The introduction of blockchain technology has started a monumental movement in the global finance sector. This groundbreaking innovation introduced numerous new concepts that enable safer, swifter and decentralized management of finances. Despite various solid features and benefits, the main attraction of blockchain technology was its unprecedented security from any malicious threats.
That is where Proof-of-History (POH) and other consensus algorithms come in. Consensus algorithms are digital methodologies ensuring blockchain security by validating each transaction using various means. In simple terms, consensus algorithms are the digital inspectors, ensuring that each blockchain block is verified before being added to the blockchain network.
What is Proof-of-History Consensus Algorithm?
There are numerous consensus algorithms on the market, each offering unique methodologies to handle block creation. The initial and most popular algorithm was a proof-of-work, which required solving complex mathematical equations to create new blockchain blocks on the network.
While this method was highly secure due to its encrypted nature, the Proof-of-Work algorithm demanded massive computational power, energy consumption and time. Recently, the PoW approach has become less popular due to these steep requirements, and the crypto world witnessed an inflow of brand-new consensus algorithms.
The PoH algorithm is one of the most fascinating iterations of this concept, offering a more straightforward method for validating blockchain blocks. In short, its concept creates unique timestamps for each block added to the system. This way, it is much easier to control the chronology and order of nodes, which in turn simplifies the validation process.
With such a strict order of transactions, malicious attackers have a much lower chance of manipulating the blockchain network, as every transaction is recorded and solidified instantly on the network.
How Does Proof-of-History Work?
While the Proof-of-History Concept may be challenging to comprehend at first, it’s easy to visualize this approach with a railroad analogy. Imagine courier X sending package A via the railroad system from New York to Los Angeles. Package A does not have any distinct marks or stamps on it. The only instruction is that package A should be delivered to LA.
With this approach, the package delivery process is unreasonably time-consuming and complex. Every station between New York and LA needs to verify the nature of this package and the previous stops it went through. Every station needs to do the work again before package A finally reaches Los Angeles. It is easy to understand why this method is bloated and needless.
On the contrary, imagine a scenario where package B is sent from New York to LA. Now, each station can put their respective stamps on the package, creating a unique track record and proof of history for the given package. With this approach, every station will swiftly verify where the package came from and if it is legitimate. No more confusion, excessive paperwork and redundant procedures.
The Proof-of-History concept works in the same fashion, letting the blockchain network verify each transaction through its distinct timestamps. This way, each transaction needs to be checked and verified once instead of re-checking the entire network every single time. Thus, the PoH consensus algorithm can save time, money and energy outputs for a given blockchain network, providing a Pareto improvement over the older consensus algorithm methods.
While the Proof-of-Work algorithm remains the dominant option on the market due to its well-established security prowess, the Proof-of-History algorithm is making rounds as a go-to validation system of the future. However, POH still has to prove its worth regarding security, and time will tell if it stacks up to the POW algorithm.
The Benefits of Proof-of-History Algorithm
Proof-of-history algorithms are still relatively fresh in the world of consensus methodologies. Despite its young age, POH has introduced several core improvements over the flagship Proof-of-Work and Proof-of-Stake (POS) algorithms. Below we present some of the fundamental enhancements that POH algorithms can offer to blockchain networks.
Less Need for Computing Power
It is no secret that both POW and POS methods require quite a bit of computational power to approve new nodes on the network. While POS offered some improvements to the extremely demanding POW approach, it still demands an expensive setup and a lot of energy to approve transactions. With POH, that is no longer the case, as this system relies on the Verifiable Delay Function (VDF) algorithm to validate each transaction.
VDF requires much less energy and computational resources, as it simply creates and checks the timestamps of the newly added network nodes. Therefore, the entire validation process goes swiftly, efficiently and without causing harmful carbon emissions to the environment.
Swift Finality
Finality is one of the key concepts in the node validation process, ensuring that each node addition is immutable in the network. In the POW and POS methodologies, finality is probabilistic. This means that each node addition is still subject to a change or invalidation. While both consensus algorithms are mostly validated, this small likelihood of reversal is still undesirable and can possibly create adverse scenarios for involved parties.
With the POH algorithm, finality is instant and immutable. Once any block is transferred to a blockchain network, it firmly remains in the network without any chances of reversal. With this approach, participants can have rock-solid expectations of the immediate future of a given blockchain network.
Small Digital Storage
While the POW algorithm requires significant space to store its equations and run them again for repeated block additions, the POH approach simply requires the storage of timestamps. Since timestamps are quite literally just a track record of chronology, they require almost zero dedicated storage on the blockchain platform. Therefore, platform owners and miners can reduce their storage requirements and save precious resources for other operations.
Final Takeaways: Why POH Could Be the Future of Consensus Algorithms
The POH algorithm is a promising new development in the field of consensus algorithms. With its masterful design and expertly crafted functionalities, the POH system is on the way to becoming a dominant consensus algorithm on the market.
However, POH still has ways to go before conquering the industry, as it is a relatively new and unproven methodology. Time will tell if the Proof-of-History concept is the go-to consensus algorithm or the future or just a stepping stone toward better consensus technologies.
