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Introduction

Proof-of-Authority (PoA) is a consensus algorithm used in some blockchain networks. PoA represents a consensus algorithm that is based on reputation creating a practical and efficient solution for blockchain networks. It uses a limited number of block validators which makes the system highly scalable. It is a permissioned blockchain. Both blocks and transactions are verified by pre-approved participants, who serve as moderators of the system.

Unlike other consensus algorithms like Proof-of-Work (PoW) or Proof-of-Stake (PoS), PoA does not rely on solving complex mathematical problems or holding a certain amount of crypto-currency in order to make sure that there is a continuous connection between nodes, here our authority/identity is at stake. In a PoA network, a group of trusted authorities are designated to validate transactions and add new blocks to the blockchain. These authorities are typically known entities, such as government agencies, large corporations, or other organizations that have been vetted and deemed trustworthy. Each authority has a unique identity on the network and is responsible for signing blocks to confirm their validity.

When a new block is added to the chain, it is signed by one or more of the authorities. This signature acts as proof that the block has been validated by a trusted source and can be added to the blockchain. Since the authorities are known and trusted, there is no need for a complex consensus algorithm to determine the validity of the block.

Advantages of Proof-of-Authority

1. Since there is no mining, so it uses low electricity and power.

2. Faster processing of blockchains i.e., High throughput (number of transactions a blockchain can perform in 1 second).

Limitations of Proof-of-Authority

1. Centralized

2. Low number of validators.

3. Difficult for most normal people to join as validators.

Applications

1. Mostly used in Private Enterprise Blockchains.

Understanding use-cases of PoA

Consider a Decentralized Ledger System for a Healthcare system, to implement Proof-of-Authority (PoA) in a project, we will have to follow these steps:

1. Determine the list of authorities: We need to select a group of trusted authorities who will be responsible for validating transactions and adding blocks to the blockchain. (Here, the trusted authorities could be healthcare professionals and organizations. For example, hospitals, medical institutions, and doctors could be designated as authorities to validate transactions and add blocks to the blockchain. In addition to the authorities, you will also need to consider the role of patients in the system. Patients could be given control over their own data and could grant access to healthcare professionals as needed. This could be achieved through the use of smart contracts and digital signatures.)

2. Set up the network: We need to create a network that is designed to use PoA. There are several blockchain platforms that support PoA, such as Parity, POA Network, Ethereum Clique and Quorum (PoA can be used on Ethereum, but it requires a separate blockchain network to be set up that is specifically designed to use PoA as the consensus algorithm. Ethereum, by default, uses the Proof-of-Work (PoW) consensus algorithm.)

To set up a separate blockchain network for PoA on Ethereum, you can follow these general steps:

1. Choose a PoA-based blockchain platform: Using Ethereum Clique, which is a consensus algorithm built into Ethereum and requires fewer resources to set up and maintain compared to other PoA-based platforms. Since Ethereum Clique is built into Ethereum, we can use the same tools and programming languages that are used to develop on Ethereum -Solidity and Truffle. Ethereum Clique is open-source, which means that we can customize and extend it as needed for our project.

2. Set up the network: Once chosen a platform, need to set up the network by creating nodes that will run the blockchain software. We also need to set the initial parameters of the network, such as the block time and the number of authorities.

3. Deploy the smart contracts: We need to deploy the smart contracts that that defines the rules for adding new authorities, as well as contracts that govern the behavior of the blockchain itself.

4. Add authorities: We need to add the list of trusted authorities to the network. Each authority will need to have a unique identity on the network, such as a public key or a digital certificate.

5. Validate transactions and add blocks: The authorities will be responsible for validating transactions and adding blocks to the chain. Each block will need to be signed by one or more of the authorities to confirm its validity.

6. Monitor the network: We need to monitor the network to ensure that it is running smoothly and that the authorities are behaving appropriately.