What is Proof of Authority (PoA)?

What 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 the security of the network. Unlike other consensus algorithms, PoA relies on the identity and reputation of network participants rather than computing power or cryptocurrency ownership.

How does Proof of Authority work?

With 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 selected manually by an administrator running 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 break the network’s rules. Since the authorities are known and have a high reputation, it is assumed that they will not attack or defraud the network.

Where is the mechanism used?

This way of generating consensus is mainly used in private blockchains. One thinks here of blockchains from insurance companies or hospitals – here it is important that selected authorities ensure order in the network instead of randomized instances (such as with Proof of Stake). But crypto projects such as VeChain, Bitgert or Palm Network also rely on the proof-of-authority mechanism.