Good day lovely members of the steemit crypto academy community. It is an honor to be part of this week's lecture, as i learned a lot from the lecture on "consensus algorithms" by professor @alphafx. I am here to present my homework task post on this interesting topic.
Consensus algorithm which also means consensus mechanism is an adopted network by a blockchain which has the objective of getting an agreement to figure out the state of the blockchain and answering questions. This particular implementation is quite different based on the decentralization, security and incentives among other factors. We have several consensus algorithm which includes; proof of capacity, proof of burn, and many more but in this particular homework task i will be talking on proof of burn.
The abbreviation for proof of burn is (PoB). It was designed by Lain Stewart who launched this in December 2012 on one of the known bitcointalk forum. This particular consensus algorithm allows miners to burn a section of the tokens they have in order to mine a block and complete transactions. It has a minimized energy consumption power as compared to that of proof of work. Unlike in proof of work where mining rigs are not used in completing transactions rather physical ones but in proof of burn mining rigs are used in completing transactions.
A miner will only have a high power if he/she have more coins mined and the vice versa. Also having the higher power enables you to be a validator for the next block. The virtual mining of a miner is known by how many coins he/she is able to mine. Moreover, PoB and PoS are alike which they are both engaged in interacting with the tokens in order to secure the system.
There are some terminologies we need to understand when dealing with proof of burn and below are some of the terms;
Mining Power: The mining power is use in mining new blocks and a miner can get this mining power by burning tokens. Although, the mining power reduces as a miner keep mining new blocks. The reduction of mining power is known as decay. This is a factor which promotes continues burning of cryptocurrency assets by miners in order to keep their mining power.
Inaccessible Wallet: When miners burn coins, they forward them to a randomly generated wallet address which has no private key and can not be accessed by anyone. These cryptocurrency asset is pulled out of circulation and can have a serious effect on the increase in value of the coin.
Cryptocurrency coins are burned by miners which gives them the right to produce blocks on the blockchain, the produced block is from the burnt coin. This burning of coin is simply transferring a particular portion of a coin to a wallet nobody can have access to.
With the proof of burn consensus algorithm, it completes transactions within the blockchain system through a particular process . With that, a miner forwards the cryptocurrency to a verified public address known as dining direction. No one can have any access to the address at this particular stage. The addresses don't have private keys which makes them to be useless. A miner can't retrieve the active key again if he/she forwards any cryptocurrency asset to the address.
If a miner burns more cryptocurrency assets within the system then the greater the mining power and the higher the opportunity of getting block rewards. Miners are rewarded within a particular period of time which usually cover up the initial investment of the miner at the beginning of the burning of coins. The proof of burn system is manufactured in a way that, the miner has to invest more resources to get higher profits.
| Proof Of Burn | Proof Of Work |
|---|---|
| Lower security and efficiency | Higher security and efficiency |
| A miner does not need to own a mining hardware to operate | A miner needs a mining hardware to operate |
| The capital involve in operating is very cheap | The capital involve is very expensive |
| Lower energy consumption | Higher energy consumption |
| Proof Of Burn | Proof Of Stake |
|---|---|
| Coins are burnt in order to mine and get rewarded for completing transactions | Forgers stake their own coins by locking them up and may decide to withdraw all the coins and sell if they don't want to belong to the system anymore |
| There is permanent economic scarcity in proof of burn | No permanent scarcity in proof of stake |
| Need no mining hardware to operate | Mining hardware is needed to operate and it is very expensive as well |
1. The energy consumption in proof of burn is less.
2. They add value to newly developing tokens.
3. The capital involve in operating a proof of burn is lesser as compared to other consensus algorithm types.
4. Circulating supply is minimize due to the burning of coins.
5. It can also be used for bootstrapping one cryptocurrency asset off another cryptocurrency asset.
1. Proof of burn is very unpopular as compared to the other consensus algorithms (proof of stake and proof of work).
2.The verification process of proof of burn is slow.
3. High risk is involved in proof of burn as one has no assurance of recovering the values of burned tokens.
To conclude with, proof of burn prevents accumulation of unnecessary power as miners have their mining power decay with each block they create. Also, it consumes less energy as compared to both proof of work and proof of stake hence making it a good and reliable protocol to use in your investments. Miners should be very careful of this protocol as it is expose to hackers due to its low security. In addition with, i strongly believe that in the coming years many blockchain platforms will adopt to this protocol.
Thank you very much.
good work, would have liked you to talk about the projects using P.O.B in detail
Total 7
Thanks for participating
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