Consensus Mechanism: Proof of Importance

Gepubliceerd op 10 april 2022 om 09:45

As I discussed in a previous blog, the consensus mechanism is indispensable. This is a very important part of blockchain. Besides the well-known Proof of Work (using energy) and Proof of Stake (the wallet with the most crypto), there is also the Proof of Importance. The POI gives everyone a chance to validate transactions, even if the node has no money to invest in equipment to compete with other nodes.

What is the Proof of Importance?

The Proof of Importance (''POI'') is an unknown consensus mechanism. The crypto that the POI uses is NEM (XEM). POI is actually invented for this crypto. The POI ensures that the nodes (computers) within the network cooperate with each other to verify and validate transactions. So it is not that the nodes check and validate the transactions separately, but they do so together (in a group/cluster). If a transaction moves through the blockchain, then this transaction will be sent to all nodes. All nodes must check the transaction. If it is valid, then they will give a check and send the transaction to other nodes within their cluster. Each cluster can be compared with a (sub)group where nodes operate. The nodes then receive a reward for their work, namely checking and validating the transaction(s). The amount of this reward is determined by the reputation score of that particular node. If a node has a high reputation score, the reward for that node will also be higher.

How does the POI work?

The blockchain consists of a network of different nodes. And a network can consist of many nodes. All these nodes are connected to each other and can communicate with each other. When a transaction enters the network, this transaction is spread across the network/nodes. Each node in the network must indicate whether it agrees with that transaction.

If the majority of the nodes agree to the transaction, then the transaction is considered valid and it is added to the blockchain.

The nodes that validate the transactions get a block reward. Every consensus mechanism has such a reward. In the case of the Proof of Work, the miners receive a reward for solving a hashing puzzle that is then added to the blockchain. The amount of the reward for the POI is not based on solving a puzzle (proof of work) or the number of crypto/money that a wallet/node has staked (proof of stake). With the POI, the reward is determined by means of a reputation score. This score is based on 3 different variables:

- Number of transactions you have made: POI looks at how many tokens/crypto you have sent and received in the last 30 days. More recent transactions are given greater weight. Why is this important? The reason is that by validating many transactions in a network, the trading volume in a network is increased. This in turn creates more liquidity in a network.

- Earned money - the more transactions you have validated, the more money you earn from them. Having validated many transactions also increases your reputation in the network. The more you validate, the more active you are, which increases your reputation.

- Partnership with other nodes: at the POI you validate transactions together (with a majority). If you cooperate with nodes that have a high reputation score, your score will also increase more quickly and you will be able to earn more in the future by validating transactions. 

Pros and cons of POI


  • POI does not care how much money the owner has: This is important for the Proof of Work and Proof of Stake. The more money a node has, the more transactions it can validate and therefore the more it can earn. In these consensus mechanisms, the nodes have to buy a lot of equipment to be able to solve the puzzle (PoW). The richer you are, the richer you get (PoW and PoS). With POI, this is not the case. Anyone can work their way up, even if they don't have a penny to their name.
  • No wasted energy: in the proof of work, all nodes compete with each other to solve the puzzle. Each node uses (a lot of) energy to get ahead of the other. There is also only one winner. Energy from the other ''losers'' is not rewarded. That is wasted energy. With the POI, energy is used usefully because every node has to validate.


  • It takes a long time: before you have built up a substantial reputation, you are already a few years down the road. Your reputation score is not at the top in a few days.

  • Not entirely sustainable: the POI consumes a lot of energy. Each node must have enough energy to validate the transaction. Unfortunately, the POI needs energy to validate the transactions.

POI and Proof of Stake

The POI and Proof of Stake are more similar than initially thought. Both consensus mechanisms actually use a certain score. The Proof of Stake uses the size of the stakes in a wallet. The more money in a staked wallet, the greater the chance that the transaction may be validated by that wallet and thus obtain a reward (and thus be allowed to act as a validator). The POI differs from the Proof of Stake in the sense that it does not use the amount of money that has been staked, but works with a reputation score. This score is in your control and does not depend on how much money you bring in yourself. The more active you are in a network, the more you will be rewarded.

POI and Proof of Work

Proof of Work is the best known consensus mechanism. It is used by the bitcoin blockchain. The Proof of Work involves miners solving a certain puzzle. The miner who solves the puzzle the quickest gets to add the block of transactions to the blockchain. Please note that it is ultimately the nodes that do this. The nodes still have to validate the outcome of the puzzle. Once this is done, the transaction can be added to the blockchain. Solving the puzzle requires a lot of computing power. So a lot of equipment is needed to stand a chance against other nodes. Some nodes have a whole barn or building full of processors that spend the whole day trying to solve the puzzle as quickly as possible. With the POI, you don't need expensive equipment. The reputation score is not determined by how much processing power you have and how much money you have staked in a wallet The reputation score is determined by your activity on the network. Such as number of transactions, number of rewards and the cooperation with other (higher reputation) nodes.

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