How Does Proof-of-History (PoH) Work?
Crypto Basics

How Does Proof-of-History (PoH) Work?

Created 1yr ago, last updated 1yr ago

Proof-of-History, or PoH, is a novel technique used in blockchain systems to ensure that historical data is accurate and hasn’t been (and cannot be) tampered with.

How Does Proof-of-History (PoH) Work?

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Solana's first block was created on March 16, 2020, introducing the world to the potential benefits and capabilities of Proof-of-History, or PoH — a novel technique that claims to massively increase the efficiency and scalability of blockchain networks. Described as a "decentralized clock," this technology was first proposed in a whitepaper by Solana founder Anatoly Yakovenko in November 2017.
In this article, we will delve into the details of Solana's PoH technology, explaining how it works and its key features. Additionally, we will discuss its advantages and disadvantages in a blockchain network, and how it compares to other consensus mechanisms like Proof-of-Work (PoW) and Proof-of-Stake (PoS).

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What Is Proof-of-History (PoH)?

Proof-of-History, or PoH, is a novel technique used in blockchain systems to ensure that historical data is accurate and hasn’t been (and cannot be) tampered with.

It achieves this by using a hash function to create a unique "fingerprint" of a set of data (such as past transactions). This is then included in a block of the blockchain and can be verified by the nodes currently securing the blockchain. These nodes can compare the fingerprint to the current state of the blockchain data to confirm its validity and accuracy.
Because the hash function is deterministic, any changes to the data will result in a different fingerprint, which would then be detected by the nodes as fraudulent and the block would be discarded.
PoH is used to secure and decentralize the blockchain, preventing double-spending while ensuring all nodes maintain and host identical copies of the blockchain.

Note: Proof-of-History is not a consensus mechanism in and of itself but a way to improve the efficiency of blockchain systems.

Solana: First Blockchain to Use Proof-of-History

In March 2020, Solana became the first blockchain to leverage Proof-of-History along with Proof-of-Stake.

As a public blockchain platform designed to power fast, accessible and massively scalable smart contracts and decentralized applications (DApps), Solana leverages several novel technologies and techniques to help it accomplish this.
For one, Solana’s architecture is based on a variant of a practical Byzantine Fault Tolerance (PBFT) consensus algorithm known as “Tower BFT”. This allows for the parallel processing of transactions and massively improves the scalability by dividing the network into separate groups known as “towers.” Each of these towers can process a subset of Solana’s unconfirmed transactions.

Learn more about Solana and the SOL token in our deep dive.

Besides this, it also leverages a network protocol known as Gossip to ensure transactions are propagated across the Solana network quickly and efficiently, helping to minimize latency. More details about the Gossip system are provided in the official whitepaper.
By combining this with Proof-of-History to process transactions in constant time, the Solana blockchain is capable of processing somewhere in the order of 65,000 transactions per second (tps). This makes it well-suited for high-throughput applications like blockchain gaming, NFT marketplaces, and general DeFi.

Proof of Work vs Proof of Stake vs Proof of History

All decentralized blockchains need a way for nodes to reach a consensus about the current state of the ledger. The way they do they accomplish this varies considerably between chains, but they all use some form of consensus mechanism.
Right now, Proof-of-Work and Proof-of-Stake are by far the most utilized options, whereas Proof-of-History is emerging as a solution to increase the efficiency of consensus mechanisms.

The below table provides a quick overview of the main difference between the three options:

What Is Proof-Of-Work (PoW)?

The very first consensus mechanism, Proof-of-Work uses a network of powerful computers known as miners to keep decentralized networks secure while ensuring transactions can be processed and confirmed in a peer-to-peer manner.
Originally used to secure the Bitcoin network, but later adopted by newer platforms like Ethereum (pre-merge), Dogecoin, Litecoin and Monero, PoW is currently the second most popular consensus mechanism.
The system is designed to make it increasingly difficult to validate new transactions, ensuring that the network remains secure even when the total hash rate increases.

How Does PoW Work?

Proof-of-Work (PoW) enables blockchain networks to validate transactions and add new blocks to the chain. It ensures a distributed system can reach a consensus about the current state of the order without relying on a central authority.
In current PoW systems "miners," solve complex mathematical puzzles (hash puzzles) in order to add new blocks to the chain. Based on a cryptographic hash function (usually SHA-256) that takes an input (or "message") and returns a fixed-size string of characters, which is called "hash". Miners have to find a specific hash value (nonce) that matches the target hash for the current block.

A reward is provided to the first miner that solves this puzzle — this is a combination of a block reward plus all the fees paid by users to include their transaction in the block. The system is designed to make it increasingly difficult to validate new transactions, ensuring that the network remains secure even when the total hash rate increases.

The difficulty of the puzzle is adjusted (up when the hash rate increases or down when it decreases) such that blocks are added to the chain at a consistent rate. The targeted block time is currently 10 minutes on the Bitcoin network and 2.5 minutes on the Litecoin network.

This process is called "mining" and it consumes a significant amount of computing power and energy. It is intended to be a way of deterring malicious actors from attempting to take control of the network by creating multiple blocks at once.

Advantages & Disadvantages of Proof-of-Work (PoW)

As of writing, PoW is considered the most secure consensus system, since the security provided by a large network of miners arguably cannot yet be rivaled by competing systems.

Likewise, it’s also much more inclusive than competing consensus mechanisms, since practically anybody can join the network as a miner or host a node. This makes PoW blockchains some of the most decentralized networks around.

But it’s not without significant disadvantages. Large PoW networks consume huge amounts of electricity to maintain their security, with the Bitcoin network alone consuming as much electricity as a small country. As a consequence of this, PoW blockchains also have a disproportionately large carbon footprint.
PoW blockchains are also generally slow. This is because the network must wait for a sufficient number of miners to participate in the network and validate transactions, requiring a long block time. This long block time maximizes security and decentralization by increasing miner participation but reduces scalability and throughput.

These limitations have seen major blockchain platforms move away from PoW in favor of more energy-efficient consensus systems — like Proof-of-Stake.

What Is Proof-of-Stake (PoS)?

Proof-of-stake (PoS) is a type of consensus mechanism used in blockchain technology to secure and validate transactions on a network.

Instead of using computational power like in Proof-of-Work, PoS uses the stake (or ownership) of the network's cryptocurrency to validate transactions.

In a PoS system, individuals who hold a significant amount of the network's native crypto coin (SOL in the case of Solana) can "stake" their coins to become a validator. These validators are chosen at random to validate transactions, and they earn a reward for their efforts. The more coins a user stakes, generally the higher chance they’ll be selected as a validator.
Today, most blockchains use PoS consensus or some derivation of it, including popular chains like BNB Chain, NEAR Protocol and Aptos.

How Does PoS Work?

Proof-of-Stake simplifies the process of transaction validation and block production by completely eliminating the mining process, and instead using an algorithm to pseudorandomly select which node (known as a validator) gets to populate the next block and add it to the blockchain.

To join the network as a validator, users need to “stake” some of its native coins and usually meet strict hardware requirements. This adds them to the validator pool and allows them to be potentially selected to process the next block, and earn a reward for doing so.

The exact mechanism PoS networks use to select the next validator varies from implementation to implementation, but most use randomized block selection based on the size of the user’s stake — such that a user staking ~10% of the staked supply will validate ~10% of blocks.

PoS networks include rewards for validators that act honestly (typically newly minted coins + transaction fees) as well as penalties for those acting dishonestly (see slashing).

Advantages & Disadvantages of Proof-of-Stake (PoS)

PoS has been widely hailed as a more energy-efficient and, hence, environmental-friendly consensus mechanism. Since it completely nixes energy-hungry miners in favor of more economical validator nodes, it allows blockchain systems to operate using a fraction of the power.

But many Proof-of-Stake blockchains also suffer from a high barrier to entry, with users being required to meet expensive minimum stake and hardware requirements. This usually ranges from thousands to millions of dollars at stake, e.g. 32 ETH for Ethereum, 9,999+ TRX for TRON, and 6,000 XTZ for Tezos.

Some argue this makes Proof-of-Stake blockchains plutocratic and more centralized since less wealthy individuals are essentially priced out of operating a validator, limiting the total number of potential validators in the pool.

PoS blockchains generally have lower latency and are capable of generating and propagating blocks more quickly than PoW blockchains — this allows them to achieve a higher transaction throughput.

How Does PoH Work?

Proof-of-History (PoH) is a scalability solution that allows compact blockchains with a verifiable history to be created and secured.

It works by creating a timestamp for each block and then using a Verifiable Delay Function (VDF) to prove that the timestamp was generated in a certain amount of time. It is a hash of the previous PoH and the current block. A chain of these timestamps is known as the timechain, and it proves that blocks were added to the blockchain at a specific point in time.

The timestamp is a hash of the previous PoH and the current block. This creates a chain of timestamps that can be used to prove that a block was added to the blockchain at a certain point in time. The timestamp is then broadcasted to the network, and all the nodes are able to verify and store it.

The VDF is a cryptographic function that requires a large amount of computational work to compute but is easily verified. Nodes can easily verify that timestamps were generated in the correct amount of time and were not pre-computed before the block was added to the chain.

Using PoH, Solana is able to significantly reduce the amount of data that needs to be stored and verified, allowing the network to process more transactions and handle more users.

Advantages & Disadvantages Of Proof-Of-History (PoH)

Solana's Proof-of-History (PoH) technique has several benefits for the network. The main benefit being it dramatically improves the scalability of the blockchain, since past transactions can be efficiently verified while data storage requirements are minimized.

It’s also extremely energy efficient, reducing the carbon footprint of PoH-enabled blockchains.

The main drawback is that it relies on a trusted third party, the PoH generator, to generate the hashes that are included in the blockchain. This PoH generator plays a major role in the security and reliability of the network, and the overall network can be adversely affected if the PoH generator is unreliable.

Possible Problems with Proof-of-History (PoH)

Though Proof-of-History can help to enable incredibly fast and efficient blockchain systems, it does have its own set of limitations.

By far the most significant of these is centralization. At the heart of the PoH system are the PoH generators, which are used to output a PoH sequence. Since there is only one PoH generator at a time, these represent a single point of failure, and some consider it to introduce an unacceptable degree of centralization.

Beyond this, generating Proof-of-History hashes is computationally intensive, which makes running a node more complex and expensive. According to the official documentation of Solana, validator nodes are required to meet strict hardware requirements, with the following being the recommended specification: 12 core (24 thread)+ CPU, 128GB of RAM and 500GB-1TB+ of storage.

This helps to maintain the speed and efficiency of the network but can pose significant technical and financial barriers to entry, limiting the decentralization of PoH blockchains.

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