Proof of Authority (PoA) Meaning

What Is Proof of Authority (PoA)?

Proof of Authority (PoA) is a consensus mechanism that allows authorized participants to validate transactions and create blocks. PoA algorithm is ideal for permissioned blockchains rather than permissionless ones. Blockchains built upon this algorithm can operate without a native asset.

PoA is a more energy-efficient alternative to proof-of-stake (PoS) and proof-of-work (PoW) mechanisms since it requires less computational resources. Unlike PoS where the validators are pseudo randomly selected based on their economic stake, PoA is a reputation-based consensus. This means that instead of staking the network’s native token or coin, the validators (authorities) stake their reputation and identity within the network. 

Simply put, while PoS and PoW network participants can be completely permissionless and anonymous, PoA networks require the identity of every node to be known and verifiable to the entire network. The reputation of nodes is basically tied to their real-life identities.

How Does PoA Consensus Work?

PoA blockchains typically rely on preapproved validators to confirm transactions. The validators are picked by a central authority based on the value of their identities. The selection process adheres to a consistent standard by ensuring that validator applicants follow the same set of rules and conditions. This ensures that all candidates have fair and equal chances of being approved for the privilege of validating transactions and verifying blocks.

The candidates for the role of a validator must meet basic requirements such as:

• Valid and verifiable identities: a candidate’s identity must be disclosed on the blockchain and verifiable with information available in a public database.
• Trustworthiness:  a candidate should possess the qualities of trustworthiness and good moral standings.
• Willingness to risk their reputation and invest in the network: a candidate should be ready to stake their identity/reputation and capital on the network.

This process ensures that the candidates will act in the network’s best interest rather than in their own. The validators also closely monitor the activities of each other, ensuring the network’s integrity and reliability. Compared to PoW and PoS networks, PoA networks are more scalable as they rely on a small number of validators. However, this subjects the network to high centralization as a few actors hold power.

And what do the PoA validators get in return?

PoA networks incentivize validators with reputation, which allows them to retain their status as validating nodes.