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Intermediate
Mar 30, 2022

Proof of Authority (PoA)

Proof of authority is a consensus mechanism that provides fast transactions using identity as a stake. More commonly referred to as PoA, it relies on well-known vendors to produce blocks. It allows the blockchain network to perform transactions more quickly using a Byzantine fault tolerance (BFT) algorithm.

What Is Proof of Authority (PoA)?

Proof of authority (PoA) is an alternative consensus algorithm that means transactions on the network are verified by approved authorities. These authorities are known and trusted by all participants in the network.

PoA allows the blockchain network to perform transactions more quickly using a Byzantine fault tolerance (BFT) algorithm.

Proof of authority is different from proof of work (PoW) and proof of stake (PoS) consensus mechanisms, which use mining and staking, respectively, to verify transactions. Proof of authority is effective for use on networks where the participants know and trust each other.

On these networks, PoW or PoS would be inefficient and unnecessary.

How Does Proof of Authority (PoA) Work?

To verify a transaction on a PoA network, an authority node signs the transaction with its private key. This signature proves that the authority node has verified the transaction. All other nodes on the network then check the signature against the authority node’s public key. If the signature is valid, the transaction is also considered valid.

In order for PoA to function properly, three conditions must be met:

  • On-chain identification for validators

  • Eligibility based on reputation, association, etc.

  • Complete conformance to predefined procedures

Differences Between Proof of Authority (PoA) and Proof of Stake (PoS)

The main difference between proof of authority and proof of stake consensus is in how the validators are chosen. PoA validators are chosen by the network creator, while PoS validators are chosen according to the stake they hold in the network. 

PoA is more centralized than PoS, but it’s also more efficient and scalable. PoA is ideal for small networks where all participants know each other and there’s a high degree of trust. 

Proof of Authority (PoA) Use Cases

PoA was originally proposed back in 2015 by Dr. Gavin Wood, co-founder of the Ethereum network. Instead of a network taking up resources like computing power, Dr. Wood envisioned a network that would rely on validators who put their reputations on the line.

Both the PoW and PoS networks allow people to use them without revealing their identities.  However, validators, who approve individual transactions or blocks of transactions, need to reveal their identity, since they're chosen based on their dependability. General users, on the other hand, don’t have to do so. 

PoA works best when deployed on private blockchains instead of public ones. A good example is Microsoft Azure’s use of a PoA algorithm on the Ethereum implementation.

Proof of Authority (PoA): Limitations

Just like PoS and PoW, PoA has its limitations. Let's look at some of the most noticeable ones:

  • Centralization: PoA is more centralized than PoS because it relies on a set of approved authorities. Proof of stake, on the other hand, is more decentralized because it relies on a group of stakeholders to validate transactions.

  • Scalability: PoA is less scalable than PoS because it can only handle a limited number of transactions per second (TPS). PoS can handle more TPS because it doesn’t require authorities to verify transactions.

  • Security: PoW and PoS are more secure verification mechanisms than PoA because they rely on mining and staking, respectively, to verify transactions, whereas PoA relies on a set of approved nodes for transaction verification.

For more details on PoS, make sure to read up on the proof of stake model here.