Understanding “Proof of Burn” in just 3 minutes – The ₿log

The lexicon specific to the crypto ecosystem is particularly dense and technical. In this regard, there are two essential terms: Proof of Work (PoW) and the Proof of Stake (PoS). These are two consensus algorithms used by the majority of systems blockchain. But did you know that there was a third much less known: the Proof of Burn (PoB).

We will try in the lines below to explain to you more concretely what the Proof of Burn consists of. What is the operation, the interest and especially the advantages and disadvantages of the latter.

What is Proof of Burn really about?

The Proof of Burn is a particular protocol invented by Iain Stewart which can result in the expression of “evidence of destruction”. Even though PoB has several similarities with PoW and PoS, it nevertheless has its own approach to ensure consensus and validation of blocks on a network.

It should also be known that this PoB algorithm comes closest to proof of work. Except that the first offers a much lower level of energy consumption.

In reality, the Proof of Burn nevertheless takes the opposite view of the Proof of Work. The second will target the creation of value, work and computing power, while the first will seek to destroy existing value.

How does Proof of Burn work?

With Proof of Burn the process is as follows: the PoB gives the right to a user to mine the next block on a network according to the number of cryptocurrency units that it has previously been able to burn.

In fact, the destruction process will consist of sending the tokens to a “dead wallet”. This will render these tokens inaccessible, untransferable and useless. These addresses are randomly created without association of a private key.

This destruction work will be rewarded in the form of block rewards to miners. What theoretically allow them to recoup their costs and investments.

Note: in order to avoid penalizing certain minors compared to the first users, the PoB protocol has implemented a system of periodic destruction of cryptocurrencies in order to maintain mining power. This ensures regular activity of miners instead of one-off and anticipated investments.

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Advantages and Disadvantages of Proof of Burn?

Among the advantages of this protocol, we can in particular recall that PoB does not require large computational resources. As such, there is no need to have large and expensive extraction equipment (ASIC type). Generally, with Proof of Burn miners will use virtual mining rigs instead.

Otherwise, this destruction of coins, and therefore of value, also makes it possible to reduce the supply in circulation. This scarcity effect will eventually tend to support prices.

Among the drawbacks or disadvantages of using this process, we can cite in particular the fact that this process of destruction is not necessarily very transparent. Also this process is not really verifiable by any user. Finally, it should be noted that the verification work is longer with the PoB than with blockchains in Proof of Work.

Conclusion: PoB, a real alternative to PoW and PoS

Proof of Destruction is a new protocol in the crypto ecosystem for building blockchain consensus. Being energy efficient, it could quickly become very popular and democratize among cryptocurrency users and investors.

It remains to be seen over time how this new mechanism will develop. IIt will also be necessary to remain attentive to the supervision of the latter with regard to the thorny question of privacy.

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Understanding “Proof of Burn” in just 3 minutes – The ₿log

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