play with PoW. This way, the intention is to mitigate, to a large extent, the negative effects of both mechanisms and to be more energy efficient to achieve consensus.

Stage One: 100% PoW

At the launch of the Metabase blockchain, the consensus mechanism would be 100% PoW.

Stage Two: PoW + gradually introducing dPoS

Beyond a specific block number, the system will switch from pure PoW to a dual consensus mechanism of PoW & dPoS with mining rewards split at PoW 90% and dPos 10% at the start of Stage  Two.

As more mining power comes into the network (from war of attrition dynamics of PoW) the difficulty of the network will algorithmically rise, but at the same time the rewards for PoW would be reduced and rewards for dPoS will be increased. This way the reward percentage of dPoS will gradually increase. This helps keep in check the amount of computation applied as rapid increment of mining power would disincentivize further PoW mining and give more leverage to PoS mining.

Asymptotically as the difficulty of the network approaches infinity, the mining rewards for PoW will approach 20% and dPoS 80%.

Summary

In this article, we discussed the two most popular consensus mechanisms – with their pros and cons. We then described the Metabase consensus protocol – a dual consensus mechanism evolving over two stages – with the aim to mitigate the negative effects of PoW and PoS when considered individually. We call this Delegated Proof Of Efficiency – as the consensus mechanism tries to be efficient over the resources (energy) required to achieve consensus.

Want to Learn More?

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