- Proof-of-Burn (PoB) is a method for distributed consensus and an alternative to Proof-of-Work and Proof-of-Stake. It can also be used for bootstrapping one cryptocurrency off of another.
- The idea is that miners should show proof that they burned some coins - that is, sent them to a verifiably unspendable address, also called 'eater address'. This is expensive from their individual point of view, just like Proof-of-Work; but it consumes no resources other than the burned underlying asset. To date, all proof-of-burn cryptocurrencies work by burning proof-of-work-mined cryptocurrencies, so the ultimate source of scarcity remains the proof-of-work-mined "fuel".
- From Bitcoin.com (25-11-2019:
"The brainchild of Iain Stewart, the Proof of Burn mechanism encourages users to burn – or make permanently unavailable – mined coins. In return, they are granted the right to add blocks in proportion to the coins that have been destroyed. The idea is that users burning their cryptocurrency are exhibiting a long-term commitment to the coin by being willing to accept a short-term loss. In other words, to invest. PoB is often dubbed PoW without the energy waste, with no high-grade mining hardware or computational resources required."
One popular mechanism that evolved from token burning is proof-of-burn (PoB) consensus, which is based on users destroying their tokens to gain mining rights. Proof-of-work remains a popular choice, especially due to its advocacy by Bitcoin, but it consumes significant resources and can be unfeasibly expensive. PoB attempts to address this issue by restricting the number of blocks miners that can verify (and attach new blocks to the blockchain) in order to match with the number of tokens they’ve burned. Essentially, they create virtual mining fields that can grow larger as they burn more tokens.
In theory, the burning of tokens will reduce the number of miners at any given time and decrease the need for resources as competition is lowered. In practice, this mechanism would give large miners, who can burn vast volume of tokens at once, a disproportionate capacity. To combat this, many PoB implementations use a decay rate that reduces the total mining capacity of a miner whenever it verifies a transaction, so that each must constantly invest more tokens to burn and thus remain competitive. PoB is also similar to proof-of-stake, since both require users to lock up their existing assets to gain the privilege of mining. Unlike PoB, however, stakers can take their coins with them if they choose to stop mining."
- From this post:
"Proof of Burn (PoB) algorithm which works in a fairly simple fashion. The miners of the PoB coins will send coins to an unspendable address — otherwise known as an “eater address” — thus taking them forever out of circulation or burning them. These transactions are recorded on the blockchain, ensuring that there’s a necessary proof that the coins cannot be spent again, and the user who burned the coins is issued a reward.
The entire idea behind proof-of-burn consensus is that the user burning the cryptocurrency is showing long-term commitment to the coin by burning it. This is because they are taking a short-term loss in exchange for a long-term gain. Additionally, burning coins is also viewed as less resource intensive by some since the main resource being used is the person’s willingness to delay their profits. As long as someone is okay with being patient for their gains, then this may be the consensus algorithm from him or her.
As time progresses, the user of a proof-of-burn coin continues receiving rewards, either increasing their stake of alternative coins or earning greater privileges for mining on the network. This way, if a user burns more coins, they’ll have a greater chance of successfully mining the next block and further increasing their overall rewards. Moreover, there are actually a few different ways to implement a proof-of-burn consensus mechanism. In some cases, an existing proof-of-work coin can be burned in exchange for the PoB coin. In other cases, the actual PoB coin is burned in order to gain increased mining privileges.
In much the same way that the cost of mining Bitcoin increases over time in the form of hardware and electricity costs, the cost of mining a PoB coin also increases over time as more coins need to be burned to maintain the same odds of being selected to mine the next block."