What is Proof of Authority?

The most well-known blockchain consensus mechanisms are Proof of Work and Proof of Stake. Nowadays there is also Proof of Authority, but what does it really mean?

Proof of Authority (PoA) is a consensus mechanism significantly different from Proof of Work (e.g., Bitcoin) and Proof of Stake (e.g., Ethereum). In Proof of Work, miners ensure the security of the network, while in Proof of Stake, those who have staked the highest stakes, i.e. the most coins, in the network manage the security of the network.

Wat is Proof of Authority?

PoA takes a slightly different approach. Here we are dealing with a consensus algorithm used in blockchain networks to validate transactions and maintain network security. Unlike other consensus algorithms, PoA relies on the identity and reputation of network participants, rather than the computational power or ownership of cryptocurrencies.

Hoe werkt Proof of Authority?

In PoA, blocks and transactions are validated by so-called "authorities." Authorities are selected nodes in the network that have a high reputation and are considered trustworthy. These authorities are manually selected by an administrator in the network.

In the PoA network, authorities have the right to create new blocks and verify transactions. They are rewarded for their services and also risk being punished if they violate the network's rules. Since the authorities are well-known and have a high reputation, it is assumed that they will not attack or cheat the network.

Where is the mechanism used?

This way of generating consensus is mainly used in private blockchains. Think of blockchains for insurance companies or hospitals - here it is important that selected authorities rather than randomized authorities (as with Proof of Stake) ensure order in the network. But cryptoprojects such as VeChain, Bitgert or Palm Network also rely on the proof-of-authority mechanism.