A blockchain consensus mechanism aiming to bootstrap one blockchain to another with increased energy efficiency, by verifying that a cost was incurred in “burning” a coin by sending it to an
Proof-of-burn (PoB) is a blockchain consensus mechanism with minimal energy consumption, compared to
proof-of-work (PoW).
Decentralized platforms employing the PoB method ensure
miners reach a
consensus by
burning coins. Burning is the process of permanently eliminating cryptos from circulation. Although the practice reduces
inflation, PoB-powered blockchains use it to validate transactions.
However, unlike in PoW-based decentralized platforms like Bitcoin, Proof-of-Burn uses virtual
mining rigs instead of physical ones to validate transactions. Simply put, PoB miners initiate coin burns as a way to show their involvement in the
network and be allowed to mine.
How many coins a miner burns demonstrates his virtual mining power. Therefore, the more
coins, the higher the power and vice versa. Note that just like in PoW systems, higher mining power improves the speed of finding new
blocks. Consequently, the miner earns more rewards.
On proof-of-burn (PoB) networks, the coin burn process involves sending the coins to an “eater address.” This address is publicly verifiable but inaccessible. Note that eater addresses are randomized and they don’t have
private keys.
Proof-of-burn is similar to
proof-of-stake (PoS) in the sense that both consensus mechanisms involve interaction with coins to secure the network. However, unlike PoB, coins locked in PoS systems aren’t permanently erased; their holders can still access and sell them in case they want to leave the network. On the other hand, PoB, unlike PoS, leads to a coin scarcity.
Note that the PoB mechanism is a new type of consensus
algorithm. As such, it hasn’t been proven to work on large networks yet. Some advantages of the PoB mechanism is that it is sustainable and its
mining process is highly decentralized.