Author: Isabelle Yeo
The expansion problem is currently the main obstacle for Blockchains, and Proof-of-Authority is being proposed and used as a short-term expansion solution.
What is the capacity expansion?
In Ethereum, we define the capacity to increase the performance of the primary network as users increase, without affecting the user experience. The network architecture must adapt to new needs as the application grows, not the other way around.
Ethereum’s current state
Currently, Ethereum could not be expanded due to the design of Blockchain Protocols. When processing transfers, each full node stores state data, including smart contract codes, account balances, and storage space. This will ensure a high degree of security, but the scalability is lost.
What is the problem now?
DApp needs a capacity expansion solution to avoid impending problems; network congestion and high commissions would deter future projects from building with Ethereum. Vitalik Buterin, the founder of Ethereum, named the issue as an expansion triangle dilemma.
The triangular dilemma currently facing the blockchain makes it possible to satisfy only two of the following three attributes: scalability, decentralised, security
There is now a series of short-term solutions: Proof-of-Authority is deployed on the network and connected through the bridge and the primary interface (similar to a bridge containing Parity and Grid+). The advantage is that PoA does not rely on the node to find the answer to the math problem, but the pre-selected authoritative group called “verifier” will ensure the security of the blockchain and will also allow the creation of new blocks. They have a public certificate and manage the entire network. In other words, all of their identities are public and certified by third parties.
About trust and governance
The PoA chain changes the trusted formula. Trust is no longer generated through a verifiable Ethereum workload consensus. Trust now comes from the vast majority of verifiers. While the number of verifiers affects network distribution, for security, more importantly, the diversity between verifiers. The critical point is not to let the verifiers focus on an industry, or they may cooperate with each other.
PoA is an optimised version of Proof of Entitlement (PoS) in which the verifier’s public information represents the same role in the proof of equity. The verifier can be a well-known entrepreneur, DApp or blue-chip company. Using their reputation as collateral, they will be motivated to do their best to do things for the entire network. As far as consensus is concerned, the vast majority of verifiers need to be signed on the chain. When this is done, it becomes a permanent part of the chain. In summary, Proof-of-Authority is more appropriate for the private chain. It will help create faster, more scalable, and more cost-effective blockchains, enabling DApps and blue-chip projects to launch and test their innovative ideas freely.
What are the limitations of Proof-of-Authority?
The biggest problem with authority is that it is pre-determined. Since the selected verifier does the consensus, unlike the proof of equity, the consensus is drawn by the person who submitted the security deposit. For example, trust can be distributed through an industry network, such as banks, regulators, unions, custodians, lawyers, exchanges etc. Using identity as collateral for equity, participants are motivated to maintain their public reputation, which also meets the needs of the entire network. Moreover, more layers of protection can be implemented, such as fines, deregulation permits, and other preventive measures that can be written into smart contracts, which will be initiated as soon as the network detects any fraud.
The Ethereum network is not ready for DApp deployment, which has forced many projects to be shelved and unable to test and launch their products. We believe that if Proof-of-Authority is used, it may be possible to form a blockchain that is faster, more efficient, and more scalable.