Proof-of-Importance (PoI) is a consensus algorithm that chooses block harvesters based on their importance to a cryptocurrency network.
First introduced by NEM, PoI represents a mechanism that is used to help determine which network participants are eligible to add a block to the blockchain.
This process that is also referred to as harvesting. In exchange for harvesting a block, nodes are able to collect the transaction fees within a block.
Harvesting follows some pretty basic premises. For example, accounts with a higher importance score will have an improved probability of being chosen to harvest a block.
In order to be even eligible for the importance calculation, the NEM protocol requires that an account hold at least 10,000 XEM in order to be eligible for harvesting.
Proof-of-Importance versus Proof-of-Stake
PoI is a unique consensus algorithm relative to other existing consensus mechanisms such as proof-of-stake (PoS).
This is due in part to PoI’s considering of one’s overall support of the network.
With PoS, one can make the claim that this system rewards coin hoarders.
However, under the PoS model, nodes are limited to mining a percentage of transactions that is reflective of their stake in a cryptocurrency.
The limitation with this consensus model is that it incentivizes nodes on the network to save their coins, instead of spending them.
PoI looks to reconcile the problems that can be found in the PoS model by identifying an account’s overall support of the network. NEM looks to control for this by accounting for three factors.
This includes vesting, transaction partners, and number and size of transactions in the last 30 days.