Proof of Authority Explained

Transaction confirmations can pose a challenge in decentralized systems. The main problem lies in the fact that the power of confirming a transaction should not be in the hands of a single entity. There are many consensus mechanisms that use different methodologies to solve this problem, and today, we will present an innovative Proof of Authority.

Proof of Authority Explained

The problem with decentralization forced us to innovate and bring in a new consensus mechanism: proof of authority. This mechanism is based on three algorithms.

Algorithm 1: Approving the list of validating nodes

In proof of authority, people do not have to spend excessive energy or need to be wealthy to confirm transactions. However, they do need to register into the network and get the votes of existing entities. If the entity acts maliciously, they can be voted out.

Algorithm 2: Deciding the right of the entity to confirm the next block of transactions

Here unlike with the previous mechanism, the entities participating in the consensus need to confirm transactions within a limited period of time. They complete this operation by sequentially validating transactions and verifying their validity through execution. Later they sign these transactions and pass them to the network. Once the network gets them, it performs a quick check to see if the entity has the right to confirm the block of transactions in the specified time interval. Since the approval of new blocks occurs at a specified time interval, the throughput of this mechanism is drastically higher.

Algorithm 3: Confirming the transaction validity

In the blockchain ledger, we see a list of confirmed transactions. When the new transactions are received, the validating entities can complete these transactions on the confirmed ledger. These transactions are sequentially executed.

Hence every validating entity ought to reach the same conclusion in the ledger and reach a consensus. In case of discrepancies, the length of individual chains are taken, and the longest chain becomes the winner. The other entities whose chain was not accepted will roll back and work over their blocks.

Conclusion

The consensus is a mechanism in the blockchain to validate a set of transactions. The consensus mechanism needs to be carried out in a decentralized manner because if the power of confirming transaction lies with a single entity, it can be abused.

Though proof of work mechanism was a great innovation, it consumed a huge amount of energy. The proof of stake mechanism which addressed the energy problem brought a new risk of validation being in the hands of wealthy entities.

So, the proof of authority was conceived, where the validating entities are selected through a voting process. They need to validate transactions through execution and reach a consensus for the blocks of the transaction to be confirmed. They deliver better decentralization and higher throughput of confirmed transactions when compared with other mechanisms, so we believed it would be interesting to showcase this consensus mechanism as well.