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PoW Versus XDPoS
With XDPoS, XDC has developed a scalable, secure, and enterprise-ready hybrid blockchain platform that retains Bitcoin, Ethereum, and Quorum's best features while improving upon them in virtually every respect. XDC's hybrid blockchain, both permissioned and public, thus solves the security and scalability problems that have long plagued Proof of Work (PoW) and other Proof of Stake (PoS) blockchains.
XDC replaced energy-consuming PoW mining with Delegated Proof of Stake (XDPoS), a technologically superior form of the more energy-efficient PoS consensus mechanism.
Consensus mechanisms are of the essence of blockchain technology. Blockchains are distributed ledgers on which information is recorded. Unlike centralized networks, whose data are subject to change or modification, data recorded on blockchains are immutable because blockchains are decentralized. However, because they are decentralized, network participants have to reach a consensus about the information recorded on the ledger; they have to agree about wallet balances, transaction details, and other related information.
PoW is an energy-intensive and costly consensus mechanism in which network participants race to solve cryptographic puzzles to record information on the ledger.
PoS, on the other hand, does not require miners to devote computing power to solve cryptographic puzzles. Instead, PoS requires validators to stake a certain amount of cryptocurrency, and anyone who holds the necessary cryptocurrency in sufficient quantities can become a validator. In other words, by simply locking up their funds, validators earn the right to participate in the validation process.
Validators work together to propose subsequent blocks, with each validator's weight pegged to the node's uptime. When Validators discover an eligible block to add to the chain, they validate the block by placing a bet, for which they will get a proportionate reward.
XDPoS is an even more efficient consensus mechanism than PoS. XDPoS uses a reputation system to reach consensus: network nodes take turns producing blocks in a round-robin competition, during which elected block producers and witnesses are rewarded for validating transactions.
Block producers are randomly selected from among the limited number of nodes able to sign and create blocks.
Block validators are the Masternodes that verify that the blocks created by the block producers follow the consensus mechanism's rules.
The main difference between XDPoS and PoS lies in XDPoS’s consensus mechanism, which allows community members to have a stronger role in the governance of the network.
In XDPoS, only the Masternodes or the block producers can create blocks. Since transactions execute with just a few witnesses, speed increases, costs are cut, and scaling is improved. The witnesses are closely monitored. If they engage in bad behavior, the Masternodes can disqualify them for the following round. For example, if a witness attempts to censor a transaction, or if they double-spend, the remaining Masternodes can "fire" the culprits, as it were, by slashing them for the following round.
XDPoS is, in short, an indirect rather than a direct form of democracy, which is, as such, vastly superior in speed, economy, and scalability to other consensus mechanisms.