Proof of authority (PoA) is a consensus algorithm in which transactions are validated by approved accounts, called “validators.”
In a PoA system, validators earn the right to run a software that allows them to confirm transactions and add blocks to the blockchain. The thinking is that because validators are chosen based on their reputation as good actors, they will be incentivized to validate transactions in a trustworthy way and the system will have integrity. Furthermore, validators are not allowed to approve consecutive blocks in the blockchain as another protection against potential compromise.
The validation process itself is automated and conducted without the need for validators to directly oversee every transaction, but their computer and its authority node must be secure.
PoA is an alternative consensus model to the more common proof-of-work (PoW) and proof-of-stake (PoS) models.
Proponents of PoA argue that, because it doesn’t require a mining mechanism, it is more energy efficient and faster to conduct transactions than PoW-based platforms, such as Bitcoin.
In comparing PoS systems with PoA systems, advocates of the latter point out that the latter does not merely assume that the highest stakeholders in a system are naturally incentivized to ensure that transactions are processed properly. PoA theoretically includes additional safeguards by putting validators through a more intensive vetting process to ensure their inclination toward protecting the integrity of the system.
Critics of PoA note that by selecting individual validators as those with power over the integrity of the system, the consensus model is inherently centralized and empowers an authority with undue oversight over the system.