Enterprises, governments and developers looking to adopt blockchain will find themselves facing a wealth of options – but not all blockchains are built equal. This was the focus of a recent panel discussion at the London Blockchain Conference which considered the benefits of blockchain consensus mechanisms—Proof of Work (PoW), Proof of Stake (PoS), and Proof of Authority (PoA).
The panel highlighted the advantages of business and enterprise applications for each mechanism and offered an overview of what makes a blockchain energy-efficient and the roles involved in maintaining it.
The panel included:
- Kevin Alkema (Director of Hosting at GorillaPool)
- Charles Miller (Senior Producer at Coingeek)
- Gregory Ward (Co-Founder/Chief Development Officer at Smartledger Solutions)
- Jake Campton (Communications Lead & Project Management at VeChain).
A fundamental difference in how blockchains work
The discussion began by giving a broad overview of how different blockchain consensus mechanisms work. Put simply, Proof of Work (PoW), Proof of Stake (PoS), and Proof of Authority (PoA) are consensus mechanisms used in blockchain networks to validate transactions and secure the network.
- Proof of Work requires participants (miners) to solve complex mathematical problems to validate transactions, with the first to solve earning the right to add a block and receive a reward;
- Proof of Stake selects validators based on the amount of cryptocurrency they hold and are willing to “stake” as collateral;
- Proof of Authority relies on a small, trusted group of validators who are pre-approved to validate transactions. It offers high efficiency and scalability but at the cost of decentralisation and potential censorship risks.
Not every blockchain works for enterprises
After the panel had discussed the different consensus mechanisms from a technical level, the discussion then switched to adopting the right blockchain for your enterprise. Campton pointed to Proof of Authority (PoA), highlighting that it’s less competitive compared to other consensus mechanisms.
This is because it operates with KYC-verified nodes within what he describes as a public permissioned network. While there are many community-run validators, the core nodes are primarily responsible for block-building.
Ward noted that in Bitcoin’s early days Satoshi introduced a 1MB block size limit to prevent spam, intending it to be temporary. However, this limit was never lifted, which some see as a conspiracy, but regardless, it hinders scalability compared to unbounded blocks.
Alkema points out that mining on Proof of Work (PoW) blockchains now requires specialised ASICs. He added that there is ongoing discussion about using untapped energy sources, such as trapped gas or renewable waste, for mining.
Campton also talks about scaling on VeChain, where upgrades can be mandated and nodes are required to implement them according to their agreements. A Steering Committee, elected every two years, makes decisions on these updates to ensure effective scaling.
A common misconception around proof-of-work
There is a common misconception that Proof-of-Work (PoW) consensus mechanisms are inherently unscalable and excessively energy-intensive. However, PoW blockchains, as originally designed and promoted by BSV Blockchain, aim to achieve scalability while maintaining security, interoperability, and energy efficiency.
By increasing the number of transactions processed per block, PoW systems can significantly reduce energy consumption. As more transactions are handled within each block, the energy required per transaction decreases, leading to a more efficient system overall.
By comparison, Proof-of-Stake (PoS) networks, such as those used by Ethereum, cannot be accurately classified as true blockchains. Instead, they function as distributed ledger networks that mimic blockchain structures and processes but lack the same level of security and scalability.
The BSV blockchain, a public and permissionless blockchain adhering to the original Bitcoin protocol, offers a viable alternative to Bitcoin Core (BTC) and other PoS-based protocols.
It should be considered a benchmark for PoW-based blockchains, showcasing an energy-efficient and scalable approach rather than being grouped with other energy-consuming PoW implementations like BTC.
