Proof of Authority is a variation on the Proof of Stake consensus process in which network users stake their identity and reputation rather than tokens. Proof of Authority, first proposed in 2015 by Ethereum co-founder Gavin Wood, has recently emerged as one of the more popular consensus methods as the blockchain community looks for alternatives to Proof of Work. PoA, or Proof of Staked Authority (PoSA), aims to address some problems of existing PoW alternatives, including Proof-of-Stake.
To Begin With, Why Replace PoW?
The groundbreaking notion of Satoshi Nakamoto, which gave rise to Bitcoin and ignited the blockchain revolution, may be characterized as the ideal union of decentralization and cryptography. The Proof of Work algorithm, the brilliant idea that underpins the Bitcoin network and ensures its immutability and resistance to hostile operations, was at the core of this union.
PoW became the default consensus algorithm for most blockchain protocols that appeared after Bitcoin since it looked to serve the function. But blockchain technology gained popularity, making several PoW limits that weren’t initially clear. Many people in the blockchain community began seeking alternatives due to these shortcomings.
The Drawback of Pos That Proof of Authority Seeks to Address
Proof of Stake algorithms has been one of the most often used consensus solutions with the movement away from PoW. The benefits of PoS are apparent: it gives network validators an even greater financial incentive to act responsibly; it doesn’t require a lot of processing power or specialized equipment; and it allows for sharding, which increases the scalability of a blockchain network.
Given all these benefits, it is not unexpected that Proof of Stake (PoS) is now being implemented on Ethereum, the second-most popular blockchain network in the world. But the PoS also has a critical flaw that is frequently ignored.
Proof of stake algorithms assumes that participants in a network who have staked tokens will be motivated to act in the network’s best interest or risk losing their investment. Therefore, it seems sensible to think that a person will be more driven to ensure the network’s success if they have a more significant interest in it. This presumption, however, ignores the possibility that, despite identical stakes potentially having equal financial worth, their holders may not view them similarly. For instance, regardless of the actual stake level, a person with 20% of their entire possessions placed in a network is likely to be far more committed to that network’s success than a person with 1% of their holdings staked.
The algorithm’s premise is that network users stake their identities rather than using tokens. As a result, validators in PoA systems are well-known entities who stake their reputations on the line for the privilege of validating the blocks, in contrast to the majority of blockchain protocols where anybody may join without identifying their names. This modification to the PoS paradigm assures that all network members are equally motivated to contribute to the success of their network by eliminating the need to take into account any financial inequalities between the validators.
Proof of Authority: Benefits and Drawbacks
PoA is not feasible for public blockchains like Bitcoin and Ethereum, which include hundreds or even thousands of validating nodes because of the identification requirement. PoA networks are less decentralized since they often have a small number of validating nodes. They also have a high throughput capacity, which is good.
Proof of authority is similar to PoS because it takes little computing work and no specialized hardware. However, PoA networks often only use entities with a solid reputation as their validators, making it difficult for the average person to fill that position.
The Future of Proof of Authority
In the end, PoA will probably flourish in the corporate sector. PoA-based algorithms are unlikely ever to power public platforms with hundreds or millions of users. They are excellent at creating compact and lean networks suited to a small number of known stakeholders. Proof of Authority is where it is most likely to have a significant effect.
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