I am very delighted to learn from this lecture delivered by @alphafx. Algorithms have always been an interesting topic for me. I am submitting this homework task based on what I have learnt from my professor’s lecture and my knowledge. I hope it will be good and beneficial for everyone
Proof of Burn (PoB)
- Proof of Burn (PoB) algorithm is invented by Iain Stewart that requires very less energy as compared to Proof of Work (PoW) for its blockchain consensus process. Decentralized networks using the PoB protocol, ensure that miners achieve a consensus through the burning of coins. Here burning refers to such a mechanism by which cryptos are permanently removed from circulation. PoB-powered blockchain platforms use it to verify transactions, this practise decreases inflation.
- (Proof of Burn)PoB use virtual mining rigs instead of physical ones to verify the transactions unlike of decentralized systems that are based on Proof of Work (PoW), such as Bitcoin. In other words, the Po-B miners burn coins to prove their network presence and mining rights. Burning of coins is directly proportional to access of mining blocks. If we are a miner, the more we burn coins the more we can mine blocks. It shows a virtual mining power of the miner and high the mining power, the more quickly we can find new blocks. It results in more rewards.
- This blockchain system bootstraps one blockchain to another with efficient energy consumption through validating that the "burning" of a coin was incurred by sending it to an unusable address. The coin burn method sends coins to an "eater address" while using a proof-of-burn (PoB) network. This address can be verified publicly, but cannot be accessed. It is important to know that addresses of eaters have been randomized and have no private keys. We can send transactions to the network that will burn our coins. Other people will mine/burn on top of our block and we can add other participant’s transactions to our block also. Essentially, this burning operation maintains the network agility and rewards participants for their actions (which include the burning of their own coins and the burning of other coins.
- The POB procedure has developed the mechanism for periodic combustion of crypto coins in order to avoid unfair benefits for initial adopters. Every time a new block is mined, the power of the burnt coins decays or reduces partially. Instead of a one-time early investment, this encourages routine mine operations. In future, miners will need to invest in better equipment as technology is progressing, to retain a competitive advantage.
A burnt parent token is hedged and new tokens are lifted on the hedged tokens for other purposes.
Some see burning tokens as the transmission of inherent work to achieve tokens based on burned tokens.
Example of Proof of Burn (PoB)
Slimcoin, a virtual network of currencies using POB, enables a miner to burn coins, giving them not only a right to compete for next block but also a chance to obtain blocks for even a year.
Basically, the implementation of Slimcoin's POB incorporates three algorithms: POS, POW and the main principle POB. This burning method uses POW. The more coins we use to burn, the more chances we get to mine, ensuring the POS is used and the entire ecosystem follows the principle of POB.
Difference between Proof of Burn & Proof of Work
- Proof of Burn reduces energy consumption while proof of work requires more energy consumption.
- As by the name refers, PoB involves burning of coins while proof of work uses a substantial amount of computer resources to prevent harmful cyber-attacks.
- More is burning in PoB, more is mining power while more are resources utilized, more chances for block mining.
- Finding a nonce is essential in Proof of Work but Proof of Burn does not requires any nonce for verification.
Difference between Proof of Burn & Proof of Stack
- As understood by the name, Proof of Stack requires staking an amount of coins but Proof of Burning requires burning of coins for block support.
- In Proof of Burning, coins are permanently finished while in Proof of Stack, coins can be put to stake and unstake any time and coins are not removed permanently.
- Proof of Stake gives a priority to specific miners on other miners on the basis of ownership in network while Proof of Burn does not involves such like that.
- Circulation supply is reduced in PoB while PoS does not reduce circulation of supply.
Benefits of Proof of Burn
- PoB is used for the purpose of adding value to several alternate coins as well as for cryptocurrencies.
- It is especially important to add an implied value to a new token to be created by using a burnt token.
- Slimcoin and XCP (Counterparty) are among those who have used the proof of burn to pass a token value.
- Proof of Burn increases mining power, the more we burn, the more we get power to mine.
- Energy consumption is minimized in proof of burn.
In this lecture we have learned the differences between different proofs within the cryptocurrency world and also how we can increase our mining power and show our mining rights. Proof of burn aims to replace proof of work and proof of stake while attaining distributed consensus. The major goal of Proof of Burn is to burn coins in such a way that it is hard to recover but easy to verify.