This article is about Proof of Burn in blockchain technology. In this guide, we going to look at the below-listed points in detail.
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- Why PoB is required?
- How does it work?
- Advantages and disadvantages of PoB
Why Proof of Burn Required?
Looking at some of the drawbacks of the PoW consensus algorithm researchers decided to look forward to a new consensus algorithm i.e PoB.
- The first drawback is the power consumption of PoW which is considered to be very high. Miners are rewarded by upgrading the ledger under a PoW model. In exchange for remuneration, computational power is employed to solve a math problem. The greater the money a miner spends to solve the problem, the greater the possibility that they will get to mine blocks.
- PoW needs very high capital investments.
Working of PoB
- As the name suggests, it’s obvious that in PoB virtual currency is burned. The more the currencies miners burn, the more they have the power to create blocks.
- By burning it means not using that coin. In simple words, it is sent to somewhere where it can’t be spent. So miners send these coins to such addresses from where they can’t be used. Normally, it is sent to a public verifiable address where it cannot be accessed and thus can not be used.
- you must be thinking about what happens when a coin gets burned. Well, let me inform you when the coin is burnt its availability decreases. Decreasing availability leads to a potential increase in the value of the coin.
- So why do we need to burn the coin? By destroying the currency, the consumer is displaying a big commitment to the currency by foregoing a narrow benefit in exchange for a long-term profit.
- The PoB has devised a process that is helpful for the periodic burning of crypto coins in order to maintain mining capacity. The energy of burned coins decreases slightly, whenever a fresh block is mined.