Every blockchain uses a consensus mechanism, which is like a set of rules that all the devices in the network must follow in order to add new data or make changes to the blockchain. The most well-known consensus mechanisms are Proof-of-Work (POW), which is used by Bitcoin, and Proof-of-Stake (POS), which is used by Ethereum. Another consensus mechanism in use is called Proof-of-Authority (POA).

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In this system, whenever new transactions are added to the blockchain, they must first be verified by nodes (computers run by members of the network) called validators. It is the validator’s job to moderate new transactions and confirm that the data being added is correct.

Instead of making validators compete with each other, as in a Proof-of-Work system, or stake tokens, as in a Proof-of-Stake system, a network using Proof-of-Authority selects validators based on their reputation.

Validators need to meet several requirements:

• They must follow the same selection procedure as everyone else.
• Their real-life identities need to be verified.
• They need to maintain the security and integrity of their own computers to keep the rest of the network safe from bugs and security breaches.
• They need to be willing to invest their money and put their reputation at stake. Failure to perform their tasks correctly will affect their reputation.

Proof-of-Authority is commonly used by centralized or private blockchains. Compared to networks using POW or POS, POA is able to complete transactions faster and more efficiently, with less energy wasted.

Proof-of-Authority motivates the members of a network to maintain a good track record because validators with a poor reputation will lose their position. This weeds out untrustworthy individuals from the network and keeps the blockchain secure.