Steemit Crypto Academy – Season 2 - Week 5 - Post for @alphafx
Hello awesome people, how is everyone doing today, we are in a brand new wee again, cool atmosphere as everyone is aiming to get the best out of the new week. Exciting times ahead as we look forward to what the week has to offer. This week’s topic is about writing on one of the consensus algorithms.
Proof of Burn Consensus Algorithm
Blockchain technology and cryptocurrency still remains one of the greatest inventions in the past decade. Over the past few years, blockchain technology and cryptocurrency has continued to grow at a massive rate, spreading across various sectors and industries and nations as more and more people are beginning to see the power of blockchain technology and cryptocurrency.
One of the main aspects blockchain and cryptocurrency is the consensus algorithm and so far there are a number of different consensus mechanisms and each having their pros and cons.
The proof of burn algorithm is basically a type of consensus mechanism which was developed as an alternative to the proof of work and proof of stake consensus algorithms. It is a method for distributed consensus mechanism or protocol where miners reach consensus my burning coins. In other words, miners send burn coins by sending the coins to public addresses that are verifiable where the coins cannot be retrieved again.
The proof of burn consensus protocol is a very different type of consensus mechanism especially if you compare it to the proof of work where miners need expensive and high energy consumption hardwares in order to mine block and proof of stake where consensus is reached by the amount of coins stakes in the blockchain network. The proof of burn aims to eliminate all those hassles and instead allowing miners to reach consensus by burning coins to irretrievable public addresses. As miners commit their coins, they earn the reward and privilege to mine on the network based on selection process that is random. One of the main differences of proof of burn networks compared to proof of work networks such as ethereum when it comes to validating transactions is that proof of work uses physical expensive and high power consumption mining rigs while proof of burn makes use of virtual mining rigs to validate transactions.
How Proof of Burn works
This is one consensus algorithm that operates differently compared to the two most popular types of blockchain consensus algorithms. Like the name says, proof of burn is about burning coins which consists of sending coins (burning) to addresses that cannot be accessed or retrieved. These addresses are not human wallet addresses but rather addresses known as eater addresses which are randomly generated and do not have any associated private key.
How Proof of Burn Differs From Two of the Most Popular Consensus Algorithms Proof of Work and Proof of Stake
Proof of burn requires miners burning coins in addresses that are unrecoverable to reach consensus while proof of work requires mining making use of high energy mining rigs and high computing power to reach consensus while proof of stake requires miners reaching consensus based on the amount of coins held or stakes in the network.
In proof of burn, there is no competition for miners to add block and validate transaction on the blockchain network while in proof of work, there is competition as miner compete against themselves to the first to solve the complex mathematical problems and puzzles in order to add a new block on the blockchain.
In proof of burn, there is miners make use of virtual mining rig while in proof of stake, the larger the stake of the miner, the higher the chances of being selected to create a new block on the network.
Pros of Proof of Burn Consensus Algorithm
One of the huge pros of proof of burn is that creates scarcity in the supply of the coin because of the burning. In proof of stake for instance, when validators stake their coins on the network, they can decide to unstake them and the coins becomes available to trade or sell in the market. However, in proof of burn, the coins that are transferred to addresses that cannot be recovered or retrieved, is forever lost and is out of supply.
Another huge advantage of proof of burn consensus algorithm is that it doesn’t require miners to own super expensive and high power consumption but rather make use of virtual mining rigs.
In the crypto space, burning can bring more added value because of scarcity caused by burning of coins.
Another pros in proof of burn is that burning coins leads to reduction in circulation supply which is great because the lesser the circulation supply, the more valuable the coin of the coin is due to scarcity.
Cons of Proof of Burn Consensus Algorithm
The major cons or disadvantage of proof of burn consensus algorithm is that is still not proven to be effective and work on a larger scale where lots of transactions is made on the network.
Another major concern of the proof of burn is the security. We all know that proof of work is very secure in the sense that it is not only decentralized but also requires miners to own expensive mining rigs in order to become miners and secure the blockchain network. Proof of burn isn’t yet battle tested on its security aspect.
Another concern of proof of burn is efficiency… we all know that the most popular consensus algorithms are efficient when it comes to reaching consensus and transactions on the blockchain.
Typical Example of Blockchain Project that Uses Proof of Burn Consensus Algorithm
Since the proof of burn consensus algorithm isn’t that popular yet and isn’t tested to pass all the major requirements like security and efficiency, it is still very much like an experimental phase and as such, there are not that many blockchain projects making use of this type of consensus algorithm. However, it is an interesting concept and an alternative to the famous proof of work and proof of stake, which means that we will be seeing more and more blockchain projects utilizing proof of burn.
Slimcoin (SLM)
Slimcoin is a decentralized and open source blockchain project that uses the proof of burn consensus algorithm for creating new block on the network and cryptocurrency distribution. Because of the burning mechanism in place, it becomes interesting especially in the economic aspect of the coin as more and more coins is burnt, the value the circulating coins would most likely have. Slimcoin doesn’t fully use the proof of burn consensus algorithm, it uses a hybrid mechanism of both the proof of work and proof of stake. At the moment, slimcoin is still in development.
Slimcoin (SLM) Statistics
Based on the current statistics on the cryptoslate website, SLM has a current price of $0.03297, martketcap of $492,501, Circulating Supply of 14,937,439 SLM, Total Supply of 14,937,439 SLM.
Conclusion
The proof of burn consensus algorithm is one of the many different types of consensus algorithms, each having their own pros and cons. Proof of burn was created as an alternative to the proof of work consensus algorithm and the proof of stake consensus algorithm, however, it isn’t yet proven yet and still very much like an experiment because there are not many blockchains using it to testify how secure and efficient it is especially when it comes to handling large transactions and scaling. Nonetheless, it is still a very interesting consensus algorithm, concept that has a huge potential especially when it comes to adding value to the economic aspect.
Thanks for participating