SteemitCryptoAcademy: Consensus Algorithms@ alphafx || Proof of Burn Consensus Algorithm

Introduction

I am sure you must have heard of consensus algorithm so many times and you would wonder what this is. The consensus algorithm began with the blockchain and a blockchain isn't complete without a consensus algorithm. With the blockchain being decentralized and cryptocurrency is a decentralized means of finance, there needs to be a way to checkmate activities in the system and consensus makes this possible. Consensus allows for everyone to agree and be sincere with the system.

There are several consensus algorithms from the creation of Bitcoin. These consensus mechanisms include;

• Proof of Work
• Proof of Stake
• Delegated Proof of Stake
• Leased Proof of Stake Consensus
• Proof of Authority
• Hybrid PoW/PoS Consensus
• Proof of Burn

In this post, I will be explaining extensively the Proof of Burn Consensus Algorithm and I hope to do a very good job explaining the nitty-gritty of this consensus algorithm.

Source

Proof of Burn

The proof of work with Bitcoin is very expensive and allows for competition between miners who use computing power to validate/mine blocks by solving complex arithmetic puzzles. While the proof of work is believed to be expensive as well as consume a lot of resources, there are several consensus mechanisms that would be cheaper and less resource consuming and one of them is the Proof of Burn.

While the Proof of Burn is similar to the Proof of Work, it is less expensive and consumes fewer resources. It does not require powerful computer hardware for mining like the ASICs series but rather, it is the algorithm that requires the burning/destroying of coins The mining is virtual instead of physical. The burnt coins are the mining rig and not computers. In other to achieve this, the coins are sent to an eater address which cannot be accessed by anyone to view total amount available or unlock the coins.

How Proof of Burn Works

In other for proof of burn to occur, the tokens are sent to a verifiable address where the coins are destroyed, the addresses are known as the eater address and this address is created randomly. The interesting thing about these addresses is that they do not have a private key. Once these coins are burnt, they are out of circulation which means they cannot be accessed in the market while also doing the network good by obeying its consensus algorithm. Instead of investing in electricity, labor, computers, and GPUs, it requires investing by burning coins into the miner.

Difference Between Proof of Burn and Proof of Work

Proof of Work	Proof of Burn
Requires Computing power	Does not require computing power
Reward Users for mining	Tokens are burned by miners
Mining requires energy, time, machines	It is a virtual method of mining that requires burning

Difference Between Proof of Burn and Proof of Stake

Proof of Stake	Proof of Burn
Requires staking of coins	Require burning of coins
Rewarded for staking	Not rewarded for staking
Users can access coins back and sell	Users can't access funds again
Funds can be retrieved once not in use	Coins are burnt forever

Advantages of Proof of Burn

• Requires little power supply
• Does not require the use of complex mining hardware and mining rig
• Miners are more committed to the network

Disadvantages of Proof of Burn

• Coins burnt can't be retrieved again
• The process is not transparent or verifiable by users in the network.
• It is not popular and hasn't been tested on a larger scale

Cryptocurrencies that uses Proof of Burn

Although the proof of burn consensus algorithm isn't popular, a few coins use the consensus algorithm and they include;

• Counterparty tokens (XCP)
• Factom
• Slimcoin

Conclusion

Proof of Burn, is relatively not popular but it is a consensus algorithm that other projects should give a try. Thanks to @alphafx, I was able to research on this blockchain consensus algorithm.