Proof of Burn (PoB) is a particular consensus protocol in which miners gain the power to mine a block by "burning" a portion of the tokens in their possession. That is, the mining capacity is given to that miner who spends a part of his money for the right to mine a block and claim the reward from him.
LThe creation and launch of the first cryptocurrency, Bitcoin, along with its underlying technology, the blockchain, have opened up endless possibilities and new technologies in crypto and financial ecosystems. One of these new technologies in development is the consensus protocol. Proof of Burn o Burning Test.
This protocol was designed by Iain Stewart, who he presented his idea about Proof of Burn, on the popular Bitcointalk forum, in December 2012. Iain uses an analogy to describe the algorithm: burned coins are like mining rigs. In this analogy, a miner burns his coins to buy a virtual mining rig that gives him the power to mine blocks. The more coins burned by the miner, the bigger his virtual mining “rig” will be.
Another forum user had presented a similar idea in January 2012, but his idea failed to materialize.
While the most common consensus protocols used by cryptocurrencies in their blockchains are the Proof of Work (PoW) y Proof of Stake (PoS), el Proof of Burn (POB) It promises to cover the flaws that the aforementioned algorithms have presented. To do this, it seeks to present a more efficient solution, while guaranteeing the security and stability of the network.
El Proof of Burn o Burning Test It does not use the mining process to discover and obtain new cryptocurrencies. Rather, on the contrary, it consists of the burning of some tokens of the native or alternative cryptocurrency, in order to earn the right to extract them. At first, this methodology may seem a bit illogical or meaningless, but to understand it, you have to discover how it works.
How does the Proof of Burn consensus protocol work?
The Proof of Burn (PoB) consensus protocol has a very particular way of reaching consensus and validating transactions within the blockchain. In the, miners must send cryptocurrencies to a verifiable public address. This address is known as eater addresses o dining direction, from where they will never be able to obtain them again. That is, miners must make a kind of investment in the blockchain with cryptocurrencies. And because of the greater number of cryptocurrencies burned in the network, the greater the mining power that the miner reaches.
In other words, miners must invest in the blockchain to demonstrate their commitment to the network. In this sense, this protocol is closely related to the Proof of Work (PoW). The difference is that miners should not invest in expensive and powerful computing equipment, but rather in tokens and cryptocurrencies.
In this way, in the Proof of Burn (PoB), the burned cryptocurrencies will be unusable and inaccessible to any user. This because of eater addresses are created randomly and have no known private keys associated with them. Therefore, cryptocurrencies cannot be recovered once they are sent to those addresses.
Motivation behind this protocol
The main motivation behind the design and creation of the Proof of Burn protocol, was to create a consensus protocol that required a really costly job to perform and more efficient than Proof of Work. Thus, the idea of consuming real and tangible resources such as a cryptocurrency or token with real value was born, in order to achieve the ability to mine within the blockchain.
Imagine the following, for a miner using Proof of Burn to be able to generate and verify blocks, it is necessary for them to make a payment of a certain amount of money in the form of cryptocurrencies or tokens. Just by making this payment, the miner will have the ability to mine and verify transactions on the blockchain. In doing so, it seeks to make the mining process especially costly and avoid denial of service attacks and 51% attacks. After all, carrying out attacks of this type would lead the malicious actor to spend money in euros, to buy coins from the blockchain. Doing so would raise the value, taking away any interest in performing these actions.
Advantages and disadvantages of Proof of Burn
Although the concepts and opinions about this protocol are very varied according to the user, in a general sense, we can mention the main advantages and disadvantages that the implementation of this consensus algorithm presents.
Pros
- Proof of Burn (POB) does not require an excessive amount of energy or computing power. Therefore, it is estimated that this protocol, while not using 100% renewable energy, is much more sustainable and friendly to the environment.
- The process of burning the tokens and cryptocurrencies is done virtually, so no mining equipment or hardware is required to carry out the burning of cryptocurrencies. Centralized hardware companies are eliminated, creating an imbalance of advantages in the sector.
- The Proof of Burn (PoB) guarantees the stability and security of the network, by encouraging miners to make investments (burning) with the coins and tokens. So it ensures the honest and trustworthy behavior of network miners, who do not want to lose their investments.
- In addition, encourages investor commitment to the long-term project, which in turn maintains and ensures price stability.
- This protocol also can be used to add value to a new developing token or for burning unsold cryptocurrencies in ICOs.
- The Proof of Burn (PoB) also makes it easier to distribute tokens and cryptocurrencies in a much more decentralized and fair way.
Cons
- Depending on the system, tokens to be burned may come from other cryptocurrencies (such as Bitcoin) or from alternate Proof of Work (PoW) processes. A factor that, for many, makes this protocol one that is no longer so friendly to the environment.
- El Verification process of the work done by each miner is much slower than that carried out in Proof of Work (PoW).
- Having no guarantee of recovering the values of the burned cryptocurrencies or tokens, Proof of Burn (PoB) users face a similar risk as when investing.
Very similar to Proof of Stake (PoS), in this protocol tThose who invest the most in burning cryptocurrencies will be more likely to validate transactions. This opens up the possibility of 51% attacks or denials of service.
How much do you know, cryptonuta?
Is Proof of Burn an insecure consensus protocol?FALSE!
The Proof of Burn (PoB) protocol is actually a double consensus consensus protocol. That is, it needs the operation of another protocol (such as PoW or PoS) to initially generate the coins that it is going to burn. Although certainly the difficulty of mining these PoW or PoS systems is not very great (as in other currencies), their existence gives us an initial security on the system. In addition to this, PoB applies other security measures to prevent coin burning from being altered in any way during its operation.
Cryptocurrencies and tokens that use the Proof of Burn
Currently, cryptocurrencies using this consensus protocol are Slimcoin (SLM), Counterparty (XCP) and Factom (FCT). Slimcoin (SLM) It is an open source cryptocurrency that uses both the Proof of Burn, PoW and PoS for the creation of its tokens, as well as for burning them in virtual PoB mining.
For its part, Counterparty (XCP), uses PoB only for the creation of its tokens. In it, users will send bitcoins to an eater addresses and receive Counterparty tokens in exchange.
Factom (FCT) on the other hand, it uses a more complicated process called “burn and mint”. In the Factom ecosystem, tokens are constantly created through the monetary policy of the project. On the other hand, tokens are burned as data is committed to the blockchain. Essentially, the more the Factom network grows, the more tokens are burned, and ultimately the coin supply should decrease.
Author
