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Bybit Learn
Mar 23, 2022

Liquid Proof of Stake (LPoS)

Liquid proof of stake (LPoS) is a consensus algorithm that was designed to be an improvement on the proof of stake (PoS) and delegated proof of stake (DPoS) algorithms.

What Is Liquid Proof of Stake (LPoS)?

Liquid proof of stake (LPoS) is a blockchain consensus mechanism that allows token holders to loan their validation rights to other users without relinquishing ownership of their tokens.

With LPoS, delegation is optional. If you're a token holder, you delegate your validation rights to other holders without custody. That means that the tokens will remain in the delegators' crypto wallets.

What's more, only the validators are penalized in case of a security fault.

What Is Liquid Democracy?

The concept of liquid democracy refers to a blockchain voting system that allows people to elect delegates to vote for them on certain issues, and to vote personally on the same problems. The "liquid" in liquid democracy comes from the ability of people to change their delegates at any time.

How Liquid Proof of Stake (LPoS) Came to Be

The LPoS algorithm was originally introduced as a part of the Tezos project a few years ago by Arthur Breitman and Kathleen Breitman.

In 2017, the Tezos Foundation conducted an initial coin offering (ICO) and raised over $232 million. It’s since become known as one of the largest ICOs in the history of the internet. Subsequently, Tezos went live in 2018, and has gone on to achieve success as a rival to the Ethereum network.

Liquid Proof of Stake (LPoS) Limitations

There are a few limitations with liquid proof of stake. First, it’s not as decentralized a consensus as proof of work (PoW). This is because there is still a small group of people who control the majority of the coins. 

Second, LPoS is more vulnerable to attacks than PoW because potential attackers only need to control a small amount of the total supply in order to command 51% of the network.

What Is the Difference Between Proof of Stake (PoS) and LPoS?

There are a few key differences between proof of stake (PoS) and LPoS. LPoS users aren’t required to keep their coins staked all of the time. Instead, users can unstake their coins at any time and still receive rewards.

In addition, LPoS doesn’t require users to have a large number of coins in order to stake.

What’s the Difference Between Delegated PoS (DPoS) and Liquid PoS?

The main difference between delegated PoS (DPoS) and LPoS is that the latter allows users to loan their validation rights to other users without relinquishing their ownership of their tokens. In contrast, with DPoS, users are required to give up their voting rights in order to delegate them to another user.