What Is the Trade-off in Decentralization between PoA and Pure PoW?
PoA generally offers less decentralization than pure PoW. While the PoW phase is open to all miners, the PoS validation phase often involves a smaller, sometimes permissioned, set of stakers.
Pure PoW allows for a more open and permissionless participation, leading to greater geographical and organizational decentralization. PoA sacrifices some of this openness for faster finality and energy efficiency.
Glossar
Trade-off
Balance ⎊ In derivatives modeling, this involves the necessary balancing act between maximizing potential yield and managing downside risk exposure through hedging instruments.
Degree of Decentralization
Architecture ⎊ Degree of decentralization, within cryptocurrency, options trading, and financial derivatives, fundamentally reflects the distribution of control and authority across a network.
PoA
Mechanism ⎊ Proof of Authority (PoA) is a consensus mechanism where transactions are validated by a limited number of pre-approved, trusted validators rather than through competitive mining.
Regulatory Classification
Categorization ⎊ Regulatory classification refers to the process by which governmental bodies and financial authorities define the legal and operational status of financial instruments, assets, or services.
Faster Finality
Determinacy ⎊ Faster Finality, within cryptocurrency and derivative markets, signifies a reduction in the probabilistic nature of transaction settlement, moving towards assured state confirmation.