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Solana has also become a highlight when it comes to being a base layer for DeFi applications. The reasons for that are many, but ultimately, they all go back to the network’s consensus mechanism which combines Proof-of-Stake (PoS) with the innovative and Solana-exclusive Proof-of-History (PoH).
Proof-of-History is a type of consensus mechanism. Thus, to understand it, you need to first understand what network consensus mechanisms are. If you are interested in cryptocurrencies, blockchain technology and how these sophisticated technological paradigms function, this term might not be new to you.
Blockchain systems use a consensus mechanism to reach or achieve a necessary agreement on a single data value or a single network state in the distribution of diverse processes or multi-agent systems. It might sound complex at first. But if we delve deeper into the purposes they serve, we can understand what these mechanisms are more clearly.
Imagine a centralized system where information stays in a database. The system employs some functionaries to look after the maintenance and updating of the database as and when required. The task of updating is not random. Specific rules and norms shape the contours of the scenario under which a record would be added, deleted or updated. Very few are permitted to do it.
What happens in the case of a public blockchain or systems that follow the norms of decentralization and self-regulation? Thousands of participants make their contributions in verifying transactions or mining blocks. But how does the system make them ensure that all transactions occurring on the network are genuine? How does it make participants reach a consensus on the state of the ledger? It is through the consensus mechanism you use for your blockchain.
There are many types of consensus mechanisms in the world of blockchain. There is Proof-of-Work consensus that is among one of the most frequently used. Then there is Proof-of-Stake that emerged as a low-cost, low-energy alternative to PoW. The Proof Of Capacity (PoC) consensus algorithm allows sharing of memory space of the contributing nodes, while the Proof Of Activity (PoA) uses aspects of both Proof Of Work (PoW) and Proof Of Stake (PoS). Proof Of Burn (PoB) consensus mechanism requires transactors to send small amounts of cryptocurrency to inaccessible wallet addresses.
While there are all these consensus mechanisms, one of the most efficient consensus mechanisms comes in the form of the Proof-of-History or PoH. It cryptographically encodes the passage of time to reach a consensus without having to expend many resources.
How do you offer proof for an event to have happened at a specific point in time? When you send a mail, it carries a timestamp. While it helps the reader understand how much time ago the mail arrived, it also works as proof for the sender. If the sender was expected to send the mail on or before a specific time, he could prove so by showing the mail timestamp.
But is embedding timestamps through sophisticated systems the only way to place an event at a specific place in the chronology of time? No. There are simpler ways to show that you created or delivered the message at a certain point in time. Take a photo of the message with a Newspaper. That would prove that the message was created after the paper was published. Here, you would not have to trust a system-generated timestamp. This analogy fits perfectly with the ways the Proof Of History (PoH) consensus mechanism works.
Solana leader nodes use cryptographic proofs - much like the newspaper - to prove that some time has passed since the last newspaper was published, which in this case is the last proof. All data that has been hashed into the proof must’ve occurred - therefore - before the proof was generated. This core element of Proof of History consensus mechanism refers to the Verifiable Delay Function or VDF.
The Verifiable Delay Function requires appending the hash of data connected to previously produced states on the blockchain network. This allows for the insertion of new data into the transaction sequence. This process is useful in publishing important information such as input data, transaction count, what transaction occurred, the previous output, and the current state of the transaction. Using this method of the Verifiable Delay Function ensures that there is no possibility for the recreation of the data or any alternative versions.
In the Solana blockchain, the node shares the new blocks with validator nodes. These validator nodes can verify those proofs. Validators can receive these blocks in any order since there is no specific order for them to arrive. These blocks could even be replayed years later because of the historical record. Because Solana can guarantee such a high level of synchronization, it is possible to break blocks into smaller batches of transactions. These transactions are called entries. Entries reach validators in real-time, even before the concept of block consensus kicks in.
Thus, technically, the phrase ‘sending the block’ means something different altogether for the Solana blockchain. It entails the chronology of entries for validators to vote on to accomplish confirmation. Solana’s confirmation times are therefore comparable to block-based systems. As per the latest data available, the current implementation time on Solana has set the block time to 800 ms.
The fact that it happens so fast and as seamlessly as possible is reason enough why the Proof Of History (PoH) consensus proves so valuable. Entries reach the validators as soon as a leader node has batched a set of valid transactions. Much before they are voted for validity, the validators have processed these entries. Since they are processed before time, there is hardly any scope of losing time between receiving the last entry and the node voting on validity. In the case, you have not managed to achieve a consensus, the node will roll back its state.
Introduced in 1981, this process is called Optimistic Concurrency Control. It helps negate the delay and keep the process as consistently speedy as possible.
While Proof of History is considered - by many - a separate consensus mechanism altogether, it is essentially an improvement to the Proof Of Stake (PoS) consensus. You might be wondering how so! Let us go back to Solana’s synchronization properties then.
Why does the Solana blockchain have such high throughput for which it is famous? It is because of reliable synchronization. Usually, blockchains synchronize on large chunks of transactions that we call blocks. What’s often disadvantageous is that while synchronizing on blocks, you cannot process a transaction until a specific amount of time - also known as block time - has passed.
In the case of the Proof Of Work (PoW) consensus, the block time is usually 10 minutes. While Proof Of Stake (PoS) does not have such block-time limitations, there is no reliable way for the validator to know the order of the incoming blocks. In absence of reliable timestamps, the available workaround is to use a wall clock timestamp. To explain, each block has a Unix time. These timestamps are valid only if it is greater than the median timestamp of the previous 11 blocks and less than the network-adjusted time + 2 hours. But then there are clock drifts and variance in network latencies. Finally, it results in accuracy only within an hour or two.
These delays and workarounds lengthen Proof Of Stake (PoS) block times lengthy, despite not having a set limit of 10 minutes like Proof Of Work (PoW). It is precisely the problem that Solana’s Proof Of History (PoH) solves. And that is why it is seen as a complementing system to the low-cost and low-energy consensus of Proof Of Stake (PoS), only much faster now.
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