What is Proof-of-Burn (PoB)?
Let's find out Proof-of-Burn (PoB) meaning, definition in crypto, what is Proof-of-Burn (PoB), and all other detailed facts.
Proof-of-Burn (PoB) is a blockchain consensus mechanism that uses virtual mining devices and consumes less energy than Proof-of-Work (PoW). Miners on networks using the PoB mechanism verify and create new blocks by burning cryptocurrency coins.
Burning is the process of taking cryptocurrency assets out of circulation permanently. This practice is typically used to reduce inflation. However, it has been applied for transaction validations on blockchain networks that use the Proof-of-Burn consensus mechanism.
Blockchain systems maintain all data regarding transactions completed on the network in blocks. New blocks are verified and added to the chain once all network nodes reach a consensus on valid transactions.
Since this process is autonomous and decentralized, networks require automated mechanisms to ensure the consensus between all nodes. Consensus algorithms, like Proof-of-Work, Proof-of-Stake, and Proof-of-Burn, take up this role in the network.
Proof-of-Burn was developed with the intent of creating a system capable of preventing fraudulent transactions on the blockchain network. This mechanism can also improve blockchain efficiency and functionality.
Proof-of-Burn stands out for using virtual mining rigs instead of the physical hardware required for Proof-of-Work processes on blockchains like Bitcoin. PoB miners prove their network involvement by burning crypto coins which allows them to mine. The power of the virtual mining rig is determined by how many coins they can burn.
Similar to the PoW mechanism, having higher mining power means that new blocks can be found faster, thus allowing the miner to earn more rewards.
The coins used on Proof-of-Burn networks are sent to an eater address where they cannot be accessed as these addresses do not have private keys. Eater addresses are publicly verifiable.
Miners can opt to use the native currency of the blockchain or the currency of alternative chains for burning. If they use alternative currencies, they receive a reward in exchange, converted to the native currency of the blockchain they are connected to.
Proof-of-Burn shares some basic similarities with the Proof-of-Stake consensus mechanism as both require coin interactions to maintain the network. However, assets used in PoS networks remain accessible after use and are not permanently burned. The process of PoB can lead to coin scarcity.
Proof-of-Burn is a relatively new consensus mechanism and has not been implemented by any major blockchain networks. Some of its advantages over the more conventional consensus algorithms are sustainability and decentralization of the mining process.