What is Proof of Authority (PoA) in blockchain?

Proof of Authority (PoA)

Proof of Authority (PoA) is a consensus algorithm used in blockchain networks where the nodes that validate transactions and create new blocks are pre-selected by trusted individuals or organizations. In other words, it’s a consensus system that allows only authorized entities to validate transactions in a blockchain network.

In contrast to Proof of Work (PoW) and Proof of Stake (PoS) algorithms, where computational power or the amount of crypto held determines validation, PoA uses identity as the validation mechanism. The approach seeks to provide a more efficient and scalable alternative for permissioned blockchain networks, where the identity of the nodes is known and trusted.

How does Proof of Authority work?

Proof of Authority (PoA) is a consensus mechanism used in permissioned blockchain networks. In a PoA network, a set of validators, or “authorities,” are pre-selected, and their identities are known and verified. These validators are responsible for creating new blocks and validating transactions.

When a new transaction is proposed, it is conveyed to all the validators. Each validator independently verifies the transaction to ensure that it is valid and complies with the network’s rules. If most of the validators agree that the transaction is valid, it is included in a new block. The validator who creates the block is chosen through a consensus algorithm, such as a round-robin selection or weighted random selection.

Once the block is created, it is broadcast to all network nodes. Each node independently verifies the block’s integrity by ascertaining that it contains valid transactions and is properly linked to the previous block. Once the majority of the nodes agree that the block is valid, it is added to the blockchain.

Consensus Requirements for Proof of Authority

Consensus requirements for authority proof are conditions that must be met for a given proof of authority to be considered valid. The requirements typically include a certain level of agreement among network participants and some terms of security and integrity of the proof. Examples of consensus requirements include the use of digital signatures, the specific number of network participants needed to approve a given proof, and the use of secure cryptographic algorithms to ensure the integrity of the proof. While the conditions vary from network to network, the PoA consensus algorithm is broadly based on three requirements:

• Validators need to confirm their real identities.
• A validator should be willing to invest money and risk one’s reputation.
• Maintaining a standard process to weed out suspect validators and ensure long-term commitment.

Advantages of Proof of Authority

The main advantage of using PoA is that it is more energy-efficient compared to other consensus algorithms like Proof of Work (PoW) and Proof of Stake (PoS). PoA is less computationally intensive, as it doesn’t require miners to solve complex mathematical problems to validate transactions. Thus PoA networks can operate with less electricity, which can benefit the environment and reduce operational costs.

Besides, PoA can provide a higher level of security and stability than PoW and PoS since it is based on the trust of a set of validators that are pre-selected and vetted by the network. They are more reliable and trustworthy than anonymous miners or stalkers.

PoA networks are easily customizable since the validators can be changed depending on the needs of the network, and the rules for validating transactions can be adjusted as required.

Limitations of Proof of Authority

Yet, the consensus algorithm has its flip side. First, PoA is centralized as the network relies on a pre-selected group of validators to approve transactions. Centralization leads to less transparency and accountability in the network, as the validators wield significant control over the network. What’s more, this can also expose the network to security vulnerabilities.
PoA is less resistant to censorship, as validators can reject or block certain transactions, preventing certain parties from participating in the network.

PoA is also less scalable than other consensus algorithms, as the number of validators is limited. As a result, it can process only a limited number of transactions per second. Besides, PoA is not suited for public networks as validators are pre-selected, which restricts access.

Conclusion

Proof of Authority (PoA) as a consensus algorithm is more energy-efficient and secure than other algorithms. PoA is suited for private and permissioned blockchain networks where the participating entities are known and trusted. However, PoA has its downsides, too, as discussed earlier.

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