Proof-of-Burn (PoB) Definition
Proof-of-Burn (PoB) is a consensus algorithm design in blockchain technology that requires network participants to ‘burn’ their own coins by sending them to a non-recoverable address to earn the right to mine or validate block transactions. This act of burning demonstrates their commitment to the network and the chances of being selected to mine the next block are directly proportional to the amount of coin burned.
Proof-of-Burn (PoB) Key Points
- Proof-of-Burn is a consensus algorithm used in blockchain where participants destroy their own coins to validate transactions.
- The more coins ‘burned’ by participants, the higher their chances of being selected to mine the next block.
- The burning process involves sending coins to an address from which they can never be spent again.
- Proof-of-Burn is seen as an alternative to Proof-of-Work and Proof-of-Stake, reducing the energy consumption associated with mining.
What is Proof-of-Burn (PoB)?
Proof-of-Burn (PoB) is a blockchain consensus mechanism that aims to address the high energy consumption associated with other consensus algorithms like Proof-of-Work (PoW). The method involves network participants proving their commitment to the network through the act of burning, or permanently removing their own cryptocurrency coins from circulation. This is done by sending coins to a public address, often referred to as an ‘eater address’, from which they can never be retrieved or spent. This demonstrates that a cost has been incurred, similar to the significant energy and hardware costs associated with PoW.
Why is Proof-of-Burn (PoB) Used?
Proof-of-Burn is used as a means of avoiding the high energy consumption in blockchain networks that use methods such as Proof-of-Work. By requiring users to burn a proportion of their own cryptocurrency as evidence of their commitment, PoB creates a disincentive for malicious activity on the network. It also offers a way to randomly distribute the right to create new blocks, as the more currency a participant burns, the higher their chance of being selected.
How Does Proof-of-Burn (PoB) Work?
In a PoB system, participants ‘burn’ their cryptocurrency by sending it to an eater address from which it cannot be retrieved. This demonstrates a participant’s long-term commitment to the network as they are effectively sacrificing potential immediate monetary benefits. The more coins burned by users, the higher their chances of being selected to mine the next block. In some PoB models, ‘burned’ coins are replaced with virtual tokens, which can then be used in the network.
Where is Proof-of-Burn (PoB) Used?
Proof-of-Burn is used in various cryptocurrency systems as an alternative to energy-intensive consensus methods like Proof-of-Work. Slimcoin, an energy-efficient digital currency, was the first known currency to use the PoB method. Other examples of networks that employ Proof-of-Burn include Counterparty and Blockstack.
When is Proof-of-Burn (PoB) Used?
Proof-of-Burn is used during the validation or mining process of block transactions in certain blockchain networks. The act of burning coins is used to demonstrate a user’s commitment to the network, allowing them the opportunity to mine blocks and validate transactions.
Proof-of-Burn (PoB) Limitations
While PoB is a promising alternative to energy-heavy consensus mechanisms, it is not without its detractors. Critics argue that it still relies on a form of waste – burning currency – and thus doesn’t completely solve the problem it aims to address. Additionally, not all users may be willing to ‘burn’ their crypto, potentially limiting network participation.
