Jan 22, 2019

# The Proof of Authority Algorithm in the Energy Market

As Blockchain technology shares data between multiple nodes (e.g. computers or servers), consensus algorithms are being applied to achieve an agreement on one single data value. Proof of Authority is one mechanism for this. Proof of Authority is an open and Permissioned network that is efficient and easy to understand form of Proof of Stake. It works on a consensus mechanism that is based primarily on identity as a stake.

The concept of Validation

An important concept to be understood while discussing Proof of Authority is that of a validator. Validators are approved accounts which validate new transactions and blocks based on the Proof of Authority consensus. Validators carry out the process of validation with the help of software. That way, they do not constantly need to be monitoring their laptops while the transactions are being put into blocks. A smart contract manages all these validators and the identity of each validator.

Let’s compare this to two other major mechanisms

Proof of Work

In Proof of Work Consensus, in order to validate any block of a transaction, miners or numerous nodes of the ledger compete with each other to solve a complex mathematical problem. The first miner to find the solution shares it with rest of the nodes that is the rest of the miners. The solution is verified by the nodes and the consensus is reached. The principle of Proof of Work is that the solution is difficult to find but once found it is easy to verify.

Proof of Stake

In Proof of Stake Consensus, the validators, known as minters, validate the transactions. Each minter deposits some cryptocurrency that he or she owns in the network as a stake. Then, an algorithm selects the minter with the highest stake who then validates the transaction blocks. Proof of Stake works on the principle of “The higher the stake of a validating node in the network, the more chances, and legitimacy it has to validate transactions.”

Proof of Authority vs. Proof of Work vs. Proof of Stake

Proof of Authority is designed in such a way that it is less computationally exhaustive as compared to the Proof of Work models. Proof of Work consensus requires utilizing extensive electricity for solving the problems. While comparing Proof of Authority with Proof of Stake, it is crucial to note that Proof of Authority addresses the primary concern of the Proof of Stake model which is even though the stakes between two nodes may be identical; their value to every node might change significantly in contingency with their holdings.

How can Proof of Authority be of use in the Energy Market?

Proof of Authority can be beneficial in the following ways –

Reducing Power Consumption — The biggest challenge faced by energy blockchains is the use of power. Ethereum and Bitcoins have faced massive outrage and criticism due to the enormous wastage of energy and electricity due to the use of Proof of Work as their standard protocol. Numerically speaking, a single transaction of Bitcoins uses energy which is enough to power approximately 330 houses for one hour. Use of Proof of Authority Consensus model in these transactions in the place of Proof of Work Consensus will significantly reduce the power consumption.

Time consumption — The fact that once a node is verified to be genuine in Power of Authority Consensus; it stays that way as long as this node is a part of the system. This way, the Power of Authority Consensus does not end up wasting precious power spent in re-verification of the nodes. The conservation of energy in transactions makes Proof of Authority a highly valuable asset in the Energy Market.

More robot network is built — Since, in PoA networks transactions and blocks are validated by approved validators, it assures that a robot block of a network is built. Individuals upon becoming a validator are given an incentive to retain the position gained by him. Upon using the PoA in the energy market, similar results can be achieved as the service provider or utility can be incentivized with controlling the rates for the services offered.

Conclusion

With PoA allowing faster transactions, security and working for the benefits of the end users, the algorithm has so much to offer for the energy market, if used effectively. The algorithm will help energy companies to save power, time and have control over the market at the same time.

Check also:

https://www.ampcontrol.io/