Second it needs to solve or at the very least significantly improve the 51% vulnerability while keeping the proof of work mechanism. I know it can be done, someone clever enough just needs to figure it out.
After lengthy discussions between coblee, cunicula, killerstorm, Meni, myself, and a few others, so far the best protocol that we have come up with and that we plan to implement is:
https://bitcointalk.org/index.php?topic=102355.msg1437768#msg1437768I'm trying to solicit more peer reviews to this PoA protocol. If you or anyone else have useful comments then please let us know, either here or in that PoA thread.