SteemitCryptoAcademy: Consensus Algorithms@ alphafx || Proof of Burn Consensus Algorithm

Greetings, I will like to extend my appreciation to professor @alphafx for impacting this knowledge into us. Since the day I joined this academy, I can boost about learning a whole lot and I can’t even say thank you enough. This week’s test requires us to write on a couple of consensus algorithms and I decided to share my views on Proof of Burn (PoB). But before I start I will like to write a little about what consensus algorithms are since PoB is an example of it.

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What is consensus algorithms?

Consensus algorithms is a process which is used to achieve agreement among distributed systems. This process has to ensure that all trustees on the platform can agree on a particular truth and that’s what is known as consensus algorithms.

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What is Proof of burn?

Proof of Burn (PoB) is also known as the coin burn method is used by miners when they are in need of sending crypto coins to a burn address without the use of a familiar private key. In simple words, PoB is a blockchain consensus mechanism that uses much less power consumption as compared to its Proof of Work. This operates by giving miners the chance to burn virtual tokens.
This burn address certify the rationality of the coins that are being transferred and determine whether the holder of the coin has enough coins in his account and coins will go straight to the address once it is validated. The burn address in Binance is called the Burn function.

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How does Proof of Burn work?

In PoB random addresses are generated without having any private key related with them, this address are known as eater addresses. When in the burning process of coins, there is an economic scarcity hence increasing the value of the various coins that are burnt. But it is really another good and less risky way of investing without difficulty.

Proof of Burn has the same scheme as Proof of work but just that they aren’t focus on investing into hard labour, electricity and computational power but rather its blockchain platform is supposed to be made secured through the coin burns. PoB provides miners block rewards and over some time, the rewards given are expected to cover the amount of coins that are burnt at the initial stage. There are so many ways of executing PoB, many execute throught BTC and others by their native coins.

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Difference between Proof of Burn and Proof of Work

1. Proof to burn does not required so much computer power but Proof of work requires so much computing power and energy.

2. With proof of burn, customers are required to use virtual machines whiles more powerful machines are needed when working with proof of work.

3. In proof of burn, burnt coins cannot be recovered but recovery is possible in proof of work.

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What are the cryptocurrencies that uses proof of burn?

There are only a couple of coins that uses PoB. They are Factom (FCT), Counterparty (XCP) and slimcoin (SLM). Slimcoin uses both PoW and PoB.

Advantages of Proof of Burn

1. Proof of Burn does not require so much energy or excessive computing power in order to operate.

2. There is price stability in Proof of Burn. Because of this, it gives investors a good reason to be committed to a long term project.

3. This can be a protocol used in ICOs for the burning of coins that are not sold yet and also be used in the development of new tokens.

4. With Proof of Burn, coins and tokens and even other cryptocurrencies can be distributed in a decentralized way. In simple put, Proof of Burn promotes decentralization.

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Disadvantages of Proof of Burn

1. Verification process is so slow in Proof of burn as compared to the verification process in Proof of Work.

2. There is the risk of having no guarantee of retrieving the full value of crypto currency you burnt.

3. This protocol leads to scarcity of tokens and cryptocurrencies.

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Conclusion

Proof of burn is one of a popular consensus algorithm that attracts more investors because other projects has used its platform to stabilize its coins hence making more investors interested in that. Looking at its advantages, Proof of Burn has a promising future. To me, I think PoB is superior to all the other concensus methods (proof-of-work and proof-of-stake) in so many ways.

Thanks for reading @alphafx for taking us through.