Understanding strengths and vulnerabilities of Delegate Proof of Stake (DPOS)

[merivercap]

1. A 51% attack only applies to future changes, cannot impact past transactions.
2. Any and all changes to the code are known (no secret attacks where owners sell the assets out from under the company just before filing bankruptcy).
3. High concentrations of votes will impact risk profiles and thus lower value... but they also represent focus and adaptability which can increase value.

Minority stakeholders are protected by keeping all changes slow enough for them to sell prior to the change. If the 51% want to steal the funds of the 1% by dilution the 1% can sell prior to the dilution. This the smaller investor is more liquid than the larger investor.

Thanks.

1.  This is good to know technologically since it narrows the scope of concern.   As for 51% attacks on future transactions any full node will be able to identify double spends, missed transactions or misappropriation of new blocks to shareholders  on an ongoing basis correct?  So even if someone had 51% control the transparency in the system will allow the free market to recognize if there's any malfeasance. 
2. Interesting.  Very good point. 
3. I agree with this.  51% is oftentimes a very good thing operationally, as long as there is no malfeasance.   It's good for early founders to really just run and adapt without too much external influence. 

[bytemaster]

1. A 51% attack only applies to future changes, cannot impact past transactions.
2. Any and all changes to the code are known (no secret attacks where owners sell the assets out from under the company just before filing bankruptcy).
3. High concentrations of votes will impact risk profiles and thus lower value... but they also represent focus and adaptability which can increase value.

Minority stakeholders are protected by keeping all changes slow enough for them to sell prior to the change. If the 51% want to steal the funds of the 1% by dilution the 1% can sell prior to the dilution. This the smaller investor is more liquid than the larger investor.

[merivercap]

Hey guys, I think this is an important topic to discuss for multiple reasons.  I think by identifying vulnerabilities in our protocol we can all as a community learn to be stronger and protect the system.  Secondly in order to gain mainstream adoption, we need more people in the blockchain community to accept DPOS.  Proof-of-work(POW)-maximalism dominates mindshare currently.  We aren't doing a good enough job explaining DPOS and I think a lot of smart people in the Bitcoin community are stuck thinking inside the box.  We need each and every one of us to be able to make the strongest arguments in favor of DPOS.  There are white papers discussing various consensus mechanisms and I think that's a great start.  However, I think one of the most powerful ideas  that support DPOS is not a technological argument, rather it's an economic one, namely:

Almost all the millions of corporations and organizations that do business today currently use DPOS.

That is the meme I've been using personally for quite some time.  Those that have a majority stake or share in any business or organization dictate the strategy and operations of a business.  There is far more real world evidence that DPOS works than POW.  Once people accept the idea that DPOS is equivalent to shareholder voting in almost every business that exists today, it's far easier for people to adopt the technology. There's no need to even discuss the Byzantine General's Problem.

We do have to be aware of the vulnerabilities of the system.   One explanation of what can go wrong is essentially the same as what can happen in a 51% attack for mining.  Anyone who owns 51% can corrupt the system.  What is the worst damage that a witness or a colluding group of witness do and how can we minimize that?  Furthermore, those who are part of startups who've created businesses or are intimately involved in the affairs of corporations understand what happens when any individual, group, or entities control 51%. I'm sure there are many horror stories about battles over control, direction, and also regarding corruption.  There are many minority shareholder rights battles that go on because of the power the majority have.  An extreme example is that if you as a startup founder control 51% of a company and investors hold 49%, you can issue a large amount of share to yourself as salary, bonus or anything such that you end up with 99% of the company over time.  On the other hand if an investor group has 51% of the control they can do the same thing and give themselves new shares for any reason such that they get 99% of the company and the founder and employees get 1%.   There are free market forces that prevent these extreme cases because in the first case if a founder was self-dealing new investors would not come in.  On the other hand if an investor group self-dealt the current founders/employees would leave and the investor group would have to find new talent to operate the company.  Yet I'm sure there a lot of cronyism that happens and you can imagine anyone with control can give unqualified friends jobs and unqualified businesses contracts.  This is a vulnerability that we should keep in check.  Ultimately the free market has corrective mechanisms.  The market value of a business goes down if it operates inefficiently and there is cronyism.   However it is wise to be vigilant so that we don't have to wait for the market value to decrease to make corrective actions.  Even the perception of corruption will effect our DPOS ecosystem.  I think it's incredibly important for each one of us to uphold the integrity of the system and minimize any perceptions of conflicts of interest.

Just to kick off the conversation, just a few questions:

1. Why do you trust in DPOS? 
2. What arguments do you use in favor? 
3. What do you perceive as vulnerabilities?
4. Have you started your own organization before or have been a majority/controlling stakeholder?
5. What experience do you have as a minority stakeholder and what level of participation have you had?
6. Do you think about the integrity of our DPOS voting system?
7. How are you protecting the Bitshares DPOS system and what formal or informal controls do you think can make it stronger?