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What are blockchain consensus protocols?

What is the PoA network?

The PoA network utilises a consensus algorithm known as 'Proof-of-Authority' which is notably different from other consensus algorithms

The PoA network is an open-source project designed to be a public side-chain of Ethereum – though, it isn’t just a side-chain implementation. The PoA network was designed to be its own public blockchain. This means it has its own consensus algorithm.

Popular consensus algorithms are Proof-of-Work (PoW) used in Bitcoin and Proof-of-Stake (PoS) which is the end goal for Ethereum. The PoA network utilises a consensus algorithm known as ‘Proof-of-Authority’ (PoA).

The PoA network and scalability

Scalability has been an ongoing discussion in the crypto space. For example Bitcoin, without the Lightning Network, cannot match the transaction throughput and speed mainstream payment processors like PayPal provide.

The Lightning Network is a layer 2 scaling solution designed to enhance Bitcoin’s transaction throughput and speed. In theory with the implementation of the Lightning Network, Bitcoin can compete. Bitcoin isn’t the only cryptocurrency with this issue – nearly all crypto projects have been searching for an answer that will allow them to compete with the likes of PayPal and Visa. Ethereum, for example, is looking toward an implementation known as Plasma.

The PoA network is another possible solution to the issue of scalability.

Validators and nodes

In the PoA network there is a notary system in place. This is used to solve trust issues with nodes. A node is a computer device which helps support a network. Any validator in the PoA network must go through the relevant ‘Know-Your-Customer’ (KYC) process. KYC is commonplace in most financial-related businesses and companies. It’s a test that determines how likely a person is to commit illicit activities.

The PoA consensus is essentially a reputation-based system. Each validator must be verified by a special validator whose only function is to approve transactions in the network. To be a validator, you must be registered in the public notary database – and this identity must match the identity you have on the platform. Validators in the PoA network are often public personalities – typically university professors. However, this does not come without a drawback.

Due to the nature of this, the PoA network is not fully decentralised. The POA network believes that by sacrificing decentralisation, it provides added trust since anonymity is also removed for the validators.

Any concerned third-party can cross-validate a validator’s identity using open data sources to ensure they are a good ‘actor’ with no prior criminal records. This helps mitigate against bad behaviour since validators do not want to receive a bad reputation.

Another benefit of the PoA system is that it commands less computing power to support the network than PoW or PoS systems. This can be achieved through the zero node to node data transfer requirements. Once a node has been verified as genuine and honest it will remain that way until they are no longer needed, or it is proven they cannot be trusted.

This means nodes do not need to be repeatedly approved.

POA20 bridge

One implementation of the POA network is the bridge solution. This enables tokens to be swapped between the Ethereum mainnet and other blockchains.

This gives the PoA network cross-chain interoperability – which is an aspect of blockchain technology that could promote mainstream adoption. This is because it provides tangible use-cases where it can be taken from the crypto space and applied to other institutions and businesses.

The POA20 standard is the implementation of the first ever cross-chain bridge. POA20 is the representation of POA tokens as ERC20 tokens (ERC20 are Ethereum-based tokens).

Cross-chain bridges demonstrate how two standalone blockchains can interact with each other – thereby circumventing the scalability issue. There isn’t a need for a blockchain to scale when cross-chain bridges can be facilitated. One demonstration of this is decentralised applications (dApps). Ethereum is a popular platform for building dApps and through interoperability the PoA network could be leveraged to reduce bottlenecks on the main chain.

PoA networks can also be cloned. This is beneficial since cloned PoA networks can be extrapolated and moulded to suit different industry standards.

The POA token

Back in November 2017 the PoA network hosted its initial coin offering (ICO). During the ICO it raised $12.6 million selling roughly 175 million PoA tokens. The PoA token public sale began during late February 2018.

Much like how Ether (Ethereum’s token) can be used as ‘gas’ to fund network costs such as fees, the PoA token can also be used to fund the PoA network.

It can also be used to reward validators for helping secure the network.

It always pays to do research

Hopefully this introduction to the PoA network has helped you understand its key concepts. Ultimately the biggest attraction for the network is its Proof-of-Authority system alongside its interoperability.

However, we do not recommend any crypto, project or network and as such it would be wise to conduct your own research before making any decisions.

Interested in hearing more about scalability? Discover more about the issue of scalability and whether it has been solved.

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