Proof-of-Stake Authority (PoSA): A quick introduction

A hybrid consensus mechanism called Proof-of-Stake Authority (PoSA) merges Proof-of-Stake (PoS) and Proof-of-Authority (PoA). It offers shorter block times and reduced costs at the expense of network security and decentralization.

This is considered an interesting consensus mechanism for the blockchain sector. Let’s find out more about this in the article.

Who uses Proof-of-Stake Authority?

This Proof-of-Staked-Authority consensus mechanism is basically what the Binance Smart Chain (BSC, now BNB Chain) is. In comparison to, say, the PoW consensus mechanism used by Ethereum (ETH) (now switched to PoS with the launch of Ethereum 2.0), the PoSA consensus model provides a faster block time and lowers expenses.

Short block times and cheaper costs are made possible by the PoSA consensus mechanism, but network decentralization and security are sacrificed. A user cannot immediately begin validating transactions of the Binance Smart Chain by themself, as they could with Bitcoin or Ethereum, due to the PoSA consensus process.

Let’s learn the difference between Proof-of-Authority (PoA) and Proof-of-Stake (PoS) to understand PoSA better.

Proof-of-Stake (PoS) Vs Proof-of-Authority (PoA)

Like any consensus mechanism, PoA and PoS algorithms have benefits and drawbacks. Moreover, no platform or developer has ever been able to propose a consensus mechanism that is immune to problems or criticism throughout the history of blockchain.

The PoA algorithm simplifies validation and lowers the amount of power needed to run the network. Staking in the PoS consensus mechanism, on the other hand, promotes decentralization by allowing user participation in network security.

The PoA algorithm ensures continued connectivity between nodes without the need to solve puzzles. As a result, the validators don’t need specific hardware to keep the network running. However, if we look at the staking process of Ethereum, three different pieces of software—an execution client, a consensus client, and a validator—are needed.

The proof-of-authority algorithm accelerates the rate at which the authorities validate transactions. Due to the predictable creation of blocks based on the number of validators, the blockchain registers a higher transaction rate than PoS.

Additionally, a person who successfully generates 51% of the processing power cannot breach the network, making the PoA network more secure against attacks than the PoS consensus. However, if enough coins (51% of the entire stake) are obtained, a hacker or group of hackers might attack or take down the PoS network.

PoA is the best solution in terms of security and energy usage, compared to PoS, which both have security weaknesses. However, PoA targets companies or private organizations that want to use permissioned networks since it is a more controlled approach to maintaining consensus on a blockchain network.

Conclusion: The future of PoS and PoA

Proof-of-authority is a modified version of proof-of-stake in which a validator’s identification serves as the stake rather than money.

Furthermore, due to the PoA consensus’s simplicity, it is crucial to ensure the independence of validators and provide them with the resources they need to protect their nodes. The growth of Decentralized Applications (DApps), the security and scalability of cryptos, and several other use cases that we haven’t even seen yet can all benefit from the adoption of PoS algorithms.

Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.