Knowing Asterisk Chain - Private Blockchain / PoA

What is PoA?

What is Proof of Authority?

Proof of Authority (PoA) is a type of blockchain consensus mechanism especially suited for private or permissioned blockchains. A consensus mechanism is a system that ensures transactions executed on the network are valid and that all participating users agree on the status of the ledger.

In the PoA method, identity and reputation are valued instead of cryptographic assets as in the case of Proof of Stake, or computational power in Proof of Work.

Blockchains can be categorized into two groups- permissionless and permissioned. Both types use the same basic technology, but they differ in terms of access and participation.

Permissionless blockchains are open access and anyone with the right equipment can participate. Permissioned blockchains, on the other hand, are private— all nodes must be pre-authenticated and network use is granted only by permission.

Where public, permissionless blockchains use consensus mechanisms such as proof of work and proof of stake, permissioned blockchains require alternative consensus algorithms.

How Does Proof of Authority Work?

A permissioned blockchain running PoA doesn’t require “mining” of transactions. The purpose of mining is to provide an incentive for nodes to validate transactions and participate in maintaining an honest record of a decentralized public and permissionless blockchain.

But on a private blockchain where all the participating nodes are already identified and pre-authorized, there is no need to be incentivized. Therefore, there is no need for mining.

There is no need for nodes to solve complex mathematical problems in order to add a block to the chain. Instead, blocks are added to a permissioned chain when a majority of the pre-authorized nodes sign off on them.

To become authorized, nodes must prove their authority to do so by meeting certain conditions thus proving their long-term commitment to maintaining the blockchain.

This can be anything from being located in a particular country, being associated with the organization, having good moral standing and reputation, and having formal on-chain identification.

Advantages of Proof of Authority

One of the main advantages of maintaining a network through Proof of Authority is that the validation process is simplified. PoA only requires a limited number of block validators to maintain the network.

Not only is this a highly scalable system, but without mining or staking, computational power and energy consumption is greatly reduced. There is also no need for expensive equipment or sophisticated hardware.

But the benefits of Proof of Authority consensus reach much further.

Higher Throughput Capacity

With POA, blocks are generated in a predictable sequence that takes into consideration the number of validators. Since validators are pre-approved, this allows for greater efficiency and a higher throughput rate compared to that of PoW or PoS.

A Greater Resistance to 51% Attacks

With the PoW model, if a malicious actor took control of a majority percentage of the network’s computational power, they will be able to censor, reverse transactions or rewrite their own or other's transactions.

They would have the ability to create more hashes, i.e., do more “work”, meaning that they are able to validate transactions and add blocks quicker than the rest of the nodes. This would result in the attacker’s version of the ledger being accepted as the truth.

With the Proof of Authority consensus, an attacker would need to obtain control over 51% of the authorized entities which is much harder to do, especially when they aren’t directly connected.

Better Defense Against Denial-Of-Service Attacks

A Denial-of-Service (DoS) attack on the blockchain would make it inaccessible to users. An example would be if an attacker flooded a network node by sending a huge number of transactions to crash the network. With the PoA consensus mechanism the network nodes are pre-authenticated and the right to generate blocks can be reserved only for nodes that have security in place to withstand a DoS attack.