Proof-of-History (PoH) is a consensus mechanism that uses a cryptographic algorithm to verify the passage of time in a blockchain network. A blockchain with a Proof-of-History (PoH) protocol employs a cryptographic technique to create a reliable sequence of transactions and events recorded in the ledger. This approach addresses the challenge of achieving time agreement and allows for the nearly instantaneous finalization of thousands of transactions per second. ^[1]

Overview

Developed by Anatoly Yakovenko, founder of Solana, Proof of History (PoH) is a method of incorporating time itself into the blockchain, attempting to reduce the load on network nodes while processing blocks. In a traditional blockchain, gaining consensus on the time a block was mined is just as important as getting a consensus on the transactions in that block. It is important because timestamping informs the network (and any observer) that transactions occurred in a specific order. ^[2]

The PoH mechanism is primarily used in the Solana blockchain network, designed for high scalability and the ability to process thousands of transactions per second. By minimizing the storage and bandwidth needed to maintain the blockchain, PoH enhances the efficiency and speed of the Solana network while also providing a secure and verifiable record of transactions. ^[3]

Technology

Cryptographic Timestamping

At the core of Proof of History (PoH) is cryptographic timestamping, which employs a sequential and pre-image resistant hash function. This function takes two inputs—the current state of the blockchain and a random seed—and produces a unique, irreversible output known as a hash. This hash acts as a verifiable timestamp. ^[3]

Hash Chain Generation

Solana creates a hash chain by applying the hash function iteratively to the output of the previous hash. Each step represents a tick, with the number of hash operations indicating the time elapsed. This results in a continuous, verifiable record of time used to sequence transactions​​. ^[3]

Transaction Recording

When a transaction is made, it’s sent with the most recent hash observed. Validators confirm its validity and timing by ensuring it references a hash within the current PoH sequence. This proves the transaction happened at a specific moment​​.  ^[3]

Consensus

Transactions timestamped with PoH are then processed using a Proof of Stake (PoS)-based consensus algorithm, Tower BFT, in Solana’s case. Validators stake SOL (Solana’s token) to participate, earning rewards for securing the network and validating transactions. Tower BFT, with the help of PoH’s timekeeping, quickly achieves consensus, allowing Solana to handle thousands of transactions per second​​. ^[3]

Verifiable Delay Function (VDF)

A core component of PoH is the VDF, which ensures block producers pass through it to access their block production slot. Solana appends the hash of data related to previously generated states in the transaction sequence, creating verifiable timestamps without the possibility of data recreation or alternative versions​​. ^[3]

Real-World Applications of Proof-of-History

Proof of History (PoH) is a relatively new consensus mechanism that various companies and networks are exploring for its potential applications. An example of a company using PoH is Solana, which uses PoH as its primary consensus mechanism to achieve high transaction speeds while maintaining security and decentralization. ^[1]

Arweave is a decentralized storage network company that uses PoH to improve its storage and retrieval processes while maintaining security and data integrity. Apart from these companies, PoH has also been used in developing other Blockchain projects such as Chainlink, a decentralized Oracle network that provides secure and reliable data feeds to smart contracts. ^[3]

Filecoin- a decentralized storage network and Hashgraph are also built on a PoH Blockchain. ^{[1] [3]}

Benefits of Proof of History

• Scalability: By offloading the task of ordering transactions to the local clocks of validators, PoH enables high transaction throughput, potentially processing thousands of transactions per second.
• Security: The use of VDFs makes it computationally expensive to tamper with the timestamps, ensuring the integrity of the historical record.
• Efficiency: PoH requires less energy compared to PoW as it doesn't involve solving complex computational puzzles.  ^[2]

Drawbacks

Its limitation of requiring a trusted time source to function means that the timestamps generated by the PoH mechanism are only as secure and reliable as the underlying time source used to generate them. If the time source is compromised or inaccurate, it could undermine the security and integrity of the entire PoH system. ^[3]

Another potential drawback of PoH is that it may require more computational resources than other consensus mechanisms, such as Proof of Stake (PoS). This is because PoH involves generating and verifying large amounts of data, which can be computationally intensive. This could potentially limit the scalability of PoH-based networks and make them less accessible to smaller players in the blockchain ecosystem. ^[3]

There may be concerns about the centralization of PoH-based networks. The system relies on one trusted entity to verify the data and pass it along to other entities in the network. If this entity is hacked or corrupted, the integrity of the network could be threatened. ^[1]

Also, since PoH requires a trusted time source, it may be more difficult for smaller players to participate in the network and validate transactions. This could lead to a situation where a small number of entities have significant control over the network, which could undermine the decentralization and security of the system. Thus failing to provide the required decentralized ecosystem. ^[1]

Another challenge is that Proof of History (PoH) is a form of proof of Work (PoW)that requires significant computing power to function effectively. To ensure the success of PoH, a substantial amount of processing power and energy is necessary. Each node involved in the Proof of History requires extensive computing resources, which limits the number of nodes that can be deployed. This limitation can make it difficult for smaller businesses to adopt the platform.  ^{[1] [3]}