Consensus is the process by which a group of peers – or nodes – on a network determine which blockchain transactions are valid and which are not. Consensus mechanisms are the methodologies used to achieve this agreement. It’s these sets of rules that help to protect networks from malicious behaviour and hacking attacks.
Proof of Stake Authority (PoSA) is a reputation-based consensus algorithm that introduces a practical and efficient solution for blockchain networks (especially private ones).
The PoSA consensus algorithm leverages the value of identities, which means that block validators are not staking coins but their own reputation instead. Therefore, PoSA blockchains are secured by the validating nodes that are arbitrarily selected as trustworthy entities. The Proof of Stake Authority model relies on a limited number of block validators and this is what makes it a highly scalable system. Blocks and transactions are verified by pre-approved participants, who act as moderators of the system.
Some advantages include:
- Low Energy Consumption
- Fast Transactions
- Low Transaction Fees
In networks that use PoSA transactions, blocks are validated by approved accounts called validators. Validators run software that helps them push transactions into blocks. This is a fully automated process.
Although the conditions may vary from system to system, the PoSA consensus algorithm is usually reliant upon:
- Valid and trustworthy identities: validators need to confirm their real identities.
- Difficulty in becoming a validator: a candidate must be willing to invest money and put his reputation at stake. A tough process reduces the risks of selecting questionable validators and incentivizes a long-term commitment.
- A standard for validator approval: the method for selecting validators must be equal to all candidates.
The essence of the reputation mechanism is the certainty behind a validator’s identity. This can’t be an easy process nor one that would be readily given up. It must be capable of weeding out bad players.
There needs to be an incentive for keeping the position validators have earned. Validators are incentivized to keep the transaction going, as they don't want to lose their reputation. Reputation is assigned to the validators’ identity. Losing it may result in the loss of the hard-earned validator role.
Finally, ensuring that all validators go through the same procedure guarantees the system’s integrity and reliability.