What Is Proof-of-Burn PoB?

This important task is performed by consensus-mechanism algorithms. The idea behind crypto burn meaning is that it creates a “negative mining” incentive. In other words, to create new tokens, someone must first destroy some existing ones.


Burning coins simply means sending coins to a verifiably unspendable address, so they are effectively destroyed. The process of burning coins is sometimes called ‘destroying’ coins, but the reality is that the coins aren’t being burned because their data still exists on the network. Instead, it’s better to think of burning as an irreversible public action where the coins are sent to a place where they’re no longer spendable. Proof of burn is a method for distributed consensus and an alternative to Proof of Work and Proof of Stake. The proof of burn consensus method requires another cryptocurrency, usually Bitcoin, to be destroyed or burned by having it sent to an unspendable address, known as an eater address.

In practice, users identify tampering through hashes, which are lengthy sequences of integers that serve as Bitcoin proof of work. Put a particular data set through a hash function, and it will only produce one hash. However, because of the “avalanche effect,” even little changes to any piece of the original data will result in a completely unreadable hash.

Proof of Burn – example

Miners accomplish this task by employing mining devices that generate computations quickly. The goal is to be the first miner with the target hash because that miner will be the one to update the blockchain and receive cryptocurrency rewards. Blockchains that use this consensus mechanism provide block rewards to miners in the currency of the blockchain. To avoid any undue advantages for early adopters, the PoB has devised a method that allows for the periodic burning of crypto coins in order to maintain mining capacity. Any time a fresh block is mined, the energy of burned coins decreases slightly.

  • It’s unclear yet whether this will adequately deal with the rich get richer problem that exists in many economic systems.
  • Depending on the implementation, miners either burn the blockchain’s native currency or the currency of an alternate chain, such as Bitcoin.
  • In the case of Ripple and Request Network, the process is different.
  • Needless to say, the fact that they have a working utility token and a descending money supply has made the demand for their token pretty robust.
  • Participants had to send Bitcoins to an unspendable Bitcoin address and received Counterparty tokens in exchange.
  • These include white papers, government data, original reporting, and interviews with industry experts.

This algorithm is implemented to avoid the possibility of any cryptocurrency coin double-spending. Proof-of-burn is a process where cryptocurrency holders use their coins to burn them by sending them to an unspendable address. Doing this destroys the coins, and in return, they are rewarded with new tokens.

Each time a user makes a transfer they pay transaction fees, and the network burns a small amount from that fee. Again, this has the effect of reducing the total supply of that coin. In this scenario, the value is spread to everyone in the network from the resulting deflation.

Block forgers or minters are used for the validation of new blocks. The forger who puts more coins at stake has a greater chance to be selected as the block validator. Proof of stake is another algorithm that allots mining rights to miners proportional to their stakes held in the cryptocurrency. Proof-of-Work is a system where new coins are created by solving a difficult mathematical problem.

Blockchain Security: How to Understand Blockchain Audits to Stay Safe in DeFi

Miners need to burn a part of their coins in order to secure the right to mine new blocks on the network. In theory, this means that miners are still working to secure the network, except that it’s in the form of the destruction of coins. The idea here is that miners don’t need the heavy expense of hardware and electricity to do the work. Proof-of-Stake is more scalable than proof-of-work because it does not require nearly as much computing power. Proof-of-stake cryptocurrencies are more environmentally friendly because they can process transactions faster, with less energy usage, and for lower fees.


When the Bitcoin is burned the sender receives a set number of other coins in exchange based on the amount of Bitcoin burned. They also burn tokens on a quarterly basis with the aim of achieving a total supply of 100 million coins. Needless to say, the fact that they have a working utility token and a descending money supply has made the demand for their token pretty robust. BNB is one of the few tokens that has outperformed Bitcoin since listing.

Proof-of-burn is an attempt at creating a system that can prevent fraudulent transactions on a blockchain and can also improve the overall efficiency and functioning of the blockchain. Though not implemented completely in their consensus methods, there are other cryptos that use burning as a feature for a number of other benefits. This consensus mechanism is usually viewed as an energy-efficient version of Proof of Work. However, the absence of competition makes this method of attaining consensus rather concentrated, as whales with enormous numbers of tokens have far more voting power.

Coin-burning as a tool for transition between cryptocurrencies

The first miner to solve the problem is rewarded with a certain number of new coins. This system is used to prevent people from creating fake coins by solving the problem faster than everyone else. Another key difference is that the mining process is much slower with Proof-of-Burn. To create a new block, you first need to find an unused address and submit proof of burn transaction.

In a POW system, miners are rewarded for updating the blockchain. This entails using computing power to solve a mathematical equation and results in a monetary reward. Bitcoin, the original and most popular cryptocurrency, uses a POW system. Unlike other consensus mechanisms, PoB does not require expensive hardware or a high level of skill to participate in. This makes it easier for people to get started, especially when the alternative currencies are still in their infancy. Proof-of-Burn is a method where new coins are created by burning a certain amount of an existing coin.


The more satoshis sent to the key, the more “Proof-of-Burn” it represents. Proof-of-Burn is often used in blockchain projects that issue their tokens, as it provides an extra layer of security against devaluation and inflation. It also encourages users to hold onto their tokens rather than sell them, as they can only be redeemed by destroying other cryptocurrencies. To participate in the network, you have to sacrifice something valuable.

What is the difference between PoB, PoW, and PoS?

The three most common are Proof-of-Burn , Proof-of-Work , and Proof-of-Stake . Burning your coins makes them scarce, which usually drives the price higher. Also, if you want to get in at the ICO stage for a new Proof-of-Stake token, burning some BTC or altcoins will likely raise demand while lowering supply. Aside from providing investors with the certainty they want, it also encourages long-term project investment, which maintains and ensures price stability.


Proof-of-burn is similar to proof-of-stake in the sense that both consensus mechanisms involve interaction with coins to secure the network. However, unlike PoB, coins locked in PoS systems aren’t permanently erased; their holders can still access and sell them in case they want to leave the network. It holds all transaction-related information on blocks and those blocks act as the data storage units of the blockchain.

Proof-of-work is a blockchain consensus mechanism used to confirm and record cryptocurrency transactions. It requires network participants to use computational power to solve complex cryptographic puzzles as fast as possible, rewarding only the first participant to succeed. In the case of platforms that use PoB, miners reach a consensus by burning coins, a process through which cryptos are permanently eliminated from circulation. When compared to PoW, the PoB consensus mechanism has reduced rates of energy consumption. In other consensus mechanisms, miners have become highly influential over the network because they control so much hashing power.

Proof of Burn (Cryptocurrency)

The winners add the most recent block of transactions to Bitcoin’s network. They are also rewarded with Bitcoin in the form of newly generated coins and transaction fees. So, PoB blockchains are secured by this investment made through coin burns.

DCA Meaning Crypto: What Does DCA Mean in Cryptocurrency?

The term “Proof-of-Burn” refers to locking some amount of cryptocurrencies , i.e., sending them to an unspendable address in exchange for tokens on some other blockchain. The locked cryptocurrencies are effectively destroyed, as they can no longer be used for anything other than exchanging for the new tokens. The process of burning coins is based on proof of work; the more coins you burn, the greater your chances are to mine them, ensuring proof of stake; and the whole ecosystem adheres to the proof of burn theory. Slimcoin, for example, is a virtual currency network that employs proof of burn and allows miners to destroy coins in order to compete for the next block and win blocks over a period of at least a year. Proof-of-Burn is a consensus mechanism that attempts to resolve the high energy consumption issues that plague PoW-based blockchains. Factom uses a more complicated implementation process called burn and mint.

Proof of Burn

Token holders do not vote on the validity of blocks under the delegated proof of stake . Rather, they vote to select the delegates who will validate their votes on their behalf. In EOS, for example, a pool of 21 delegates is picked at random from hundreds of users to confirm blocks. When a delegate fails to deliver a block or if they confirm incorrect transactions, they are replaced by a freshly chosen delegate. Bitcoin’s proof-of-work algorithm aims to add a new block every 10 minutes.

Similar posts

You may send transactions to the network that will destroy your own cryptocurrency coins. Other participants can mine overtop of your block, and you can take the transactions of other participants and incorporate them into your own. As we saw from the Counterparty example above, around 2,100 Bitcoins have been taken out of circulation to create XCP tokens.

Leave a Reply

Your email address will not be published. Required fields are marked *