About The Proof of Burn (PoB) Algorithm

in hive-175254 •  7 months ago 

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Consensus algorithm or mechanism has remained one of the major aspects of any blockchain network as it is what is used to reach consensus, create new block, validate block on the blockchain network. When it comes to investing in cryptocurrencies, it is very important to understand and have an in-depth knowledge of the blockchain and the concensus algorithm as part of the fundamental analysis as it goes a long way when it comes to making the right investment decision.

We all know that Bitcoin holds the status as the first blockchain and cryptocurrency to be created and it consensus algorithm was the proof of work where miners make use of expensive and high computation mining rigs in order to compete against other miners to solve the complex mathematical problems and add new block to the blockchain network.

This process became more and more problematic as mining rigs became more and more scarce and expensive. While miners make a lot from mining due to the value of bitcoin, it is also important to know that the process to become a successful bitcoin miner isn’t an easy one and require a lot of investment on the expensive mining rigs and sometimes, it is not even guaranteed that a new miner would recover the cost of setting up a mining rig for bitcoin.

Proof of burn consensus algorithm is simply a type of consensus algorithm that has to do with miners burning coins to unrecoverable and irretrievable addresses that has been randomly generated and doesn’t have any private keys attached to them. Proof of burn was created to be an alternative to the already proven and popular proof of work and proof of stake. One thing that makes proof of burn stand out aside from the fact that it is the only consensus algorithm that burns coins to reach consensus, it also has a connection with proof of work because it burns coins that has been mined by proof of work mechanism.

How does proof of burn work?

When it comes to proof of burn, there isn’t only one version of it, in fact, there are various versions of the proof of work consensus mechanism or algorithm. Basically, the proof of burn works by miners burning coins to verifiable addresses that doesn’t have any private keys attached to them – which simply makes those addresses unrecoverable and the coins irretrievable, meaning that those coins sent to those addresses are burnt or gone forever, removing them out of circulation.

While there are some similarities between proof of burn and proof of work, the proof of burn consensus algorithm is very much different in its own way… proof of burn uses what is known as virtual mining rigs instead of the physical mining rigs which proof of work uses. When miners burn coins to these unrecoverable addresses that doesn’t have any private keys attached to them, they show their commitment and gain rights to mine and validate transactions on the network. Simply put, the more coins a miner burns, the more mining power the miner gets and the more mining power, the higher the chances that the miner will be chosen to validate the next block.

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hello @designieplay,
Currently many projects fail because they do not have an efficient cryptocurrency burning system, i.e. if a project cannot maintain the minimum demand for its token the price will fall and the token will disappear. On the other hand becoming a miner requires a high investment and many times the return on that investment is very slow, that is why investors prefer to take a risk with tokens instead of trying to invest in mining.

Greetings @designieplay entertaining read that allows us to familiarize ourselves with the protocols implemented in some blockchain networks.

I find interesting the way they burn tokens or crypto as it allows to run proof of burn consensus which uses what is known as virtual mining platforms instead of physical mining platforms that prove the work.

Regards

Yea... it is very important to understand the consensus mechanism a blockchain uses so as to make the best decision when investing in the cryptocurrency. The Proof of burn consensus mechanism isnt very popular yet but has shown to also have its own benefits compared to other consensus algorithms