Decentralized Finance (DeFi) is now a popular concept in the cryptocurrency industry, and for a good reason. Its apps not only provide users of all backgrounds with unparalleled chances but also do so in a consumer-friendly and transparent manner. Today’s focus will be on the mechanism called Proof of Reputation (PoR), which many have dubbed the “future of Decentralized Finance.”

Decentralized Finance (DeFi)

Before delving into the specifics of PoR, a basic overview of Decentralized Finance is required. Basically, DeFi refers to a word for any protocol not regulated by a centralized power that employs public blockchain tech and gives consumers equitable access to finance and other advantages via cryptocurrency. Several DeFi concepts are available, such as DEXs, liquidity provision methods, staking choices, etc.

Consensus Mechanisms: PoW, PoS, And PoR

DeFi and crypto initiatives, in general, employ a consensus process to offer their services and benefits to consumers safely. These algorithms are required to ensure the network’s nodes (computers) are on a particular page regarding all operations and that the possibility of malicious conduct is limited or perhaps eliminated.

The three most common consensus techniques are Proof of Stake (PoS), PoW, and the present favourite, which is the Proof of Reputation(PoR). PoR is an upgrade of the Proof of Authority.

PoW is based on node agreement on computations that are executed. While some evidence shows it’s relatively safe, and popular cryptos like BTC depend on it, many have criticized the mechanism for damaging the environment due to its high electricity usage. 

Proof of Stake (PoS), which Cardano (ADA) utilized, has improved some flaws of using PoW. For example, it does not need energy-intensive operations to gain consensus. Instead, the nodes must put up staking tokens as collateral, promising that they will not meddle with the server. If they interfere with the server, the algorithm will grab their stake. However, the greatest difficulty with PoS is its lack of speed since it cannot meet the throughput need.

Finally, PoR is a secure variant of PoA developed by Kaiba. It is the most recent and effective consensus method. In general, nodes govern the network and enforce the rules by putting their own identities at risk. This provides an open and obvious way of checking nodes, and it is also reliable and very fast.

PoR In Action

Kaiba’s apps may be used to demonstrate how PoR works. Because of their underlying PoR architecture, these applications can deliver more incredible speeds and lower prices than competitors. For example, KaibaEx, the project’s DEX, charges about 20% fewer costs than most exchanges, like Uniswap, which allows for commission-free trading, which is unrivaled in the market.

PoR Is The Best Option 

Overall, the innovative PoR offers unprecedented prospects for organizations that grasp its value and design their community around it. Kaiba DeFi is among the first company to ultimately develop and utilize PoR, and based on their findings; it is fair to claim that this new consensus method is, in fact, the future of DeFi.