There’s a number of consensus mechanisms that I will be covering in a series of articles. You can check some of them in the links below:
A consensus mechanism allows distributed systems and blockchains to work together and stay secure. Blockchains, being huge distributed databases, need to have a mechanism where nodes agree on how to establish consensus among all the peer nodes.
In the proof of importance consensus mechanism, nodes receive a rating according to the stake they have (i.e. the number of coins owned) plus for how long the node owned those coins. Additional metrics such as how many times they transact and net transfers — number and size of the transactions over the last x number of days are also included in the proof of importance calculation. Unlike proof of stake, in proof of importance, the nodes not only need to stake, but they also need to gain some importance in the network by owning the coins for a period of time, i.e. vesting, and actually using them for transactions.
In proof of stake, the rich nodes get richer just by accumulating coins. Proof of importance tries to solve this problem by adding other variables that will give “importance” to the node. This consensus mechanism was developed and implemented by the cryptocurrency NEM.
Proof of Importance blockchain NEM
NEM started as a fork of the cryptocurrency NXT. It was launched in March 2015 as an energy-efficient blockchain, ready for enterprises. It proposed to solve some of the issues related to proof of stake, such as the drawback of the richer becoming richer. Proof of importance introduces a rating or score system based on additional variables. The higher the rating, the better the probability of a node to be selected as a block harvester (they call miners block harvesters). The variables included in calculating the score are vesting, transactions partners and the number and size of transactions.
In NEM proof of importance mechanism, nodes need to meet the following conditions as part of the conditions to get a higher rating and be selected as a harvesting node:
- Have a balance of at least 10 000 XEM (the NEM native cryptocurrency). This is also called the minimum vested stake, and it’s an amount that needs to be in the node’s account for a minimum period of time to start harvesting
- Have transferred at least 1 000 XEM
- Have happened within the last 43 200 blocks (approximately 30 days)
- Have transaction partners, i.e. make transactions with other nodes in the network. In this case, network theory is used to verify the importance of a node (it avoids, for example, someone creating two accounts to transact with each other only)
The algorithm then puts together the values and computes a rating for each node. According to the rating, the node will have a certain probability of being randomly selected for the next round of block harvesting. If the node selected is not online, the block harvesting can be delegated to another node, aka delegated harvesting.
Proof of importance doesn’t require nodes to compute complex problems, and consequently, it doesn’t spend much energy, and it doesn’t need any specialized hardware.
How important is proof of importance? Well, not many blockchains have implemented it, but NEM is a pretty big one. Maybe we will need a few more years to see.
Anyway, you have read my article, and you are important to me! 🦄
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