Crypto Academy Week 13 Homework Post for Professor @alphafx BY @huzaifanaveed1

Imagine you're burning your money in a fire and you know its for the greater good. The reward you'll receive will be way better. You are letting go of a smaller thing in return of a bigger reward. This is what Proof of burn is but the only difference is that it is done virtually

PROOF OF BURN

Before talking about PoB we need to know a little about proof of work where a miner has to solve strenuous puzzles and and problems to carry out with transactions and creating new blocks. The first one to do it takes it all kind of work. This process requires ton loads of computing power.

In Proof of burn the energy expenditure is comparatively very low. PoB requires the 'burning' of your already owned cryptocurrency which is termed as an investment. This investment is used as a resource in favour of the miner.

So basically what's happening us that you burn your coins in return of resources. Now its common sense. For example there's a marathon going on and you've to run a 1000 meters. The person with the highest stamina (resources) has the best chances of winning this race. The same is with the proof of burning scenario. The more coins you burn, the more you invest in a virtual mining rig, the more chance you have to be a block validator.

What does the burning of coin does?

Starting off with an example:

There's a certain type of disease circulating in your vicinity and the doctors are prescribing one specific drug for the treatment of that disease. The pharmacies are filled with patients wanting to buy that specific medicine. Soon, what happens? That drug is not available in the market anymore. It Becomes 'short'.
Now the people still want that drug but now when the drug re enters the market its price will automatically be raised. What just happened? The market availability was reduced, a paucity was created and the price of the drug spiked up
The same is happening when you burn coins. It diminishes the market availability of that coin, which causes scarcity and increases its value.
Furthermore, the systems reward the miners who burn their coins, which covers the initial loss/investment of the burnt currency.

ADVANTAGES OF PROOF OF BURN

a) The foremost and in my opinion the most important advantage of PoB is that it doesn't require hefty power consumption and hardwares for mining

b) it increases the value of the coin through market unavailability (thoroughly explained above)

DISADVANTAGES OF Proof of Burn

a) cannot be done by anyone. The process not easily executed by a mediocre user

b) a slightly slower process

EXAMPLES

XCP(Counterparty) & SLIMCOIN

COMPARISON

Constituents	PoB	PoS	PoW
Burning of coins	YES	NO	NO
Energy required	NO	NO	YES
Cost of participation	NO	YES	YES
Rewards	miners are given rewards	miners are given transaction fee	miners are given rewards

CONCLUSION

In summary we've extensively learned about the consensus algorithm and its types. Now, it's upto the miners which ever type they feel most comfortable with. Despite this fact, after spending atleast 1.5 hours on this lecture and drafting down my answer I would prefer the Proof of Burning and that is why I chose to write on it

Professor @alphafx lecture and the assignment was very informative and absolutely useful in practical life to all of us I suppose. Studying for this task and then writing it down broadened my knowledge about the consensus algorithm.

I wish you success in your endeavours.

Regards,
@huzaifanaveed1