To function properly, a blockchain network must be able to validate the authenticity of transactions. As well as validate all current data within its system. Made possible via a blockchain consensus mechanism. A fault-tolerant algorithm that allows a group of validators to agree on the sole version of the truth.
When blockchain technology was first invented back in October 2018, proof of work (PoW) was the primary blockchain consensus mechanism. Still, many of the most popular cryptocurrencies deploy it, such as Bitcoin and Ethereum. However, over the years, several alternatives have come into the fray. This includes proof of stake (PoS), which is by far the most popular alternative (at the time of writing).
With that said, both PoW and PoS suffer from similar underlying issues, most of which point toward a discernible lack of decentralization, security, and interoperability. In light of this, Victor Young, the lead mind behind blockchain project Analog, has developed a new consensus mechanism called proof of time (PoT), which shows real promise, particularly in terms of omnichain interoperability.
The Problem with Proof of Stake
PoS was first introduced as a successor to the PoW model. Since PoW requires miners to expend computational resources in order to validate and mine new blocks, blockchains that operate using these algorithms struggle with low scalability and centralization. They give preference to those with the largest mining power. Potentially bought in the form of computer hardware.
While PoS systems are more efficient, environmentally friendly, and scalable, they are not completely decentralized. Individuals can wield more power by acquiring more coins to stake. In turn, the integrity of PoS is dependent on the trustworthiness of a few selected validators. This implies that the system is more likely to break down.
What is Proof of Time (PoT)?
Proof of time is a completely decentralized consensus algorithm where any user can join and propose/confirm blocks without being hindered by a lack of hardware or staked coins. This eliminates the main barrier to entry present in most PoS systems.
The PoT algorithm selects validators based on two independent factors; ranking score and fixed stake. The ranking score is a numerical value that the protocol assigns to each time elector and time node. In many ways, the PoT ranking score operates in a similar fashion to Google’s page rank algorithm across three separate parameters. These parameters are:
- A node’s tenure on the blockchain
- The historical validation accuracy of each node
- The average weighted value of the ranking score for the vicinity nodes
The nodes with the highest-ranking score have more chances of being selected to validate and confirm blocks to the blockchain. However, unlike PoS and Pow networks, validators choose based on merit. In other words, nodes confirm blocks based on their reputation and historical impact on the blockchain. Rather than merely how much money they have invested in gaining influence.
As for the fixed stake component of the PoT model, this simply refers to this fact. Nodes must hold a specific number of tokens to qualify as a validator. Unlike PoS-powered chains, nodes are not given any extra preference for holding more coins than the predetermined threshold.
As a result, the PoT consensus algorithm was meticulously designed from the ground up to be a truly decentralized and secure means for achieving interoperability consensus. The combination of fixed stake and ranking score ensures that all nodes have an equal opportunity to participate in validation and consensus procedures. Furthermore, the fixed stake procedure is necessary for network bootstrapping and onboarding new nodes.
Why is Proof of Time Such a Big Deal?
First and foremost, one of the most significant benefits of the PoT mechanism is the level of decentralization it brings to blockchain networks. After all, attaining decentralized consensus is the primary challenge that blockchain developers face. And while PoS and PoW have done a good job at rising to this challenge, they are far from perfect.
In a nutshell, a blockchain must be transparent and immutable to function effectively. Thus, all nodes should have an equal opportunity to update the ledger. If any barriers are present, it jeopardizes the integrity of the network. As mentioned, both PoW and PoS are vulnerable to security issues in this regard since favor on the network can be indirectly purchased. This is not the case with PoT due to the factors mentioned earlier (ranking score and fixed stake).
Another reason why PoT is gaining popularity is its inherent interoperability. Prominent layer-1 platforms like Ethereum, Solana, Cardano, and Algorand have evolved with specific features and development ecosystems that make them appealing to various dApps, use cases, and communities. As a result, new subsectors of the blockchain industry have emerged, such as decentralized finance (DeFi), metaverse, and NFTs. However, because no blockchain can address every problem effectively, different chains must be able to communicate with one another.
PoT provides a different approach to the typical interoperability framework since the network creates an infrastructure where all chains can interact, allowing frictionless transfer of event data. In turn, this allows for the creation of a decentralized ecosystem where each blockchain, regardless of consensus protocol, use case, and token design, can seamlessly interoperate while benefiting from the scalability and security of the proof-of-time network.
Thanks to its increased decentralization, security, and omnichain interoperability, the proof-of-time consensus mechanism looks set to bring immense value to blockchain projects across a wide number of use cases. Furthermore, since network validators have no real method for purchasing influence over the blockchain, PoT finally provides a much-needed upgrade to proof of stake. Especially when it comes to attaining decentralized consensus.