Proof of Activity (PoA)

Proof of Activity (PoA) is a hybrid consensus mechanism that combines the

principles of Proof of Work (PoW) and Proof of Stake (PoS), offering a novel
method of achieving consensus in blockchain networks.

The PoA system is an attempt to combine the best aspects of both the PoW
and the PoS systems; the mining process begins like a PoW system, but after a
new block has been successfully mined, the system switches to resemble a PoS
system.
How Proof of Activity works
 How it Works
1.Block Mining (PoW Phase)

The process starts like PoW: miners compete to solve a cryptographic puzzle.

Once a miner finds a valid solution (hash below the difficulty target), a block header is
generated.

At this point, the block does not contain transactions — only a header with the previous
block hash, timestamp, nonce, and Merkle root placeholder.

2. Random Validator Selection (PoS Phase)

The block header is broadcast to the network.

Based on the information in the header, the system randomly selects a group of validators
(stakeholders).

These validators are chosen according to the amount of cryptocurrency they have staked
in the system.
3. Block Completion

The selected validators sign the block.

If a validator is inactive or unavailable, the system moves to the next eligible
validator.
Once enough signatures are collected (meeting the consensus rule), the
block is considered complete.

4. Finalization

The fully signed block is added to the blockchain.

Miners receive a smaller block reward for their PoW effort.
Validators receive a portion of transaction fees or rewards for their PoS
contribution.
Example

Suppose Alice mines a new block header via PoW.

The system randomly selects Bob, Charlie, and David as validators based on
their staked coins.

They sign the block.

The block is finalized and added to the chain.

Alice gets a mining reward, and Bob, Charlie, and David get validator
rewards.
 Key benefits of Proof of Activity
Enhanced security: PoA provides a strong defense against attacks by fusing
PoW and PoS. PoS motivates validators to uphold network integrity, while PoW
offers the first line of defense against malicious actors.

Energy efficiency: PoA networks are more environmentally friendly since they
use less energy than PoW-only networks. This efficiency is essential as people
worldwide grow more aware of the negative effects of Bitcoin mining on the
environment.

Scalability: High-speed processing applications benefit from the PoS phase of

PoA because it enables quicker block formation and greater transaction
throughput.

Reduced centralization risk: Because validators are selected based on their

stake rather than just processing capability, the hybrid structure of PoA reduces
the possibility of centralization.
 Disadvantages

Still consumes energy for PoW (though less than pure PoW).

Requires both mining and staking resources.

Complexity is higher than single consensus methods.

 Proof of Burn (PoB)

Proof of Burn (PoB) is a blockchain consensus mechanism where participants

“burn” (destroy) a certain amount of cryptocurrency to earn the right to mine or
validate new blocks.

The idea is that by burning coins, miners show commitment to the network
without consuming large amounts of electricity (like in Proof of Work).
 How Proof of Burn Works
1. Burning Coins
Participants send coins to a special unspendable address (also called an eater
address or black hole address).
Once coins are sent here, they can never be recovered.

2. Mining Rights
In return, the participant gets the right to mine or validate blocks.
The more coins burned, the higher the chance of being selected to produce the next
block.

3. Virtual Mining
Instead of using computing power, burned coins are treated like “virtual mining rigs.”
Over time, the ability to mine decays, encouraging continuous burning.

4. Block Rewards
When a participant is selected to mine/validate a block, they receive a reward (new
coins or transaction fees).
Example

Alice burns 100 coins.

Bob burns 50 coins.

Alice’s chance of mining the next block is 2× higher than Bob’s because she
burned more coins.
Advantages
Energy-efficient compared to PoW.
Demonstrates long-term commitment since burning is
irreversible.
Reduces circulating supply → can increase scarcity of the
coin.
Disadvantages
Permanent loss of assets (some users may dislike the
concept).
Early adopters who burn large amounts gain a long-term
advantage.
If the project fails, burned coins are gone forever.
 Proof of Elapsed Time

Proof of Elapsed Time (PoET) is a consensus mechanism mainly used in

permissioned blockchains to determine which node in the network gets to
create the next block.

It was developed by Intel and is especially associated with the Hyperledger

Sawtooth blockchain framework.

The idea is to make block creation random and fair, but without wasting
massive computing power (like Proof of Work does).

Instead of solving puzzles, nodes wait for a randomly assigned time.

The node whose wait time expires first wins the right to create the next
block.
 How It Works (Step-by-Step)

1.Trusted Execution Environment (TEE)

PoET relies on a secure hardware-based environment, typically Intel SGX (Software Guard Extensions), to
ensure fairness.
This prevents cheating by ensuring wait times are truly random and cannot be manipulated.

2. Random Wait Time Assignment

Each node asks its secure hardware to generate a random wait time.
Example: Node A → 4.5 seconds, Node B → 6.1 seconds, Node C → 3.8 seconds.

3. Sleeping
Each node sleeps for the duration of its wait time.

4. Waking Up
The node whose timer expires first wakes up and creates the next block.

5. Proof of Wait
The winning node generates a certificate (a signed proof from the secure hardware) showing it waited
honestly.
This proof is included in the block and verified by other nodes.

6. Block Validation
Other nodes verify the proof before accepting the block into the blockchain.
Example
Imagine a blockchain for a supply chain
network with 5 companies (nodes).
Each company:
Requests a wait time from its Intel SGX
chip.
Node 3 gets the shortest wait (2.2
seconds).
Node 3’s chip produces a proof that it
waited for 2.2 seconds.
Node 3 publishes the block, and the
proof is verified by the other
companies.
Advantages

✅ Energy Efficient – No need for huge computational work like PoW.

✅ Fair – Wait time is randomly assigned and secured by hardware.
✅ Fast Finality – Blocks can be confirmed quickly.
 Proof of Authority
Proof of Authority (PoA) is a consensus algorithm used in blockchain networks
where a pre-approved set of validators are given the authority to create new
blocks and verify transactions.

It trades full decentralization for high efficiency, low cost, and fast transaction
finality — making it popular in private or consortium blockchains.

In PoA, instead of mining (like Proof of Work) or staking coins (like Proof of
Stake), validators are chosen based on their identity and reputation.

Validators are known, trusted entities such as organizations, companies, or

individuals.

The security of the network depends on the validators maintaining their

reputation — because any misconduct would harm their credibility.
 How It Works (Step-by-Step)

1.Selection of Validators
A group of trusted entities is pre-selected to act as validators.
Their identities are usually public and verified.

2. Block Creation
Validators take turns (or follow a fixed schedule) to create new blocks.
No competition like mining — the validator whose turn it is simply produces the block.

3. Block Validation
Other validators check the block for correctness.
If valid, the block is added to the blockchain.

4. Rotation
The role of block producer rotates among validators according to the rules of the network.

5. Accountability
If a validator misbehaves (e.g., approves fraudulent transactions), they can be removed
from the validator list.
Example

Suppose a logistics blockchain is run by 10 big shipping companies:

Each company is a validator.

They take turns creating blocks every 5 seconds.

If Company 4 tries to approve fake shipping data, the other companies

detect it and vote to remove them.
 Advantages

✅ Very Fast – High transaction throughput (hundreds or thousands per second).

✅ Energy Efficient – No mining competition.
✅ High Security in Closed Systems – Identities are known and verified.
Limitations

❌ Centralization – Only a few validators control the network.

❌ Trust Required – Depends on validators’ honesty.
❌ Not Suitable for Fully Public Blockchains – Works best in permissioned or
semi-public settings.
 Real-World Examples

VeChain – Supply chain blockchain using PoA.

Ethereum Kovan Testnet – Uses PoA for faster testing.

Energy Web Chain – For energy sector applications.

 Proof of Importance

Proof of Importance (PoI) is a consensus algorithm introduced by the NEM

(New Economy Movement) blockchain.

It improves on Proof of Stake (PoS) by not only considering the amount of

coins you own but also your activity and contribution to the network when
deciding who gets to create the next block.

While PoS rewards those with the most coins (often leading to wealth
concentration), PoI rewards active participants in the blockchain
ecosystem — encouraging decentralization and real economic activity.
 How It Works (Step-by-Step)

1.Importance Score Calculation

Every account on the network gets an importance score based on:
Vested stake – Coins held and vested over time.
Transaction activity – How much you send/receive and to whom.
Network contribution – Interactions with other active participants.

2. Vesting of Coins
Coins need to be held in your account for some time to become vested.
Only vested coins count toward your importance score.

3. Harvesting
Equivalent to "mining" in PoW or "forging" in PoS.
The higher your importance score, the greater your chance to harvest (create) the
next block.

4. Rewards
Successful harvesters collect transaction fees from the block they create.
This incentivizes keeping coins vested and staying active.
Example

Imagine two users:

Alice: Holds 50,000 coins but rarely sends transactions.

Bob: Holds 20,000 coins but frequently trades and interacts with other active nodes.

In PoI, Bob might have a higher chance of creating the next block than Alice — because
his network activity boosts his importance score.
Advantages

✅ Encourages Network Participation – Activity matters, not just wealth.

✅ Energy Efficient – No mining competition.
✅ Fairer than PoS – Reduces the risk of rich getting richer.
Limitations

❌ More Complex – Importance score calculation can be manipulated.

❌ Still Favors Wealth to Some Extent – Need a minimum vested balance to
participate.