Proof of Authority – A more Efficient Consensus Algorithm?
Crypto has become one of the most popular topics in the tech world. And with thousands of cryptocurrencies in the market, developers have to always come up with something new that provides more speed, needs less energy, and is more secure.
Since the creation of Proof of Work (PoW), many others have been developed, including Proof of Stake (PoS), Delegated Proof of Stake (DPoS), Proof of Importance (PoI), Proof of Capacity (PoC), or Proof of Authority (PoA).
In this article, we are going to talk about what Proof of Authority is, what advantages it has, and how it differs from one of the most popular consensus mechanisms, Proof of Stake.
What Is Proof of Authority?
Proof of Authority (PoA) is a consensus mechanism that became popular in 2017, thanks to Gavin Wood, a co-founder of the Ethereum blockchain. One of the most intriguing facts about Proof of Authority is that it delivers a more efficient solution for blockchains, especially for private ones.
How Does PoA Work?
Block validators are not staking coins in the Proof of Authority consensus mechanism. Instead, the system leverages the value of identities, and users are staking their own reputation.
Compared to other consensus algorithms, those using PoA are not required to monitor their computers constantly, as the whole process is automated. However, they should always make sure that their computers are working well.
Proof of Authority requires a limited number of block validators, and this is remarkably contributing to the system’s scalability.
Proof of Authority Use Cases
Since Proof of Authority does not imply mining, it can work on a gasless blockchain like the one offered by Redlight Finance. Furthermore, this means that other industries, such as retail, can use the system. For instance, PoA is considered a practical option for supply chains, as it enables businesses to keep their privacy while also benefiting from the features of blockchain technology.
Considering the fact that PoA is an extremely transparent and fast algorithm, it allows retailers to track products in real-time, thus making the whole process surprisingly efficient and increasing the speed and quality of deliveries.
Another industry that can benefit from PoA’s features is the pharmaceutical sector. Through Proof of Authority, pharmaceutical companies can track the origins of medicine in an easier way and with a higher speed.
PoA vs. PoS
No consensus mechanism is indeed 100% secure or scalable. However, with every update, these algorithms can improve and provide many advantages to their users.
Concerning Proof of Stake and Proof of Authority, the main difference between the two is that PoA validators are staking their reputation instead of crypto. On the other hand, in Proof of Stake, those aiming to become validators need to stake a specific amount of the cryptocurrency and run three pieces of software: an execution client, a consensus client, and a validator.
When it comes to the speed provided by the two consensus mechanisms, Proof of Authority proved to have a higher transaction rate. The main reason for this is that PoA networks require fewer validators than those using PoS; thus, the transactions are verified quicker. However, this advantage comes with a downside for PoA, too. It may not suit public blockchains, as it cannot improve decentralization as much as it does with scalability. This is why most of the blockchains using Proof of Authority are private.
Fortunately, the PoA consensus mechanism has a higher resistance to attacks than PoS. This happens because if an individual or a group manages to provide 51% of the power needed to make the blockchain work, they will not be able to compromise it. In Proof of Stake, those having 51% of the total amount staked may be able to attack or shut down the network. However, it is still remarkably hard to hold such a big percentage of the staked crypto.
When developers learned that Proof of Work consumes tremendous amounts of energy, they started to consider switching to Proof of Stake. Take Ethereum, for example. The second cryptocurrency in the world decided to switch from PoW to PoS in order to reduce energy consumption. And the results were astonishing, as Ethereum managed to reduce energy consumption and the carbon footprint by over 99% each. However, more is needed, especially regarding energy consumption, one of the biggest problems our world is currently facing.
On the other hand, the Proof of Authority consensus algorithm comes with surprising energy efficiency. Because PoA is less computationally exhausted and requires no specialized hardware for completing related processes, so, it is one of the most energy-efficient consensus mechanisms.
Proof of Authority is indeed a remarkably efficient consensus mechanism. And this also comes with benefits for other industries, such as retail or the pharmaceutical sector.
However, it has some limitations, too. For instance, as we mentioned before, despite its high scalability, PoA still needs to achieve such high decentralization. And this is why it is primarily used for private networks.
Moreover, it is important to mention that the identities of Proof of Authority validators are visible to anyone. This can be a way for ill-intentioned users to reach validators and convince them to act differently in order to compromise a network.
Proof of Authority is one of the most popular consensus mechanisms among tech enthusiasts.
One of its main advantages is that it can be used in other industries, too, as it provides a remarkably high transaction speed; thus, its scalability stands pretty high.
Moreso, PoA comes with high energy efficiency when compared to PoW or PoS. However, it is important to note that despite its high scalability, Proof of Authority still has to improve its decentralization.