Proof-of-Authority Consensus Mechanism

In a centralized system, such as a bank or a broker, a designated authority or central operating system would be in charge of adding transactions or information to the system, making sure that each transaction is trustworthy, up to date with the whole system, and does not duplicate previous transactions.

In contrast, public blockchains are decentralized, peer-to-peer systems that have no central authority or oversight like this. Designated actors are responsible for processing transactions, creating new blocks and maintaining the integrity and history of previous blocks.

The system for determining these actors and how they are selected is called a consensus mechanism. These mechanisms determine the process of who can confirm transactions and create new blocks on the blockchain and the protocol for how they do so. Because there is no central oversight, consensus needs to be designed in a way that prevents or disincentivizes malicious or uninformed actors from corrupting the integrity of the chain.

There are many consensus algorithms. You may have heard of some widely used ones like Proof-of-Work or Proof-of-Stake. Each mechanism has its own way of determining who is eligible to process transactions and create new blocks, and how how actors are selected to do so.

The Energy Web Chain uses the Proof-of-Authority (PoA) consensus mechanism.

All consensus mechanisms have disadvantages and advantages and are chosen based on the purpose and use case of the blockchain it will be serving. Read more about why Energy Web employs the Proof-of-Authority mechanisms.