6.1 Proof of Authority Consensus
Proof of Authority (PoA) is a reputation- based consensus algorithm that introduces a practical and efficient solution for blockchain networks (especially the private ones). The term was proposed in 2017 by Ethereum co-founder and former CTO Gavin Wood.
The PoA consensus algorithm leverages the value of identities, which means that block validators are not staking coins but their own reputation instead. Therefore, PoA blockchains are secured by the validating nodes that are arbitrarily selected as trustworthy entities.
The Proof of 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.
PoA consensus algorithm may be applied in a variety of scenarios and is deemed a high-value option for logistical applications. When it comes to supply chains, for example, PoA is considered an effective and reasonable solution.
The Proof of Authority model enables companies to maintain their privacy while availing the benefits of blockchain technology. Microsoft Azure is another example where the PoA is being implemented. In a few words, the Azure platform provides solutions for private networks with a system that does not require a native currency like the ether ‘gas’ since there is no need for mining.