Proof of Activity (PoA) in Blockchain

Have you ever wondered what Proof of Activity is in the context of blockchain? It's a consensus mechanism that blends Proof of Work and Proof of Stake elements. In this system, mining begins using Proof of Work, but the blockchain switches to Proof of Stake for validation, ensuring enhanced security and efficiency in the network. Let's understand more!

Today, we picked up proof of Activity (PoA) in this series of learning various consensus algorithms in blockchain. In this article, you’ll learn about the workings of the PoA mechanism and its pros and cons. PoA mechanism ensures that all blocks of transactions added to the network are genuine and valid. It’s a way that helps miners get network agreement (or consensus) to add their new block. Moreover, PoA protects the blockchain network against external and internal attacks. 

Table of Content

• What is Proof of Activity (PoA)?
• How does the Proof of Activity (PoA) Algorithm work?
• Benefits of Proof of Activity (PoA)
• Limitations of Proof of Activity (PoA)

What is Proof of Activity (PoA)?

Proof of Activity combines proof of work (PoW) and proof of Stake (PoS) mechanism. 

First, PoA uses the mining concept by proof of work, where miners have to do complex mathematical computations to prove their efforts and sincerity to the network. However, instead of mining a block of transactions, PoA allows miners to mine (or add) a blank template block with header information and mining reward address. Once this almost empty block gets mined, the mechanism switches to Proof of Stake (PoS).

Then a group of validators is picked at random. They are responsible for validating or signing the new block. Validators analyze the header information of the block and then mark it as valid or invalid. This process continues until a block receives the required number of validators (or signers).

The higher coins the network participant holds, the stronger are their chances of being picked up as a validator (or signer).

Once the group of validators signs the new block by the miners, it’s marked as a valid, complete block and gets added to the blockchain network. Finally, the transactions will be recorded on the newly added block.

At last, the mining fees/rewards are distributed among the miners and the group of validators who contributed to the mining process.

Let’s see how the proof of Activity (PoA) mechanism works step by step. 

How does the Proof of Activity (PoA) Algorithm work?

Following are the steps to the PoA algorithm.

STEP 1: Process of Mining the Block (by Miners)

Miners try to submit their almost empty block (with header information and miner’s reward address) by solving a complex mathematical puzzle (finding the correct nonce and block hash)—similar to PoW.

Once the miners submit their nearly blank blocks, the consensus approach switches from PoW to the PoS mechanism.

STEP 2: Process of Signing the Block (by Validators)

This step uses the concepts of the Proof of Stake (PoS) mechanism for using network validators. However, here validators and miners are separate entities. 

A group of network participants called validators (or signers) verifies the block submitted by the miners. These network validators are selected based on their coins in the network. The higher the coins held by a validator, the greater the chances of getting their signed block chosen.

Validators analyze the header information and miners’ reward address of the block and then mark it as signed or unsigned. 

Note: The process of signing continues until a block receives the required number of signs on their block by the validators. 

STEP 3: Adding transactions

Once a block gets signed by the required number of validators. It marks a valid and complete block. Afterwards, new transactions from the transaction pool add to the block. Finally, the block gets added to the blockchain network. 

The mining reward is distributed among the winning block’s miner and the validators for their contribution to the network.

 

Decred (D-Cred) is the best-known cryptocurrency that utilizes proof of activity. 

Benefits of Proof of Activity (PoA)

Following are the advantages of the Proof of Activity mechanism:

• PoA combines to utilize PoW’s hashing system and PoS’s digital signing.
• It highly reduces the probability of a 51% attack on the network.
• Maintains the difficulty level to protect the network.
• PoA has high fault tolerance as the whole system will never shut down completely.
• Provide earning opportunities to both miners and network validators.

Limitations of Proof of Activity (PoA)

Following are the disadvantages of the Proof of Activity mechanism:

• High energy consumption for mining blocks.
• Due to massive computation, the mining process takes a lot of time.
• Requires expensive hardware for computation.
• There’s nothing at stake from both miners and validators leading to internal conflicts and a bad reputation.
• The number of validators could be less due to a lack of interest.

Conclusion

In the above article, we discussed proof of Activity in blockchain technology. We covered the workings of the PoA mechanism along with its pros and cons. As PoA combines PoW and PoS, we showed how and when to use them.