Club5050-Understanding Proof Of Burn As A Type Of Consensus Algorithm.
Hello everyone.
Today I want to share with you my little knowledge about one of the consensus algorithms which is Proof Of Burn simple known to be POB.
As we are all aware, the blockchain technology is a distributed decentralized system that gives privacy, security and transparency.
It is decentralized because it has no central authority to approve its transactions, still every transaction within the blockchain is considered to be secured and approved.
And all this is possible due to the presence of the consensus algorithm. It is the core part of any blockchain network.
A consensus algorithm is simply a way through which all peers of a blockchain system get to a simple agreement about the current nature of the distributed ledger.
Through this, a consensus algorithm get loyalty in the blockchain system and create trust between peers who are unknown in a shared computing atmosphere.
There are different types of consensus algorithms and some of them are, Proof Of Work (PoW), Proof Of Stake (Pos), Proof Of Burn (PoB) and many others. But in this post I will be talking mainly on the Proof Of Burn (PoB).
Proof of Burn unlike the other consensus algorithms allow miners to burn some part of their tokens in order to a block and carry out transactions successfully. Its energy power consumption is less as compared to proof of work.
This proof of Burn ideology was designed by Lain Steward and was launched in December 2012. This burning of tokens is done by sending them to addresses where they can not be retrieve again.
Proof of Burn grant it’s miners mining power which they can use to mine new blocks and a miner can get this mining power by mining more of his tokens. Meaning the higher your mining of tokens the higher your mining power and vice versa.
Crypto assets are burned by miners which enables them to produce blocks on the blockchain network. The block they are able to produce is from the token they have burnt. And this burning is done by transferring the token to an address which no one can get access to.
Transactions are completed in a particular way with proof of burn. A miner will transfer tokens to an approved address termed as dining direction. This address can’t be accessed, meaning it does not have a private key. And a miner can not retrieve a token when transferred already.
When a miner involve in burning more of their tokens within the system, it grants them more mining power and bigger opportunity of getting a block reward. As time goes on, miners get some rewards for their initial investment.
The proof of burn system is designed in a way that, as a miner you need to burn more tokens in other to get higher returns.
Now let’s take a look at what differentiates proof of burn from proof of stake, which is another type of consensus algorithm.
| Proof Of Burn | Proof Of Stake |
|---|---|
| There is economic scarcity in proof of burn | There is no economic scarcity in proof of stake |
| Coins are burnt in order to mine and get rewarded for completing transactions | Forgers stake their own coins by locking them up and may decide to withdraw all the coins and sell if they don't want to belong to the system anymore |
| Need no mining hardware to operate | Mining hardware is needed to operate and it is very expensive as well |
In proof of burn there is lesser energy consumption.
Proof of burn add more value to newly developed tokens.
In proof of burn there is lesser capital involved in running the system as compared to other types of consensus algorithms.
Burning of tokens minimizes circulating of supply.
It is also used in bootstrapping one crypto asset off another.
It is unpopular as compared to the others (proof of stake and proof of work).
Verification process is slow in proof of burn.
Burnt tokens can not be retrieved again making proof of stake very risky.
The proof of burn system prevents the accumulation of unnecessary power as the mining power of miners gets decay with the creation of each block.
Again, it consumes lesser amount of energy as compared to the other types of consensus algorithms making it a better and reliable protocol to use.
Value addition and less energy consumption is the key feature of this algorithm. Proof of work consume more energy where the proof of burn is eliminating that disadvantage of proof of work straight forward. Well explained. If you could give couple of example of blockchains working in this algorithm then it would have been great. Please Try to give some example with your such kind of writting next time. Thanks
Ok and thanks so much for your review.