Proof of burn is one of the various consensus mechanism algorithms implemented by a blockchain network to assure that all participating nodes agree to the right and accurate state of the blockchain network thereby bypassing any chance of crypto coin double-spending. Proof of burn obeys the law of “burning” or “destroying” the coins owned by the miners that give them mining benefits.
Proof of Burn, Explained
Blockchain is the principal database of cryptocurrency that operates all transaction-related data. Blockchain is composed by a series of blocks, and all transactions are managed and collected in these different blocks which serve as data storage units of the blockchain. A block is recorded only when the blockchain nodes match on a set of transactions that the nodes count as legitimate.
Proof of burn (POB) is an alternative consensus algorithm that attempts to solve the energy consumption problem of POW. POB is usually described as POW without energy consumption. It operates on the policy of supporting the miners to “burn” or “destroy” the virtual currency tokens, which gives them the power to write blocks in dimension to the coins burnt.
In other words, by doing coin burns, users can show their dedication to the network, obtaining the power to “mine” and verify transactions. Since the method of burning coins depicts virtual mining power the more coins a user burns in support of the system, the more mining power he/she owns and, thus, the greater the opportunities to be elected as the next block validator.
To burn the coins, miners transfer them to a verifiably un-spendable address. This method does not utilize any means other than the burned coins and guarantees that the network remains dynamic and flexible. Depending upon the implementation, miners are permitted to burn the local currency or the currency of an alternative chain, such Bitcoin. In trade, they get remuneration in the local currency token of the blockchain.
To stop any chance of unfair benefits for early adopters, the POB has realized a mechanism that supports the intermittent burning of crypto coins to keep mining power. The energy of burnt coins “decays” or decreases somewhat each time a new block is mined, comparable to the mining rigs becoming out-of-date with time. It encourages normal movement by the miners, instead of the one-time early investment. To survive in the competition with an ambitious end, miners may also require to invest regularly in better tools similar to the work performed in physical mining rigs with the improvement in technology.
POB implementation can be configured. For example, Slimcoin, a virtual currency system that utilizes POB, enables a miner to burn coin that not only grants him/her power to fight for the next block but also grants him/her the opportunity to get blocks throughout a more extended period – at least a year.
Slimcoin’s POB implementation links three algorithms – POW, POS, and the core POB theory. The method of burning coins includes POW, the more coins one burns the more opportunities one holds to mining power which assures POS, and the entire ecosystem supports the POB idea.
Disclaimer: This information should not be interpreted as an endorsement of any cryptocurrency. It is not a recommendation to trade. The crypto market is full of surprises and overhyped assets. Do your research before buying anything. Do not invest more than you can afford to lose.
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