Proof-of-Work, Proof-of-Stake, Proof-of-Space, Proof-of-Authority, their versions, and also hybrid algorithms, one of which is Proof-of-Activity. The latter is the subject matter of this article.
According to Microsoft, consensus algorithms are the most reliable instruments in the conditions of blockchain competition. To date, the company has been using several protocols to confirm records: Proof-of-Work, Proof-of-Stake, Proof-of-Space, Proof-of-Authority, their versions, and one of hybrid algorithms, namely Proof-of-Activity that we are going to talk about (there are also Proof-of-Burn, Proof-of-Capacity, Proof-of-Storage, etc. but they are less popular).
We will focus mostly on the number one hybrid system, namely Proof-of-Activity. Yet we strongly recommend reading about the other algorithms as this is necessary for understanding the operation principle of Proof-of-Activity.
This algorithm was invented not so long ago (in 2014) and was called hybrid with good reason: it combines the characteristics of Proof-of-Work and Proof-of-Stake.
The process of entering records into blockchain begins with the miners preparing blanks for blocks with the hash of the previous block, personal data (public address), current block index and one-time code. After generating an empty block header, if it meets the current complexity requirements, the node sends out the header in the net. Such blanks should have a number that is less than that set by the system. Note: there is no need to calculate the entire block of transactions during this operation, as in the case of PoW, and such operations need significantly less electricity. Given this situation, practically anybody can be PoS-miner (read about Proof-of-Stake), and in this case they are called stakeholders. The blank must be signed by a definite number of stakeholders; then a full-fledged block is created and entered into the blockchain. If any holder (signatory) is not available or does not participate, new blanks are generated with various sets of holders.
As a result, the reward for the generated block is distributed between miners and holders, which saves the system from the miners’ advantages. Actually, one more protection level is created. Tokens for block mining are accrued once a day on average; this is intended to protect against gaining control over the majority of computation power or hacking the algorithm.
There are several schemes to protect this algorithm. The first scheme consists of the blanks that serve a kind of data protection point; each of these points carries information about the previous blocks confirmed by the net participants but does not include the whole list of transactions. Such division is necessary because the performance of Proof-of-Activity is clearly divided between PoW miners who make coins and PoS holders who confirm transactions. This reduces the load on the net; that is why the algorithm requires permanent exchange of data to build a block with transactions: in plain language, miners begin and holders complete the block.
Another protection level – algorithm – makes control over the net by a single participant impossible, even if there is a Zeus who owns half of coins in the net: he would not be able to make new blocks. Miners will simply throw out of the net any blanks that allow the attackers to create blockchain singlehandedly.
Therefore, PoA algorithm is an utterly interesting hybrid where all participants are insured against each other: PoA mining does not permit PoA miners or PoS miners to hijack the net.
Today, only two of various blockchain projects use Proof-of-Activity: Decred set up in 2015 and the new project Enecuum. It should be emphasized, however, that Decred does not explicitly indicate its affiliation with PoA, therefore, it can be only conditionally included in this micro-list. Decred is a cryptocurrency (DCR) in which the focus is on the hybrid system PoW/PoS without a direct indication that this system is PoA. Its description clearly indicates that this hybrid system is only used to guarantee that a minor group will not be able to dominate in the stream of transactions or make changes in Decred without the community’s approval. The philosophy of this project was to ensure full and open participation of anybody who wanted to participate. Therefore, without calling itself a PoA project, Decred abides by the same principles.
The second project, Enecuum, explicitly proposes its own version providing for the use of the Proof of Activity (PoA) protocol. There is a possibility to confirm transactions from almost any device connected to the net, which helps achieve the maximum possible degree of system distribution and its high resistance to various attacks. Accordingly, the system’s performance has been described above. Miners are seeking a proper number for blocks of various sizes (according to the Proof-of-Work system), the winner fills the blocks with transactions, then, at the second stage, the new block is signed by 64 randomly selected owners of nodes. After that, the record is checked by another owner of the node (also random), then the Proof-of-Stake scheme comes into play, when the owner who owns the node for the longest period of time in the net is the most likely candidate for participation in the audit. Thus, the process consists of three stages and the participants receive reward according to the following scheme: 70% go to the first miner, 20% are divided among 64 signatories and 10% go to the auditor.
The Enecuum project has not been fully launched: only the mining mechanism is working, while token emission and the open mining process are expected in the nearest future. Testnet simulation with the main net has been recently launched, and emission is scheduled for May. In addition, its PoA code is public and available on github.
Therefore, the innovative algorithm Proof-of-Activity has not yet been widely used, but possessing apparent advantages over Proof-of-Work and Proof-of-Stake or, more specifically, combining these advantages, it will certainly be interesting for participants of new projects, being a less expensive and more secure algorithm.
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