What is Proof of Importance (PoI)? – An explanation about this consensus algorithm =

Reputation is very important for the trust we have in other people or organizations. It ensures that we can move forward, but also that we know who we can fall back on when necessary. This also works for blockchains that use the Proof of Importance (PoI) consensus algorithm.

Of course nodes, miners and validators must trust each other within any algorithm. However, this trust is often based on the computing power or money someone can provide. It is often not based on the reputation someone has.

In this article I will explain more about the relatively unknown consensus algorithm Proof of Importance . At the end of this article I will also tell you which blockchains use this algorithm.

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  • What is Proof of Importance (PoI)?
    • The benefits of Proof of Importance
    • The Disadvantages of Proof of Importance
  • How does Proof of Importance work?
  • Which blockchains use Proof of Importance?
  • POI vs. other consensus algorithms
    • POI vs. Proof of Work (PoW)
    • POI vs. Proof of Stake (PoS)
    • POI vs. Proof of Participation (PoP)
    • Other algorithms
  • Conclusion

What is Proof of Importance (PoI)?

Proof of Importance is a consensus algorithm developed for NEM (XEM). This algorithm ensures that nodes within the blockchain network work together to verify and validate transactions.

The moment a transaction is executed within the blockchain network, it is sent to all nodes. They must in turn indicate whether the transaction is valid, after which they forward the transaction to the other nodes within their cluster . A cluster can be compared to a subgroup.

Nodes receive a reward for the work they do. The amount of this reward is based on the reputation score. The higher this score is, the higher the reward for the nodes will be.

The video below clearly explains what Proof of Participation exactly is.


The benefits of Proof of Importance

Let’s take a look at the benefits of the Proof of Importance algorithm.

  • PoI is a fair algorithm. Machines are not judged by how much money the owner has, as is the case with Proof of Work (PoW) and Proof of Stake (PoS). With these algorithms, participants have to invest a lot of money in the purchase of expensive hardware or before striking. As a result, the rich are getting richer. Money says nothing about the work you can deliver.
  • No ‘unused’ energy . With an algorithm like Proof of Work, miners are validating the same transactions at the same time. Subsequently, there is only one miner who is allowed to add a block, and whose energy is therefore spent usefully. In a PoI algorithm, all energy is used usefully.
  • PoI is a secure algorithm . The Proof of Importance algorithm ensures that everything remains well protected against hackers and that the blockchain continues to work properly. For example, Proof of Importance can prevent someone from spending more than they own.

The Disadvantages of Proof of Importance

Everything has its drawbacks. The same applies to Proof of Importance.

  • It can take a long time to build a reputation. Just like in real life, it takes time to build a reputation. Because of this, it can take a long time before you have built up enough reputation to compete at the top.
  • Not sustainable . We just said that all energy is used. However, this algorithm is not as durable as, for example, Proof of Stake or Proof of Elapsed Time (PoET). There are a lot of nodes working to validate every transaction.

How does Proof of Importance work?

The blockchain consists of a network of different nodes. These are all connected to each other. The moment a transaction takes place, it is spread across the network of the nodes. Everyone must then indicate whether they agree to the transaction.

After the majority of the nodes have agreed, a transaction is considered valid and added to the blockchain.

The nodes that ensure that transactions are validated naturally receive a reward for this. This also happens with other consensus algorithms. However, the amount of the reward is not based on how quickly someone has done their work, or how much money someone has been able to put out.

Instead, the reward is based on a node’s reputation score. This score is based on three different variables:

  • Number of transactions you’ve made – It looks at how many tokens you’ve sent and received in the last 30 days. More recent transactions carry more weight. Why this is important? By making many transactions over a network, the trading volume is increased and there is better liquidity.
  • Vested money – The more money you’ve earned from validating transactions, the faster your reputation can rise. The amount of this amount says something about how long and how often you participate in the blockchain network. (You can’t compare this to staking, where you can increase the stake simply by buying extra coins/tokens).
  • Cluster nodes – You validate transactions together with other nodes. The higher the reputation of the nodes you work with, the faster your reputation will rise. It is therefore best to link with nodes that already have a high reputation score.

Which blockchains use Proof of Importance?

We can be quite brief about this. Proof of Importance is only used by NEM (XEM), and not (yet) by other blockchains.

NEM is a blockchain platform that allows you to perform various actions. This includes sending and receiving messages, making payments and creating assets. In the past, this project was a lot more popular, when it was still in the top 20 best rated cryptocurrencies based on market cap.

The cryptocurrency of this project is called XEM. You can buy this coin on various crypto exchanges, such as Binance or Bitvavo. It is also possible to register yourself with the NEM Faucet or start harvesting, so you can get your hands on XEM for free .

The project was even seen by China as one of the most secure blockchain platforms . Still, the popularity, and therefore the market cap, has decreased somewhat. NEM is still in the top 100 cryptocurrencies.

The video below explains more about NEM and the XEM crypto.


POI vs. other consensus algorithms

In addition to Proof of Importance, there are of course many other consensus algorithms. Many of these algorithms have several similarities to Proof of Importance. So let’s compare PoI with some other algorithms.

POI vs. Proof of Work (PoW)

The best known consensus algorithm is of course Proof of Work, which is used by Bitcoin (BTC). This algorithm is all about nodes (miners in this case) having validated all transactions as quickly as possible. The miner who has done this fastest can add a new block to the blockchain.

To be the fastest, you will need the best and most expensive hardware. As a result, you need a considerable starting capital to be able to mine (if you want to participate in any case for the profit).

For PoI it is not necessary to own the best and fastest hardware. The reputation score is not based on how quickly you processed a transaction. This is based on the number of transactions you make, vested money and the nodes within the cluster you work with.

Do you want to know more about Proof of Work? In the video below from AllesOverCrypto, Matt explains what PoW is and how it works.


POI vs. Proof of Stake (PoS)

There are more similarities between PoI and PoS than you might think. Both algorithms assess nodes on a certain score. Within a network that uses PoS, nodes are assessed on the size of the stake.

The stake is the money that a node (validator in this case) puts in to validate. The higher the stake, the more likely a node will be selected as a validator.

A disadvantage of this algorithm is that the rich are getting richer. You have to have a lot of money to be able to strike. As a result, it is not for everyone to participate in a PoS network.

The big advantage of PoI is that everyone can participate, regardless of how much money you have to stake. Nodes are rated based on the reputation score. They have full control over the level of this score.

POI vs. Proof of Participation (PoP)

Another consensus algorithm that is quite unknown is called Proof of Participation (PoP) . This algorithm is very similar to Proof of Importance, although there are a few differences between these two algorithms.

Proof of Partication rates other nodes (participants) on how well they participate within the network (just like Proof of Importance). However, the way they do that, and what these nodes are judged on, is different.

In the Proof of Participation algorithm, nodes are chosen to add a new block to the blockchain based on the participation score they have. With each new round, all nodes send a score to other nodes. This score is then added up, after which the node with the highest scores have a higher chance of being allowed to add blocks.

Within the PoI network, transactions are validated by all nodes. The reputation is then based on the number of transactions made, money vested and cluster nodes. So there is a significant difference here with Proof of Participation.

Another similarity is that both algorithms have been developed for a specific blockchain. Namely, Proof of Importance was developed for the NEM blockchain, while Proof of Participation was developed for ZooBC . Both algorithms have not yet been adopted by other blockchains. This is partly because new blockchains develop their own algorithm, which is then based on an existing algorithm (often Proof of Stake).

Click here to read more about Proof of Partication (PoP).

Other algorithms

In addition to PoW, PoS and PoP, there are more algorithms. Click on the link in the list below to go to an extensive article about the relevant algorithm.

  • Proof of Work (PoW)
  • Delegated Proof of Stake (DPoS)
  • Proof of Stake (PoS)
  • Proof of Burn (PoB)
  • Proof of Capacity (PoC)
  • Proof of Authority (PoA)
  • Delayed Proof of Work (DPoW)
  • Proof of Participation (PoP)
  • Proof of Elapsed Time (PoET)

Would you rather see a video that tells you more about all kinds of consensus algorithms? Then it is recommended to watch the video below.



Before reading this article, you probably knew how Proof of Work and Proof of Stake worked. Proof of Work is all about the computing power that a node can provide. The faster a node is in validating all transactions, the higher the reward. Proof of Stake is about how much money someone can bet. This is called the stake , and the larger it is, the higher the chance of adding blocks.

Proof of Importance rates nodes based on their reputation. Nodes can get a higher reputation score by completing more transactions, holding money they’ve earned, and clustering with nodes that already have a high score. With a higher score, nodes can earn more money.

As a result, Proof of Importance is seen as one of the fairest consensus algorithms , because you don’t need a big bag of money to add blocks to the blockchain.

Do you want to know more about Proof of Importance, or another consensus algorithm, after reading this article? Then ask your questions in our AllesOverCrypto Facebook group and our experts will answer all your questions.

Do you have other crypto related questions? The easiest way is to look up your question in our FAQ. What you can also do is that you google your question + “AllesOverCrypto”. You’ll soon be taken to one of our other articles dealing with that topic, so you can quickly learn more about that topic.






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