Proof of Proximity: A Fair and Energy-Efficient Consensus Mechanism for Blockchain-Based IoT and Edge Networks

Abstract

The introduction of blockchain technology has revolutionized decentralized systems. Blockchain enables peer-to-peer (P2P) transactions to be trustworthy and transparent. However, existing traditional consensus mechanisms such as Proof of Work (PoW) and Proof of Stake (PoS) have significant issues regarding computational costs, efficiency, and centralization, which severely limit their adoption in resource-constrained environments. For instance, in an industrial Internet of Things (IoT) network or a smart metering infrastructure, devices operate on strict energy budgets and cannot participate in compute-heavy PoW mining. They also lack the capital to lock up financial stakes for PoS. To address those limitations, randomized consensus mechanisms such as Pure Proof of Stake (PPoS) and Proof of Luck (PoL) were introduced. Yet these methods have issues with fairness, secure randomness generation, and cost efficiency. This paper proposes a new randomized proposer selection mechanism for blockchain consensus called Proof of Proximity (PoP) that enhances unpredictability, fairness, decentralization, and security. PoP replaces cryptographic randomness beacons with transaction-derived entropy and distance minimization. This enables fair, unpredictable proposer selection without relying on Verifiable Random Functions (VRFs), trusted hardware, or stakebased weighting, maintaining low computational overhead. The mechanism is ideal for IoT networks where resource consumption and security are critical. Experimental and comparative analysis results prove that PoP achieves improved fairness, decentralization, security, and low resource consumption, making it suitable for resource-constrained decentralized systems.