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In the world of cryptocurrencies there are several types of consensus mechanisms. One of them is Proof of Authority. In this article we will tell you all about how it works. Proof of Authority is a consensus mechanism through which blockchain participants can validate transactions and update their record.
PoA or Proof of Authority (in English) is based on the reputation of network representatives chosen by blockchain participants. Such a protocol was implemented as an optimized model of the Proof of Stake (PoS) where instead of using coins as a form of betting, identity is used.
The identity is bet on a set of pre-approved validators for the validation of transactions and blocks in the network. The set of validators is usually quite small to ensure the security and efficiency of the network. This group usually consists of about 25 or so validators.
History of Proof of Authority
The Proof of Authority consensus mechanism was designed with the goal of making it an efficient private blockchain-oriented solution. The name of the consensus mechanism, PoA, was named after Gavin Wood who held the position of co-founder, former CTO in Ethereum development and co-founder of Parity Technologies.
This consensus mechanism was proposed as a scalable idea in 2017 after its creation by a group of developers. After its launch it began to be implemented and gain reputation since it differed notably from protocols such as Proof of Work and Proof of Stake. Unlike these protocols, Proof of Authority breaks the schemes by leveraging user identities to enable validations on the blockchain.
The novel features of its release included an arbitrary selection of trusted validators which prompted developers to implement a consensus mechanism to ensure security. It is currently one of many known and implemented consensus algorithms.
How does Proof of Authority work?
In Proof of Authority the system starts with the random election of validators. Subsequently, a voting system of other previously authorized nodes allows the selection of nodes and their inclusion in the network. This prevents the access of malicious nodes that could affect the operation of the network. It should be noted that each validator can only sign one of each series of consecutive blocks in its validation time.
PoA uses identity and reputation just as Proof of Stake uses participation to ensure trust and participation in the network. In this consensus mechanism, the identity of each user becomes extremely valuable. Clearly, in order to use this system, the validated user must voluntarily reveal his or her identity.
When the validator’s information is made public, responsibilities in the operation of the blockchain are established. In addition, knowing the identity of the validators, any inconvenience or any act that undermines the security of the network automatically falls on the person or institution which will increase its good or bad reputation.
For these reasons, the validators of a blockchain based on the use of Proof of Authority take care of its reputation on a daily basis. Therefore, these validators will do everything in their power to maintain the transparency, proper functioning and reliability of the blockchain. This is because both the identity of a validator and the company behind a validator or groups of validators is at stake and this will make them feel incentivized to preserve the network.
As for the validation nodes in the PoA network, they have full authority to decide on new blocks. This means that they can stop specific transactions even if this generates a conflict of interest and harms the network. In many cases, those who control the nodes do not trust each other generating various conflicts.
In this system, nodes are encouraged to perform their duties honestly through constant monitoring, whereby each validator supervises the actions performed by the other validators.
Conditions for operation
In the operation of Proof of Authority there are several conditions to be met in order to proceed with the protocol. These conditions are discussed below:
- The obligation to validate the identity of potential validators. Any user wishing to participate in the network must verify and publish their real identity.
- All validator candidates must have the money to invest and offer their reputation as a guarantee. In this way, candidates choose to participate in the network on a long-term basis.
- Standard system for the approval of a validator. This standard system is mandatory since it is intended to achieve an adequate selection method that guarantees the equal selection of candidates.
These three measures are intended to ensure that the system is capable of eliminating possible malicious actors. In the event that a validator in the network acts in bad faith, the network should automatically remove it to maintain trust and transparency in the blockchain.
Advantages and Disadvantages of PoA
Like any system, Proof of Authority has advantages and disadvantages that differentiate it from other systems. Below we will see the most important ones:
- Less intensive. From a computational point of view, the PoA protocol is less computationally intensive than basic models such as Proof of Work, which have high power consumption.
- It does not require communication between nodes. No communication between nodes is necessary to reach consensus.
- The continuity of the network is independent of the number of available nodes. This is because they are pre-approved and verifiably trusted in the public domain.
- Centralization. One of the main advantages of this system is its centralized model as well as its distribution.
- Validators’ identities are public. The obligation to publish the identity of validators is criticized as it could lead to manipulation by third parties towards users.
- Censorship. Many users criticize that the protocol facilitates censorship and blacklisting of many users.