Proof of History
Let’s begin with the definition. According to the Solana white paper, Proof of History is a method of verifying the order and passage of time between events. Strictly speaking, PoH is not a consensus algorithm but a mechanism that addresses issues found in traditional algorithms by introducing a new way of recording event chronology.
Therefore, PoH can be utilized alongside more familiar consensus algorithms such as Proof of Work (PoW) and Proof of Stake (PoS). It functions as a “pre-consensus” algorithm to synchronize the blockchain and enhance transaction processing efficiency.
How PoH Works
Proof of History relies on a Verifiable Delay Function (VDF) based on SHA-256 with sequential hashing. This function cryptographically confirms the chronological order of events within the blockchain. Each block contains a generated VDF label, which enables network participants to synchronize. Therefore, participants can depend on the recorded sequence of events thanks to VDF.
The VDF function runs on one core with the previous output value serving as the current input. VDF is designed in such a way that the output cannot be predicted from the input. In order to create or verify an output, the VDF function must be executed completely. Hence, it is impossible to determine the hash value after, let’s say, 300 operations without invoking the function 300 times.
To better illustrate the operation of PoH, let’s take a look at Solana as an example:
A schedule known as the Leader Schedule is established, in which the network leader, chosen based on PoS voting (leadership rotates after every 1000 hashes), computes the hash and validates the transaction. The leader then sends it to two validators, who, after verification, pass it on to other validators.
Essentially, all network participants execute the same function (VDF) and compare the resulting value.
How PoH Differs from Classic PoW and PoS
While PoH itself is not a consensus algorithm, comparing PoH-based solutions with traditional versions of PoW and PoS reveals several distinctions.
- Time synchronization. Without VDF or other special features, blockchain nodes may encounter synchronization issues by relying on approximate and average timestamps. For instance, a new block might appear before the previous one. PoH is based on a strict event sequence, making order crucial and thus eliminating such problems.
- Computing power and staking. PoW and PoS consensus algorithms necessitate substantial computing power or a significant network stake from participants. PoH, which employs VDF for creating timestamps, considerably relaxes these requirements. However, it only mitigates them, not entirely eliminates them. Within the online community, concerns (albeit contentious) about the energy consumption and environmental impact of blockchains employing PoH can already be found.
- Finality. PoH ensures immediate finalization. Once a block is added to the blockchain, it becomes permanently settled, rendering transactions on it irreversible. In contrast, PoW and PoS rely on probabilistic finality, meaning there’s always a chance for a block to be reversed or invalidated.
- Storage and Bandwidth Requirements. PoH dramatically reduces the storage and bandwidth requirements for network maintenance. This is achieved by each block only needing to store a small amount of data such as the hash of the previous block and the timestamp generated by VDF.
Disadvantages of PoH
Security. Solana has experienced attacks and hacks on multiple occasions. The high throughput of the blockchain is unfortunately associated with risks.
Risks of network centralization. This concern may be especially applicable to PoH. The Solana white paper outlines numerous threats to decentralization and proposes ways to tackle them. The question is: how effective will these methods be in the face of centralization?
Post-quantum security. Researchers have pointed out that VDFs may lack security against agents with access to quantum computers. Such computers can deduce the order based on the VDF. While post-quantum-stable VDF solutions exist, the researchers themselves note that these solutions are complex and challenging to implement. As of now, the quest for a simple and elegant post-quantum safe VDF remains an interesting theoretical challenge.
Conclusion
Proof of History is essentially a “pre-consensus” algorithm for synchronizing blockchain operations. It utilizes the VDF function as its foundation. The drawbacks include network security (including hypothetical post-quantum security) and the inherent risks of centralization.