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  1. 1. What are these cryptocurrencies?
  2. 2. Bitcoin - the story of a technological revolution
  3. 3. Satoshi Nakamoto, who is the creator of Bitcoin?
  4. 4. Vitaly Buterin – the creator of Ethereum
  5. 5. What is Blockchain, and how does it work?
  6. 6. What is an NFT token?
  7. 7. What is money?
  8. 8. Cryptocurrencies vs fiat money, which will win?
  9. 9. What is DeFi (Decentralized Finance)?
  10. 10. DeFi: opportunities, advantages and disadvantages of decentralized finance
  11. 11. What is an altcoin?
  12. 12. Stablecoins - What are they?
  13. 13. Cryptocurrency wallet - what is it?
  14. 14. Why do we talk about bull and bear markets?
  15. 15. Security in the crypto market - what rules are worth following?
  16. 16. What is the seed phrase in cryptocurrencies?
  17. 17. Dogecoin and memecoin - what are they?
  18. 18. What is a Ponzi scheme?
  19. 19. What is Ethereum? 
  20. 20. What is a soft and hard fork?
  21. 21. Blockchain - examples of use
  22. 22. Is blockchain safe?
  23. 23. Smart Contracts - what are they?
  24. 24. Liquidity pools in the cryptocurrency market
  25. 25. What is cryptocurrency mining?
  26. 26. What is the mining difficulty?
  27. 27. Inflation and its effects on financial markets
  28. 28. What is compound interest, and how does it work?
  29. 29. Cryptocurrency wallet diversification
  30. 30. Blockchain and NFT games - how to make money on them?
  31. 31. Decentralized Apps – what are they?
  32. 32. What is Proof of Work (PoW) and what is Proof of Stake (PoS)?
  33. 33. What is the Proof of Authority (PoA) consensus mechanism?
  34. 34. What is Proof of Burn (PoB)?
  35. 35. What is CBDC - central bank digital money?
  36. 36. What is Cryptocurrency Airdrop all about?
  37. 37. What are the types of blockchain networks?
  38. 38. Key differences between ICO, IEO and STO
  39. 39. What is IoT - the Internet of Things?
  40. 40. What is the difference between Circulating Supply and Total Supply?
  41. 41. Everything you need to know about gas fees in Ethereum!
  42. 42. The most important cryptocurrency acronyms/slang you need to know!
  43. 43. Halving Bitcoin - what is it, and how does it affect the price?
  44. 44. What is the Fear and Greed index for cryptocurrencies?
  45. 45. APR versus APY: what is the difference?
  46. 46. Snapshot from the world of cryptocurrencies - what is it?
  47. 47. Know your customer (KYC) and Anti-money laundering (AML) what are they in the cryptocurrency industry?
  48. 48. What is a whitepaper? What is its purpose, and how do you write it?
  49. 49. How do you transfer cryptocurrencies?
  50. 50. What is EURT? How does it work?
  51. 51. What is Regenerative Finance (ReFi)?
  52. 52. Bitcoin Pizza Day
  53. 53. What Is Stagflation and Why Does It Have a Negative Impact on the Market?
  54. 54. What are decentralized DAO organizations, and how do they work? What are DAO tokens?
  55. 55. CyberPunks - the story of the most popular NFT collection in the crypto industry!
  56. 56. AI blockchain - a new look into the future?
  57. 57. The Bored Ape Yacht Club (BAYC) - the story of the popular NFT collection!
  58. 58. Who is Changpeng Zhao, CEO of Binance?
  59. 59. What is blockchain network congestion, and how does it work?
  60. 60. Azuki NFT collection guide: everything you need to know about it!
  61. 61. Who Is Craig Wright, the Alleged Creator of Bitcoin?
  62. 62. What Is Bitcoin (BTC.D) Dominance?
  63. 63. What Are Privacy Coins and Are They Legal?
  64. 64. What is an Initial Farming Offer (IFO)?
  65. 65. Michael Saylor, Self-Proclaimed Bitcoin Maximalist
Lesson 33 of 65
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33. What is the Proof of Authority (PoA) consensus mechanism?

Blockchains, as well as cryptocurrencies, must validate their new blocks, using a consensus mechanism. This can be done in many ways – using the Proof of Work mechanism, or Proof of Stake, which we wrote about here. In today’s lesson, we will tell you about another – proof of authority (PoA) consensus mechanism.

What is the Proof of Authority (PoA) consensus mechanism?

Most blockchain-based ecosystems operate on consensus proof of work or proof of stake.

In the Proof of Work mechanism, network computers and miners solve difficult mathematical puzzles to mine the next cryptocurrency and when validating transactions.

In the case of the proof of stake system, validators staked their tokens, in exchange for validating new blocks and mining new coins in blockchain technology.

However, both examples are decentralized networks where any user can become a validator and earn new cryptocurrencies. At the same time, they ensure the security of all data, transactions and the seamless operation of blockchain networks on a global scale.

The consensus mechanism proof of authority approaches data validation in an entirely new way. Instead of decentralized validation nodes, the system relies on nodes that have special security clearance from validators. As a result, the people who validate new blocks of data don’t have to stake coins or own a crypto miner that often costs millions. They risk something more – their reputation.

Proof of Authority (PoA)

As you know, adding new nodes and blocks to the network requires reaching consensus among validators. Similar to the PoS or PoW consensus in blockchain technology. The difference, however, is that the validators in the Proof of Authority mechanism are selected by a central authority that must have deemed the node trustworthy.

Nodes in the proof of work or proof of stake consensus mechanism are completely anonymous and without authority. The Proof of Authority system has changed this mechanism and requires each node to log in and identify itself.

As you can see, this is an entirely different approach to network security blockchain. Here it is a central authority that issues the right to approve new data blocks. There are no anonymous validators, who check the consensus. There are no incentives in the form of staking your cryptocurrencies and receiving a reward. Instead, there is hard work ahead in the Proof of Authority consensus mechanism, very much tied to the selection of trusted and identity-verified validators.

How does Proof of Authority (PoA) work?

To fully verify a transaction in a network using the PoA mechanism, a specific node signs the transaction with its private key. The cryptographic signature is proof that the ruler node has verified the transaction in question. All other nodes in the network check the signature against the public key of the node that first signed the transaction. If the signature is valid, the transaction is also considered valid.

The key point is that for Proof of Authority to work properly, three conditions must be met:

  1. Identify the block in the validator chain.
  2. Signature qualification based on reputation, association, good name.
  3. Full compliance with prescribed procedures and regulations.

We will use the VeChain platform to discuss this issue.

Proof of authority in this ecosystem has designated a list of 101 operators of masternode authority. They are selected and controlled by a committee that is responsible for the operation of VeChain. Of course, the ecosystem community elects the committee.

Each masternode authority undergoes a very rigorous vetting process involving accounting services giants PricewaterhouseCoopers and DNV. At the same time, the masternode must be involved in the development of VeChain and be an active developer. Therefore, it must not be a user of the network, but a person known in the cryptocurrency industry. To increase the capacity of the validation network, each operator has the option to launch several nodes.

The blocks thus created are added to the block ledger of the VeChain ecosystem by sending new data to operator nodes. The network then waits for trial nodes to validate the new block.

It is worth noting that the masternode group is small. As a result, reaching consensus happens quickly. New blocks in the VeChain network are generated about every 10 seconds.

Where else do we use Proof of Authority?

Interestingly, PoA was proposed in 2015 by Gavin Wood, co-founder of Ethereum. Wood wanted to create a consensus mechanism that relied on validators rather than using massive computing power or other resources.

As we mentioned, PoW and PoS allow users to be anonymous. In PoA, those approving nodes must reveal their identities, as they are selected based on their credibility.

Proof of authority works best on private, smaller blockchains. As for public networks – it has yet to develop. In addition to VeChain, Microsoft Azure also uses proof of authority on Ethereum implementations.

Advantages and disadvantages of Proof of Authority

The process is very profitable because, thanks to the operators, there are no costly operations in the form of staking or buying expensive mining excavators.

Computing power powers the entire ecosystem network, which uses proof of authority and is at a minimum level.

The consensus proof of authority is also extremely secure, thanks to continuous audits and inspections. Of course – it requires additional work, but the results are worth it.

In addition to the advantages of Proof of Authority, it also has one major downside. Because of its central management authority, blockchain using this consensus mechanism may be less automated than proof of stake or proof of work.

It is also worth considering that Proof of Authority is not fully decentralized, which may bother some users or validators.

Another disadvantage is scalability. Proof of authority is less scalable than proof of stake. It can only handle a certain number of transactions per second (TPS). The proof of stake consensus mechanism will handle more transactions because it does not require any authority for verification.

Proof of Authority vs. Proof of Work

The main difference between PoA and PoW is that the consensus Proof of Authority needs far less computing power. Proof of authority does not need a giant network of computers or electricity. What’s more – it has much less impact on the environment than the other consensus.

Proof of Authority is an excellent solution for enterprises where the total process does not need to be fully decentralized. However, as we mentioned in the paragraph above, proof of authority through its central management authority may not appeal to some users or developers.

The Proof of Authority consensus is also not as popular as Proof of Work. It is a relatively young idea that is just gaining popularity.

Proof of Authority vs. Proof of Stake

Proof of Authority is the idea of Gavin Wood, co-founder of Ethereum, as a solution to specific problems with the Proof of Stake mechanism.

Unlike proof of stake, the identity of the validator in the proof of authority consensus mechanism is public. Anyone can see the operator node and whether it inadvertently conveys false results. Consequently, users of Proof of Stake who know how to negatively affect nodes would certainly not want to switch to this consensus.

The proof of authority mechanism also uses far fewer validators than proof of stake. This results in faster settlement of transactions and execution of intelligent contracts.

On the other hand, like proof of work, PoA is not fully decentralized, so it is better suited to private networks. Proof of Stake is recommended for global blockchain networks.


You already know what the Proof of Authority consensus mechanism is and how it works. This is an idea that is sure to grow in the future. It has a good predisposition for that. Currently, it is a great solution for smaller, private blockchains. However, it is worth following its progress.