Clear DefinitionsProof-of-Burn
1 min read
Pronunciation
[proof uhv burn]
Analogy
Imagine an auction where, instead of bidding money that goes to a seller, participants bid by throwing money into a fire (burning coins). The more money they are willing to destroy, the higher their chance of winning the right to perform a valuable service (like mining blocks) for the community. This act of burning proves their long-term commitment because they've incurred an irreversible cost.
Definition
A consensus mechanism where participants 'burn' (destroy) cryptocurrency by sending it to an unspendable address. In return, they gain the right to mine or validate blocks, often proportionally to the amount burned. This demonstrates commitment to the network by sacrificing value.
Key Points Intro
Key Points
Miners/validators destroy (burn) a portion of their own cryptocurrency or another cryptocurrency to earn the right to mine new blocks.
The act of burning serves as a proof of commitment, similar to investing in mining hardware in PoW.
Can be used as an alternative to PoW to avoid high energy consumption or as a way to bootstrap a new currency from an existing one.
The more coins burned, the higher the probability of being selected to mine a block.
Example
Slimcoin is a cryptocurrency that uses Proof-of-Burn. Some projects have used PoB as a mechanism to distribute initial tokens for a new chain by requiring users to burn Bitcoin or another established coin.
Technical Deep Dive
Proof-of-Burn can be implemented in various ways. One common method involves sending coins to a verifiably unspendable address (an address for which no private key exists or is known). The transaction proving this burn is then used as evidence of commitment. The system might then grant mining rights for a certain period or a certain number of blocks based on the amount burned. This is seen as a long-term investment in the network's security, as the burned coins are gone forever, representing a real economic cost.
Caveat
Proof-of-Burn has been criticized for the potentially wasteful destruction of value, though proponents argue it's less wasteful than PoW's energy consumption. It also raises questions about wealth distribution and whether it truly solves centralization issues, as those with more coins to burn can gain more influence.
Proof-of-Burn - Related Articles
No related articles for this term.