Proof-of-Authority

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Proof-of-Authority (PoA) is a consensus mechanism that is based on the process of using the identities of the network’s users to establish a best validator for a transaction. The term “Proof-of-authority” was put into use by Gavin Wood, co-founder of Ethereum and Parity Technologies.

Principle of work[edit]

Similarly to the Proof-of-Work based networks, Proof-of-Authority blockchains consider transaction validation as a job that should be rewarded and encouraged. For this purpose, PoA networks establish a transaction fee or other ways of encouragement for the validators of the network that make the position attractive for users to hold.

In order to ensure the conscientious work of the validators (miners in PoW, stakeholders in Proof-of-Stake(PoS)) and to protect blockchain from the threat of changing the transaction data, networks develop various measures for control and consensus. In the classic blockchain consensus technology - PoW, protection is achieved with high demands on the amount of computing power and electricity that is needed to validate one block. It means that it won’t be profitable for malicious miner to make an attempt at attacking the network. The high amount of power needed to change something in the network is inaccessible for any single entity and mostly requires more than half of the network’s computing to be used for it. On the other hand, good work at validating blocks and all the expenses are covered with blockchain’s tokens, issued with every block’s validation and certain amount of transaction fees.

PoS consensus is an attempt to reduce the power consumption of the network and to lower the entry threshold for the future participants. In the PoS-based blockchains architecture assumes that the user with the highest stake in the network is not interested in damaging it. This assumption is based on the fact that any damage to the network diminishes the price of the assets issued by it. It makes any attack on the network self-damaging for the user. The decisions on the development of the network are also made with taking the opinions of the stakeholders with a larger stake as more important ones. Proof-of-Authority takes this approach a little further in the attempt of fixing some of PoS’s inherent problems.

By some of the PoA enthusiasts those are considered to be the following:

  • While the PoS system seems to be close to the fair distribution of the rights according to the relative size of the user’s stake within the network, it does not take into the account the ratio of overall user’s capital to the part of it, that is stored in the network and, thus, does not cover the real concern of the user about the network’s stability.
  • The PoS networks are not transparent. In the PoS blockchain validators can remain anonymous meaning they can return to the network unlimited times even after they damaged it.

PoA fixes these problems by taking the identity of the user as his stake. It means the person that wants to become a validator must confirm his identity with officially issued documents. After he does it, every action he perform in the network becomes inseparably linked to him and is stored in the blockchain. However, it is not the only necessary requirement to build a well-operating PoA network. In addition to the demand on all the validators’ personalities to be confirmed, they should be all confirmed in a certain way in accordance with some sort of protocol that is the same for every potential validator. The right of becoming a validator also should be reasonably hard to obtain in order to make it valuable and damaging to lose. Due to these rules, the Proof-of-Authority based blockchains ensure the commitment of the participants and make the network transparent while retaining the advantages of PoS.

Proof-of-Authority blockchains[edit]

Proof-of-Authority is a relatively new concept and is yet to be widely implemented. Most of its current implementations are based on the Ethereum network, as the concept was born within Ethereum’s development team. Famous use cases for Proof-of-Authority are:

  • Ethereum’s test net Kovan built on the Parity's PoA Protocol
  • PoA Network by the Proof of Authority, LLC., which is an Ethereum sidechain
  • The VeChainThor platform is based on Proof-of-Authority

Advantages of PoA[edit]

  • Proof-of-Authority based networks are of very low demand on the computing power of user and do not produce any significant strain on the electricity required to keep the network operating.
  • Transaction time of PoA is significantly faster than the transaction time of PoW-based networks.
  • PoA networks are very scalable, especially in comparison to PoW blockchains and is well adjusted to be a platform for the dapps development and maintenance.

Disadvantages[edit]

  • Proof-of-Authority based networks strongly lack decentralization. In contrast to PoW, PoA blockchain can have only a limited number of validators, which are not even necessarily democratically elected.
  • PoA does not allow to build blockchain as protected from censorship and blacklisting as other consensus mechanisms allow. A limited number of identified validators can freely cooperate to censor particular types of transactions based on the identity of the user or the purpose of the transaction.
  • The risk of damaging the reputation does not necessarily keeps a person from participating in malicious actions. The size of the gains, that can be gathered with a reputation-destroying event can be more valuable than the reputation in community. This problem also exposes the network to the third-party interference leaving the opportunity to cover the costs of the damage caused by the action.

Sources[edit]

See Also on BitcoinWiki[edit]