Proof-of-burn (PoB) is a blockchain consensus mechanism with minimal energy consumption, compared to proof-of-work (PoW). Decentralized platforms employing the PoB method ensure miners reach a consensus by burning coins. Burning is the process of permanently eliminating cryptos from circulation. Although the practice reduces inflation, PoB-powered blockchains use it to validate transactions.
However, unlike in PoW-based decentralized platforms like Bitcoin, Proof-of-Burn uses virtual mining rigs instead of physical ones to validate transactions. Simply put, PoB miners initiate coin burns as a way to show their involvement in the network and be allowed to mine.
How many coins a miner burns demonstrates his virtual mining power. Therefore, the more coins, the higher the power and vice versa. Note that just like in PoW systems, higher mining power improves the speed of finding new blocks. Consequently, the miner earns more rewards.
On proof-of-burn (PoB) networks, the coin burn process involves sending the coins to an “eater address.” This address is publicly verifiable but inaccessible. Note that eater addresses are randomized and they don’t have private keys.
Proof-of-burn is similar to proof-of-stake (PoS) 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. On the other hand, PoB, unlike PoS, leads to a coin scarcity.
Note that the PoB mechanism is a new type of consensus algorithm. As such, it hasn’t been proven to work on large networks yet. Some advantages of the PoB mechanism is that it is sustainable and its mining process is highly decentralized.