PROOF OF WORK

protocol in which miners gain the power to mine a block by "burning" a portion of the tokens in their possession. The creation and launch of the first cryptocurrency, Bitcoin, together with its underlying technology, the blockchain or blockchain , opened up endless possibilities and new technologies in cryptographic and financial ecosystems. One such new technology under development is the Burn Test or Burn Test Consensus Protocol.

The idea of the proof of burn was presented in 2012 on the bitcointalk platform by Iain Stewart, Iain uses an analogy to describe the algorithm: Burnt coins are like mining platforms. In this analogy, a miner burns his coins to purchase a virtual mining facility that gives him the power to mine blocks.

The more coins a miner burns, the larger their virtual mining "platform" will be. Another forum user had submitted a similar idea in January 2012, but his idea didn't materialize. However, the most common consensus protocols used by cryptocurrencies in their blockchains are Proof of Work (PoW) y Proof of Stake (PoS) , and the Proof of Burn (PoB) promises to cover the flaws presented by the above algorithms.

To do this, it tries to present a more efficient solution, ensuring the security and stability of the network. El Burn test or Combustion test does not use the mining process to discover and obtain new cryptocurrencies. But, on the contrary, it consists of burning some tokens of the native or alternative cryptocurrency, in order to earn the right to mine them. At first this methodology may seem a bit illogical or useless, but to understand it you need to understand how it works.

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THE WORKING PROCESS OF THE PROOF OF BURN

The Proof of Burn (PoB) consensus protocol has a very unique way to reach consensus and validate transactions within the blockchain. A, miners must send cryptocurrencies to a public and verifiable address . This address is known as an eater address or lunch address , from where they will no longer be able to get them. That is, miners have to make some sort of blockchain investment with cryptocurrencies. And the more cryptocurrencies burned on the network, the greater the mining power achieved by the miner. The difference between the proof of work and the proof of burn is that miners should not invest in powerful and expensive computer equipment, but in tokens and cryptocurrencies. In this way, in the Proof of Burn (PoB), the burnt cryptocurrencies will remain unusable and inaccessible to any user. This is because eater addresses are created randomly and have no known private keys associated with them. So cryptocurrencies cannot be recovered once sent to those addresses.

THE RATIONALE BEHIND THIS PROTOCOL

The primary motivation behind designing and creating the Proof of Burn protocol was to create a consensus protocol that required very expensive work to perform and more efficient than Proof of Work. In this way, the idea of ​​consuming real and tangible resources such as a cryptocurrency or a token with a real value was born, in order to achieve the ability to mine within the blockchain.

Imagine the following, in order for a miner using Proof of Burn to have the ability to generate and verify blocks, they need to make a payment of in form of tokens or cryptocurrencies. Only by making this payment will the miner be able to mine and verify transactions on the blockchain.

With this it tries to make the mining process particularly expensive and avoid Denial of Service attacks and attacks by 51%. After all, carrying out attacks of this type would lead the attacker to spend money in euros, to buy coins from the blockchain. Doing so would increase its value, taking away any interest in performing these actions.

PROS AND CONS OF PROOF OF BURN

Although the concepts and opinions on this protocol vary widely depending on the user, in a general sense, we can mention the main advantages and disadvantages of implementing this consensus algorithm.

ADVANTAGES

Test of Burn (PoB) does not require an excessive amount of energy or computing power . So it is estimated that this protocol, as long as 100% renewable energy is not used, is much more sustainable and environmentally friendly.
The process of burning tokens and cryptocurrencies is done virtually.

Therefore , no mining equipment or hardware is required to burn cryptocurrencies. Centralized hardware companies are eliminated, creating an imbalance of benefits in the industry.

The Proof of Burn (PoB) ensures the stability and security of the network by encouraging miners to invest (by burning) with coins and tokens. So it guarantees the honest and trustworthy behavior of miners in the network, who do not want to lose their investments. In addition, it promotes the long-term commitment of investors to the project , which in turn maintains and guarantees price stability.

This protocol can also be used to add value to a new token under development or to burn unsold cryptocurrencies at ICOs .
Proof of Burn (PoB) also facilitates the distribution of tokens and cryptocurrencies in a much more decentralized and fair way.

DISADVANTAGES

Depending on the system, the tokens to be burned can come from other cryptocurrencies (such as Bitcoin) or from alternative Proof of Work (PoW) processes. A factor that for many makes this protocol no longer so environmentally friendly.

The process of verifying the work done by each miner is much slower than that done in Proof of Work (PoW). With no guarantee of recovering the values ​​of cryptocurrencies or burnt tokens, users of Proof of Burn (PoB) face a risk similar to when making investments.

Much like Proof of Stake (PoS), in this protocol those who invest more in cryptocurrency burning will be more likely to validate transactions . This opens up the possibility of a 51% attack or denial of service.

CRYPTOCURRENCIES AND TOKENS THAT USE PROOF OF BURN

Currently, the cryptocurrencies that use this consensus protocol are Slimcoin (SLM) , Counterparty (XCP) and Factom (FCT). Slimcoin (SLM) It is an open source cryptocurrency that uses both Proof of Burn, PoW and PoS for the creation of its tokens, and to burn them in virtual PoB mining. On the other hand, Counterparty (XCP) , uses the PoB only for the creation of its tokens. In it, users will send bitcoins to eaters' addresses and receive the counterpart's tokens as an exchange. Factom (FCT) on the other hand, uses a more complicated process called "burn and mint". On the other hand, tokens are burned while data is transferred into the blockchain. Basically, the more the Factom network grows, the more tokens are burned and eventually the coin supply should decrease.

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