When it comes to peer-to-peer transactions in the digital sphere, consensus is everything. Cryptocurrencies like Bitcoin might have made waves for their early innovation, but the creators themselves instantly understood that a fundamental feature was clearly lacking. This missing piece was the functionality to remove duplication, an issue commonly encountered in the digital realms.
In response to this shortcoming, the foundations for Proof-of-Work, the first consensus model, were laid. This consensus model was built around the solving of taxing algorithms, while significant computational power and electricity were a standard requirement. When an algorithm had been solved, this solution would serve as a validation for a transaction. Those who had successfully solved said transactions could then reap the rewards in digital form.
As cryptocurrency advanced through its infancy into something worth standing to attention for, many looked to the Proof-of-Work model and then turned their back on the crypto market. The key reason for reluctance to participate here was down to the significant capital needed to purchase high-end computers and facilitate an organisational structure akin to heavy industry. This reaction however, led to the development of Proof-of-Stake.
Although still entirely anonymous, Proof-of-Stake brought with it a much more accessible consensus mechanism for users. Along with this innovation came the necessity for individuals to retain their crypto capital in wallets. This ensured they were able to validate transactions over the network. Proof-of-Stake might seem appealing, but it’s not without issues.
One key criticism of the model is that a high number of users are encouraged to adopt the network and rally behind it, with lucrative incentives part of the deal. This creates an obvious hurdle for those new to the table looking to participate.
It became apparent a new consensus mechanism was needed. Enter Proof-of-Authority (PoA), the next step for Proof-of-Stake. Unlike its predecessor, Proof-of-Authority discounts digital asset values and their relation to a user, instead putting the focus firmly on their proficiency in validating a network.
With Proof-of-Authority, those participating agree to identify verification steps with the agreement that they will validate the network itself, as well as receive reward incentives. Take a step back and you can admire the transparency of this network, with any malicious attacker now unable to maintain their anonymity.
Getting involved with a PoA network is relatively simple, with the network administrator ultimately deciding specific assignment for the individual. A testing phase and series of screenings would eventually follow, giving the green light for the individual being screened to begin validating transactions on the network.
There’s no denying that PoA abandons the allure of anonymity that was once a key draw to the cryptocurrency world. However, many seem to overlook the further benefits of Blockchain technology. Decentralised data storage has hugely advantageous benefits, with no at-risk central point that can be targeted by malicious individuals.
It’s clear that more of these networks are needed if we’re to make malicious hacker attacks a thing of the past. Point-of-Authority is taking us one step further in the right direction.