What is Proof of Authority?

Proof of Authority (PoA) is a consensus algorithm that is generally less well known than, say, Proof of Work and Proof of Stake. Yet it is an algorithm used by many blockchains. It ensures that the blockchain can be used by a completely different audience. Private blockchains in particular use the Proof of Authority algorithm.

Proof of Authority

In 2017, the co-founder and former CTO of Ethereum had developed the Proof of Authority algorithm. He did this as a solution to several blockchains that were based on Ethereum. Blockchains that were used in certain situations encountered various problems with Proof of Work and Proof of Stake. However, it was initially created against spam attacks on Ethereum's test network.

In Proof of Authority, no mining takes place like in other consensus algorithms. Normally, the one with the most computing power or the largest stake is allowed to add new blocks to the blockchain. With Proof of Authority, those who may add blocks are already selected in advance. Thus, only a few nodes are responsible for validating the transactions. We also call these nodes the 'authorities'.

This makes the network a lot less large and less decentralized. There are a lot fewer nodes that are allowed to validate transactions. Now, this sounds like a big disadvantage. However, it is actually a big advantage, given the user situations of Proof of Authority blockchains.

Who is Proof of Authority used by?

Proof of Authority is used by two different types of blockchain: private blockchains and public blockchains. It is important to differentiate between these, as it is very decisive for the function of the blockchain.

Private blockchains

Especially private blockchains make use of Proof of Authority. So these are blockchains where the general public cannot participate. Think, for example, of hospitals, insurance offices and other institutions. They benefit greatly from Proof of Authority because they can take advantage of the benefits of blockchain while still being in control of the data on the blockchain.

For example, all hospitals in a country could switch to a blockchain that uses Proof of Authority. Each hospital would then have a server that acts as an authority in the blockchain. The advantage is that patients could then go to any hospital, and that hospital would then be able to see the patient's data directly. They do not have to request the information first.

But why wouldn't they use a public blockchain? Such a public blockchain is not adaptable to the situation of the company or institution using the blockchain. Hospitals can much more easily transform the blockchain for their own use in this way. It also ensures that the data is locked away from the outside world.

Public blockchains

However, there are also plenty of public blockchains that use Proof of Authority, such as VeChain and PAO Network. These blockchains have custom validation processes for authorities, and in both cases apply strict selection criteria for choosing authorities. This is necessary because the entire network depends on the integrity of the authorities.

How does Proof of Authority work?

Actually, Proof of Authority is very similar to the Proof of Stake model. Instead of users putting in money, in this case, they put in their identity. This group of nodes is vetted in advance for integrity. It depends on the blockchain, but often there is a strict selection process beforehand. It is therefore not necessarily easier to work in a Proof of Authority than in a Proof of Stake model.

You will need to have a lot of money at your disposal in Proof of Stake, while in Proof of Authority you often need to have a good reputation to be chosen.

Often it is only a small group of authorities that provides the blockchain with new blocks. Therefore, very little computing power is needed to validate transactions. Also, no communication between nodes is needed to reach a consensus. Also, the continuity of the network is independent of the number of available nodes.

The Benefits of Proof of Authority

The Proof of Authority algorithm brings several advantages. This sometimes makes it very interesting for many blockchains to also use the Proof of Authority algorithm.

  • No expensive hardware needed. Because the computing power needed in Proof of Authority is very low, nodes do not need to invest in expensive hardware. Also, no mining farms are needed, as is the case with Proof of Work.
  • Less energy required. Less computing power is needed, and there are fewer nodes adding blocks to the blockchain. As a result, a lot less energy is needed to keep the blockchain running. The energy that is supplied is also put to good use by the blockchain.
  • High transaction ratio. The blocks are generated in a sequence at a certain time interval. This greatly increases the speed at which transactions are validated. Predictable time interval. In many other consensus algorithms, the time interval between the blocks varies. With Proof of Authority, the time interval is always the same, and so you don't have this problem.

Disadvantages of Proof of Authority

Despite its many advantages, this algorithm also has plenty of disadvantages. As a result, the algorithm is not suitable for every blockchain, which makes sense.

  • Less decentralization. Obviously, there is less decentralization in the Proof of Authority algorithm. This is because there are fewer nodes dedicated to validating and verifying transactions. It seems that Proof of Authority is primarily an algorithm that makes centralized systems more efficient.
  • Identity is known. When you want to participate and add blocks to the blockchain, your identity is made known. This would allow authorities to use their fame for side tasks.
  • Attacks can be carried out more specifically. Because of public identity, nodes can be extorted much easier by malicious parties. Because the network consists of far fewer nodes, it is much easier to form a quartet with other nodes, and then take over the network.