The crypto verse is constantly evolving. Bitcoin’s proof-of-work and Polkadot’s proof-of-stake have undoubtedly transformed the blockchain world. However, change is the only constant. And experimentation and implementation help you to sail with the tides of change. Proof of authority consensus is a mechanism that relies on the user’s reputation.
POA is a compromise of blockchain’s decentralization and centralized, efficient models. As Warren Buffet quotes, “It takes 20 years to build a reputation but 5 minutes to ruin it. If you think about it, you will act differently.” This blog explains proof-of-authority and its dynamics, a comparison of proof of stake proof of work proof of authority.
What Proof-of-Authority means?
Proof-of-Authority(POA) is a reputation-based algorithm that renders an efficient solution for blockchain networks. Gavin Wood, the co-founder of Ethereum, introduced the concept of proof of authority consensus. Moreover, it is a more robust solution than proof-of-work and proof-of-stake algorithms. POA is more energy efficient and requires less computational resources.
How does proof of authority actually work?
The poa consensus leverages the user’s identity. Instead of staking coins, the validators stake their reputation. What does reputation mean? Reputation implies the validator’s identity on their platform or determined by any documents presented by them.
Moreover, in the proof of authority blockchain, the right to be a “node” is only given to those who have proved their authority to do so. And the nodes are called “validators.”These validators run software on their nodes to store the transactions in the blocks. POA selects only limited validators for the process; hence it is highly scalable. Furthermore, the blocks and validators are verified by pre-approved participants called “moderators.”
The poa consensus algorithm has a variety of applications. Besides, it could be a practical utility for supply chain and logistics applications. Microsoft Azure platform utilizes the proof of authority crypto.
Conditions for POS consensus
The blockchain proof of authority varies from system to system. However, the primary conditions for the poa consensus are the same:
- Validity and trustworthiness of validators
The validators have to prove their real identities.
- Validator Criterion
Moreover, they have invested their money and put their reputation at stake. So, a challenging entry point reduces the penetration of questionable validators and ensures a long-term commitment.
- Standards for validator approval
Setting a standard method for selecting a validator is essential to avoid bias. POA ensures a standard validator approval process.
POA consensus and common attacks
The two common types of attacks are:
- Denial of service(DOS)
Denial of service is an attack in which malicious attackers attempt to make online services unavailable with traffic from multiple nodes. In POA, the nodes are already pre-approved, rendering an extra defense line against DOS attacks.
- 51% attack
In 51% attacks, the attackers must acquire 51% network control. Moreover, PoW 51% attack differs from POA, as the former requires 51% computational power, which is easier to obtain. On the other hand, gaining control of permissioned consensus like POA is more complicated than computational power.
Is Proof-of-Authority the same as proof of stake?
The proof-of-authority(POA) is not the same as proof-of-stake(POS). However, POA is a modified version of POS. Further, they both differ in their consensus mechanism. In proof of authority coins staking is not possible, as the validators stake their reputation. Furthermore, in POA, the validators are pre-approved by a “group of authorities” for verifying the transactions into new blocks.
As a result, the validators must adhere to two basic requirements:
- Use their platform identity to register in the public notary database
- Follow the rules of the blockchain
The following table provides a comparison of POS consensus and POA consensus:
|In POS, validators stake digital assets like coins||In POA, validators stake their reputation.|
|Validators require three pieces of software to participate in the network.||Validators don’t require any hardware to participate in the network.|
|Any malicious player with a 51% stake can shut down the network.||Any malicious player with a 51% stake cannot shut down the network.|
|Proof of staked authority is permissionless blockchain.||Proof-of-Authority is a permissioned blockchain.|
Is PoA better than PoS?
As we know, POA is a modified version of POS. POA leverages the user’s identity instead of coins. Sometimes POS chooses its validators on the “more coins, greater chance” principle. As a result, due to the decentralized nature of blockchain POS may not be suitable for some businesses and applications. Besides, the limited validators make the POA network more scalable and high-performing.
What are the advantages and disadvantages of a PoA?
Although the POA consensus mechanism has evolved from POW and POS, it has a few advantages and disadvantages.
Advantages of POA
The following are the advantages of POA:
- As the validators have to disclose their identities to participate in the network, the risk of malicious players reduces. Thus POA is more secure.
- The number of transactions per second is more.
- Validators don’t require high computational resources.
- POA provides better defense against Denial of Service (DOS) attacks. The validators are pre-approved, and their system has better security to withstand a probable DOS attack.
- Unlike POS, gaining a 51% stake in the POA network is much more challenging.
Disadvantages of POA
The following are the disadvantages of POA:
- As the validators are pre-approved, POA adopts a centralized approach
- The validator’s identity is accessible to everyone. Hence, POA makes the user vulnerable to third-party manipulation.
- Although POA is high-performing, its immutability is dubious as censorship and blacklisting are possible.
Does Proof-of-Authority require mining?
Proof-of-Authority doesn’t require mining on transactions. Generally, mining aims to provide an incentive to the nodes that participate in verifying and authenticating transactions in the network. However, in POA, all the nodes are already pre-approved; hence, mining is unnecessary.
In POA, the nodes don’t need to solve complex mathematical problems to add a block to the network. Instead, the nodes turn validators staking their reputation.
Who uses Proof-of-Authority consensus?
The proof-of Authority consensus is a new approach in the blockchain network. Therefore, it has garnered a lot of attention from crypto enthusiasts. Moreover, it has a wide variety of applications.
The following are a few platforms implementing POA consensus:
- Supply chain and logistics are essential arenas for implementing POA.
- Ethereum’s Kovan testnet is another application of POA consensus.
- Microsoft Azure also uses the proof-of-authority algorithm.
- Proof of Authority network(POA network) relies on POA consensus in its blockchain. POA network is a public platform of smart contracts that operates as an Ethereum sidechain consisting of independent validators as nodes. The network uses a public notary database to cross-verify validator eligibility. A validator goes through a two-step verification: client-side POA Network Dapp and public notary database.
- The VechainThor blockchain network uses the POA consensus mechanism. It is a public blockchain for “mass business adoption,” especially in supply chain logistics.
- Furthermore, hyperledger fabric proof of authority is an optimized implementation of POA. However, hyperledger operates on Practical BYzantine Fault Tolerance but utilizes POA consensus as a part of its open-source framework.
- Ripple uses an iterative form of POA consensus.
Every consensus mechanism is flawed. Proof of work, proof of stake, proof of authority have different advantages and disadvantages. Moreover, POA’s mechanism and the blockchain ethos – decentralization – is as different as chalk and cheese. Essentially, crypto proof of authority relies on the validator’s credibility. The strict approval process helps to weed the contentious players. Thus, only honest nodes make it to the end.
Given the limited validators in the proof-of-authority consensus, it is suitable for a private network rather than a public network. Lastly, a standard method for choosing validators maintains the system’s integrity and reliability.