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Proof-of-Burn

Proof-of-Burn

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Proof-of-burn is an attempt at creating a system that can prevent fraudulent transactions on a blockchain and can also improve the overall efficiency and functioning of the blockchain.

What Is Proof-of-Burn?

Some blockchain systems use proof-of-work (PoW) or proof-of-stake (PoS) as their consensus mechanism; however, there is an alternative known as proof-of-burn (PoB).

Proof-of-burn is an attempt at creating a system that can prevent fraudulent transactions on a blockchain and can also improve the overall efficiency and functioning of the blockchain.

Keep in mind that the blockchain is the shared database for a given cryptocurrency, which contains all the transaction-related information within blocks. A block is written into the blockchain only once all the participant nodes reach a consensus regarding a set of transactions that they deem to be valid.

Now, due to the fact that this is autonomous and given the decentralized nature of blockchain networks, an automated mechanism is required in order to ensure that the nodes agree on truly valid transactions. This is a task that is typically performed by consensus mechanism algorithms.

Proof-of-Burn is a consensus mechanism that attempts to resolve the high energy consumption issues that plague PoW-based blockchains. 

PoB allows miners to burn digital currency in order to gain the right to write blocks. To burn coins, miners have to send them to a verifiably unspendable wallet address, essentially permanently removing them from circulation. 

This is a process that does not consume many resources, and therefore energy, and also ensures that the network can remain as active and as agile as possible. Miners are allowed either to burn the blockchain’s native currency or the currency of an alternative chain. In the latter case, they receive a reward in exchange, which is denominated in the native currency of the blockchain.

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