Proof of Stake Authority (PoSA)

Proof of Stake Authority is an innovative consensus algorithm that represents a hybrid of Proof-of-Stake and Proof-of-Authority.

What Is Proof of Stake Authority (PoSA)?

Proof of Stake Authority is an innovative consensus algorithm that represents a hybrid of Proof-of-Stake and Proof-of-Authority. Proof-of-Authority is itself a modified version of PoS, wherein the identification of a validator serves as their stake rather than their capital. 

The Proof of Stake Authority consensus protocol combines elements of both systems, depending on validators who are not only known but also have skin in the game to ensure fast, secure transactions, optimal energy efficiency, and democratic decision-making. Each consensus algorithm has inherent advantages, but also key vulnerabilities. PoSA provides an approach that minimizes these weaknesses while maintaining a high-efficiency advantage.

Why Was the PoSA Blockchain Model Created?

The emergence of the PoSA algorithm was a response to criticisms of both the PoS and PoA models. Each model, while novel in creating an efficient consensus method, leaves open areas of weakness that could potentially be exploited by bad actors, or made vulnerable through a system that is too centralized. Effectively, Proof of Stake Authority is intended to address the shortcomings of both while maintaining their inherent advantages.

Disadvantages of Proof-of-Stake and Proof-of-Authority

Criticisms of Proof-of-Stake blockchains relate to the power wielded by those who hold a large amount of cryptocurrency since these are the individuals likely to be selected to validate transactions. This preference of users who already hold a substantial quantity of crypto assets effectively creates a “lords and peasants” system, pricing out users with low amounts of staked assets from ever being chosen as validators. 

This type of system is a stark contrast to the decentralized themes aimed for in a cryptocurrency network, where power should not be centralized but rather distributed. 

Proof-of-Authority does not share the same weakness as Proof-of-Stake, but it does create a different concern. The main criticism of Proof-of-Authority, which is based on a reputation system, is that it gives a central authority total control over adding and removing validators from the network. While an individual who wants to become a validator can’t “buy” their way in, the power is held, in this case, by the team that confirms reputation/validation. By making this decision-making power centralized, there is, again, a lack of decentralization, which goes against the foundation of cryptocurrency. For this reason, the consensus is generally regarded as a solution for private networks rather than public ones.

How Does PoSA Work?

PoSA combines features of both models, in that it allows a consortium to pre-approve independent validators based on their relevance to the network and their holdings of cryptocurrency or tokens. These validators then retain a certain amount of collateral, just as in a straightforward PoS system, but the difference is that all validators stake the same amount. Meaning the voting power is not based on the number of tokens, but is a simple and democratic 1:1 validator vote model. This ensures that the system holds the PoS advantage of validators having a vested interest in the success of the network, without allowing the larger stakeholders to gain a proportional amount of power based on their holdings.

In some PoSA blockchains, such as BNB Chain, a fixed stake also ensures that one member equals one vote, making the entire ecosystem safer since the size of the staked assets has nothing to do with voting power. This is a critical adjustment to the consensus algorithm that creates additional balance and stability. 

Because the list of validators is continually adjusted, and determined by those most invested in the network, the potential for centralization is drastically reduced. A rapid, controlled distribution of validators from a population having a stake in the native token and reputation-based eligibility, create one of the strongest balances of decentralization, security and efficiency for consensus algorithms. In addition, this method allows a newly launched network to quickly distribute power and avoid the vulnerabilities of early-stage attacks that have plagued those networks whose validator lists are too centralized and small.  

This hybrid approach aims to provide the benefits of both PoS and PoA, including scalability, decentralization, security, short block times and low transaction fees, while minimizing the drawbacks of each, particularly with regard to centralization and the potential for manipulation. In terms of consensus methods, PoSA strikes a strong balance of those attributes most desired by the blockchain community.

Contributor: Ralf Usbeck, CEO & Co-Founder of Chain4Travel

Ralf Usbeck enabled several travel companies to enter the web with pioneering technologies enabling high-performance searches. Customers of his leading technologies include international travel companies & global Internet giants such as Google and Facebook. In 2013, Ralf Usbeck received an international award as a “Serial Innovator of Travel Technology” at the World Travel Market in London.

Today, he is pioneering the adoption of blockchain technology in travel with Chain4Travel, founded in 2021. This start-up builds a new operating system, “Camino Network”, for the global travel industry, ready to take advantage of the next iteration of technology and the Web 3.0 age.