What is Proof of Activity (PoA)?
Proof of Activity (PoA) is one of many blockchain consensus algorithms used to ensure that all transactions occurring on the blockchain are genuine and that all users come to a consensus on the exact state of the public ledger. Proof of Activity is a hybrid approach that combines two other commonly used algorithms, namely proof of work (POW) and proof of stake (POS).
How does Proof of Activity (PoA) work?
Bitcoin, the most popular cryptocurrency, uses a POW algorithm whose inherent feature is to increase in mining difficulty as time goes on. While this method prevents spam attacks and hacks to the bitcoin network, it results in more and more computing power being used for mining, which also increases the cost of energy consumption and costs for using new age mining hardware devices. A person can mine or validate block transactions depending on how efficient the work that person has contributed on the blockchain is.
As the cost of energy and hardware skyrocketed along with mining difficulty in POW networks, POS emerged as an alternative. It grants extra weight to the participant to mine or validate block transactions depending on the amount of cryptocurrency he or she holds. While POS achieves the purpose of reducing electricity bills and using low-cost hardware, it promotes alternative cryptocurrency hoarding or spending.
Both POW and POS prevent a 51% attack of a hypothetical scenario in which a group of participants could gain more than half of the network’s mining computing power. It will then give them complete control over the network, including powers to prevent new transactions from being confirmed, stop payments between various blockchain users, and even reverse completed transactions. in the past in the process of taking control of their network, allowing them to double spend on cryptocurrencies.
Proof of Activity (POA), is a combination of POW and POS and tries to give the best of both. In POA, the mining process starts as a standard POW process with different miners trying to outdo each other with higher computing power to find a new block. When a new block (mining) is found, the system switches to the POS, with the newly found block containing only a header and the miner’s reward address.
Based on the header details, a new group of random validators from the blockchain network are selected, who are required to validate or sign the new block. The more crypto coins a validator owns, the greater the chance of being selected as a signer.
When all validators sign the newly found block, it gains the status of a complete block, is defined and added to the blockchain network, and transactions begin to be recorded on it.
In the event a selected number of signers are not available to sign the block for completion, the process moves on to the next winning block with a new set of validators randomly selected depending on the stake of their coin and the process continues until the winning block receives the required number of signers and becomes a complete block. Mining fees/rewards are split between the different miners and validators who contributed in their respective roles to logout on the block.
Since POA combines with POW and POS, it has been criticized for partially using both. There is still too much energy to mine blocks during the POW phase, and coin hoarders still have more opportunities to get on the signer’s list and accumulate more virtual currency rewards.
POA also prevents the possibility of a 51% attack like in POW and POS, because it is impossible to predict who will sign the contract in the future and the money-saving competition between signers does not allow the accumulation of computing power in a group .
Decred is a cryptocurrency that uses a POA consensus mechanism.
What is Blockchain?
What is Proof of Work (PoW)? What is Proof of Stake (PoS)?
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