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Proof of Importance (PoI) in Blockchain

Blockchain technology generated interest in the public with its first application, the cryptocurrency Bitcoin developed by Satoshi Nakamoto in 2008. Since then, the application of Blockchain has made great strides in academia, business, and society. Blockchain is a decentralized distributed network in which transactions happening is regarded as safe and verified without any control by a central authority. But since there is a huge volume of transactions occurring there is a requirement for a consensus mechanism running at the core of the blockchain network to establish a common acceptance of the network’s real state among all peers. Among many consensus mechanisms that have been developed Proof of Importance is one such mechanism developed to overcome the shortcomings of the Proof of Stake mechanism developed for the Ethereum blockchain. 

Limitation of Proof of Stake (PoS) Mechanism

The Proof of stake (PoS) was developed to make mining easier and faster along with efficient use of resources as compared to Proof of Work (PoW).

What is Proof of Importance (PoI)?

Consensus algorithms are a decision-making process for a group, where individuals of the group construct and support the decision that works best for the rest of them. It is a win for the network as the consensus not only agrees to the majority votes but to the one which is most beneficial to all participants in the network. Ever since the inception of Blockchain and the Proof of Work (PoW) consensus mechanisms to authenticate a new node or any transaction happening over the blockchain, there have been many new consensus mechanisms that have been introduced and Proof of Importance (PoI) is one such mechanism based on Byzantine Fault Tolerance.

How does Proof of Importance (PoI) Work?

Proof of Importance is the mechanism that is used to determine which nodes in the network are eligible to add a block to the blockchain, by a process that is known as ‘harvesting’ or ‘vesting’ by NEM which stands for New Economy Movement which is a blockchain. 

NEM identifies an account’s overall support of the network or score by considering the following three important characteristics: –

  1. Vesting: Also known as ‘Harvesting’ is the most integral part of this consensus mechanism. First, any node should have at least 10,000 XEM coins before they can start harvesting or vesting. The consensus mechanism counts the number of coins present in your account for a set number of days (mostly 30 days) for calculating the Proof of Importance score of the node. Therefore, the higher the number of XEM coins higher will be the node’s score.
  2. Transaction partnership: Proof of importance rewards the users who make transactions with other NEM accounts on the network and will acknowledge both accounts as partners. The network theory calculation looks at transaction behavior to assign each node an importance score and stop the user from having any pseudo partnership.
  3. Number and size of transactions: Each transaction above a minimum size has an impact on the Importance score and increases the chances of harvesting a block to collect rewards. Larger and more frequent transactions will improve the PoI score on the NEM network and the score is based on the transaction node makes in the period of 30 days.

Proof of Importance (PoI) vs Proof of Stake (PoS)

Many blockchains use Proof of Stake (POS) to allocate rewards but this mechanism favors the coin hoarders as in PoS the wealthy node gets more coins compared to other nodes having fewer coins. In Proof-of-Stake the score is one’s total vested amount unlike Proof of Importance (PoI) which also takes into account other variables, as a result, the PoI mechanism ensures more fairness.  For example, a proof of stake miner who owns 20% of all cryptocurrencies has the right to mine 20% of all the blocks on the blockchain network, this produces a scenario where the ‘rich get richer’.

Is the PoI Mechanism Prone to Sybil Attacks in Blockchain?

The term “Sybil” comes from the case study of an artist named Shirley Ardell Mason, aka Sybil Dorsett, who was diagnosed with Multiple Personality Disorder. A Sybil attack is an attempt to control a peer network by creating multiple fake identities. To outside observers, these fake identities appear to be unique users. But there is a single entity that controls many identities at once, as a result of which that entity has additional voting power using which it can influence the blockchain network.

Benefits of Proof of Importance (PoI)

  1. Energy Efficient: In a blockchain network those who use Proof of Work (PoW) have an unfair advantage over other nodes in terms of high computing power for mining blocks. These POW systems also harm the environment by consuming very high amounts of electricity and burdening miners with expensive power bills, whereas the Proof of Importance (PoI) is very energy efficient. 
  2. Avoid coin hoarding and encourages transaction: The Proof of Stake (PoS) system concentrates wealth among a few nodes since users can simply hoard as many coins as possible and reap the rewards from block creation. The more coins they keep in their accounts, the more they earn. So, everyone has the incentive to save coins instead of spending them thereby discouraging transactions and the rich getting richer. The importance score will be higher when nodes spread XEM coins and lower in case they hoard the coins, thereby proof of Importance (PoI) mechanism is very suitable.
  3. Lower Incentive: As the miners in the Proof of Importance mechanism are not required to mine blocks like in Proof of Work by using high computation power and heavy power consumption, the incentive given as rewards for adding blocks to the blockchain network also need not be higher as in Proof of Work mechanism. This helps greatly in reducing the transaction fees that are applied for validation by the miners.
  4. Discourages Forks: In traditional PoS mechanisms the marginal cost of creating a block is zero and users can continue effortlessly validating blocks in the event of a fork. But, in Proof of Importance, each node’s importance score is based on network activity and dynamic. So, this discourages the blockchain forks as the new user needs to expend resources on both forked networks to remain active to maintain their score. 


Even though all consensus algorithms share the same purpose which is to achieve consensus within a decentralized network, these mechanisms differ in the way they achieve consensus. Although ideal consensus does not exist it is important to note that consensus mechanisms have developed and adapted in the long term to meet the ever-changing needs of a system. So, it is important to choose the most suitable mechanism based on the network requirements. Proof of Importance (PoI) is one such mechanism that aims at providing fair consensus even though it still favors the rich node in the network. But one striking feature of PoI is that it allows an individual to determine how much money is required in order to begin receiving rewards. So, in the future, another consensus will be developed with an aim to remove the rewards offered to the rich node due to their wealth.

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