Crypto Academy Week 13-Homework Post For @alphafx [Proof of Burn Algorithm Consensus] by @tmighty
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PROOF OF BURN (PoB) CONSENSUS ALGORITHM
The idea behind Proof of Burn Consensus Algorithm development came from Iain Stewart.
By meaning, Proof of Burn Algorithm is a process by which cryptocurrencies are purposely burned knowingly by individuals as a way of investing in that particular blockchain and also demonstrating their commitment to the network which gives them the right to mine and verify transactions.
Burning coins is the practical way of mining that gives mining power to the the persons who perform this act. The more work an individual does in burning a coin in a blockchain, the more the individual gets to be known in the blockchain, thereby giving the person higher chances to be elected as a block verifier or validator.
PoB is a way of destroying coins thereby restricting the availability of that coin in the market. This reduces the total market supply and circulating supply making the coin scarce and valuable. Since consensus algorithms are based on agreement, individuals who have been charged with the responsibility of burning coins buys back the coin from its users and burn them at will. They do this in favour of the network in which the coin is based.
Proof of Burn is done periodically. This can be monthly bi-monthly, yearly, bi-annually or every four years. In that particular year, as many volumes of the coin is bought back and burned by the people who have been put in charge. This way they mine and also invest in the coin For example, Bitcoin and Binance Coin burn I done quarterly (every four years). This was done in the year 2020 that has resulted in the high value of both cryptocurrencies.
HOW IT WORKS
The simple way coins are burn is by sending them to public verifiable addresses where they cannot be accessed by anyone. This addresses are generated without any private key with which they can be accessed. The addresses cannot be accessed by anyone, even the sender may not be able to locate them.
Naturally, this process reduces market availability, a economic scarcity of the coin and a rise in the price of the coin (the sole. objective of burning coin).
This is done to secure the network of the coin. The owners of these blockchain networks trusts the people in which they have given the work of **burning these coins as the validity of such coins in the crypto market is dependent on its price.
Burning of a coin can be done in two ways. It be done by burning of bitcoin (The individual coins are first converted to Btc before the burn) and it can be done by burning the native coin itself e.g BNB burn.
Top Cryptocurrency and Token that uses PoB Algorithm.
Bitcoin
Binance Coin
Ripple (XRP)
Crypto.com token (CRO)
FTX token
Slimcoin
Morpheus
Steem
Advantages of PoB
It is more maintainable as it the process consumes little power.
Hardware or disk mining is not needed, burning coin mines coins (not stressful and not difficult).
Coin burns reduces the amount or quantity of a coin in circulation.
Coin burns results in increased coin value or a shot up in price.
It helps in the security of a blockchain network which makes the coin sustenance of the network.
Coin distribution and mining is less centralized in PoB.
Disadvantages of PoB
It is not economic friendly as most of the coins burned were mined using Pow. It is seen as wastage as many resources were used to mine the most of the coins through Pow.
It is not proven to work in a large capacity. There is need to do a lot of testing to confirm the efficiency and security of PoB consensus algorithm.
There is delay is validation done by miners.
The process of burning coins is not always transparent to the average user and cannot be easily verified.
Conclusion
Aside the regular Proof of Brain used by the Steem Blockchain, the Steem blockchain also burns/converts steem to Steem Power in a process known as power down. This reduces the quantity of steem in circulation and in the hands of its users thereby increasing its value in the crypto market. Instead of burning which is destroying the coin in it's real sense, the Steem Blockchain provides a platform where steem can be converted to steem power. This way, the coins are preserved instead of burning and wasting the coins.
This is the solution to the homework task by me.
SPECIAL MENTIONS:
@steemitblog
@SteemitCryptoAcademy
@alphafx
@sapwood
@yohan2on
@stream4u
Good job, the effort is well received, although I have some corrections
Bitcoin uses PoW, Steem uses DPoS, XRP uses a specialized RPC if memory serves me right, and asides slimcoin, I do not think any other coin on this list e employs as a consensus mechanism, although they do periodically burn coins.
good work nevertheless.
Thanks for participating
Correction taken Prof... Thanks for your remarks.