What is Proof of Authority (PoA)? How does PoA work?

Consensus is the core of every blockchain. Proof of Work and Proof of Stake are the two names that every crypto native gets heard of. In this article, we will get to know more about another type of consensus, which is Proof of Authority.

What is Proof of Authority (PoA)?

Proof of Authority (PoA) is an emerging consensus that enables the blockchain to conduct fast transactions. Its working principle is based on the reputation of the validators who are responsible for block verification. This means PoA blockchains will take reputation as a stake instead of the number of coins as in other Proof of Stake networks.

In 2017, the term was forged by Gavin Wood, who is the father of the Polkadot and Kusama blockchain. It has been receiving a lot of traction as it can solve the scalability problem of Proof-of-Work blockchains.

The PoA consensus can scale fast since it has a small number of validators compared to other blockchains such as Ethereum or Bitcoin. Some notable blockchains that use PoA or variants of PoA are BNB Chain, HECO, Cronos, OKExChain, VeChain, etc.

Pros and cons of Proof of Authority

Pros

• Faster scalability: PoA blockchains can execute more transactions than PoW blockchains that require hardware-intensive computational power. It also operates with a limited number of nodes/validators. This makes the block confirmation completely faster.
• Good for the centralized purpose: Organizations or enterprises need technology transition which is safe and preserves their control. PoW and PoS are too decentralized, while PoA is a more centralized alternative to them.
• Computational efficiency: PoA leverages the use of identity in block validation. Running a network of validators is more energy-efficient than PoW blockchains

Cons

• Against decentralization: It can be suitable for enterprise or organization usages that are leveraged by blockchain technology. Less decentralization means the data can be mutable since running nodes on a PoA network needs permission from the blockchain organizer. Therefore, if you are going to build a decentralized world, PoA might not be an efficient consensus.
• Vulnerable to attacks: Having a small number of validators can be a drawback. Manipulating hackers can aim at an exposed node to attack the network. If that node is the primary validator confirming the block, it will be a disaster for the network.

How does Proof of Authority work?

Proof of Authority has a limited number of validators participating in the network. Each PoA validator has its own unique and verified identity.

With an authentic identity, a validator is rated by other validators in the network. The reputation procedure is similar to ratings on e-commerce websites. The higher the rating, the more chance the validator is opted to confirm the next block.

The first requirement to start the PoA consensus is that one validator gets chosen. For the sake of long-term sustainability, a validator should have a reliable identity that is verified by other validators in the network. By selecting a healthy validator, the network is likely to run without any hiccup.

The PoA Consensus usually operates according to the following steps:

1. The blockchain selects one validator as primary to start verifying the block.
2. The primary validator receives transactions of one block and validates them.
3. Other validators confirm the block validated by the primary.
4. The chain is updated with the new block once the consensus is reached.
5. The reputation of the validator is affected if it fails to perverse the block.

Proof of Stake vs. Proof of Work vs. Proof of Authority

Proof of Authority uses identity as a stake instead of coins like Proof of Stake does. In practice, PoS blockchains are dominating PoA ones in terms of market cap. However, based on specific purposes such as privacy and scalability, PoA is still a preferable option.

As mentioned, PoA blockchains own fewer validators than other PoS and PoW ones. This makes PoA networks less decentralized. However, PoA requires almost no computing-intensive machines to scale fast. It sacrifices the decentralization for scalability and security.

As a result, it targets private organizations or businesses that looking for a less decentralized option of blockchain technology.

Every popular blockchain consensus gears towards proper implementation. Currently, it is still a big challenge to achieve scalability, security, and decentralization at the same time. PoA sacrifices decentralization to enhance scalability. BNB Chain is a notable example of PoA implementation even though it uses the hybrid version of PoA and DPoS.

FAQs about Proof of Authority

How to mine crypto from PoA blockchains?

Investors need permission from the PoA blockchain foundation to start running a validator with authority. Therefore, it is hard or almost impossible for retail investors to run validators on PoA blockchains. More validators coming to the PoA network will make it less decentralized. This impacts the influence of the organization that founds the blockchain.

Does BNB Chain use PoA?

BNB Chain uses the Proof of Staked Authority consensus, which is a hybrid between Proof of Authority and Delegated Proof of Staked.

Is PoA better than PoW and PoS?

Each consensus serves a specific purpose or need of each group of crypto natives in the market. Choosing a more suitable consensus for the blockchain is way better than implementing one that sounds trendy and cliché.

Conclusion

Besides PoW and PoS, Proof of Authority is an alternative option for choosing the consensus of a blockchain. It serves the purpose of corporations and organizations that want to build a blockchain with sustainable scalability under their control.