Proof of Burn (PoB)

With proof of burn, instead of pouring money into expensive computer equipment, you ‘burn’ coins by sending them to an address where they are irretrievable. By committinge your coins to never-never land, you earn a lifetime privilege to mine on the system based on a random selection process. A user who gives up short term wealth proves that they are following the consensus mechanism and is rewarded with a lifetime privilege to mine the next block on the blockchain. Coins are sent to unspendable address

Used in

  • Slimcoin to get the right to write blocks Node should “burn” amount of coins. The more coins Node “burns” more chances it has to create blocks (for long period) -> Nodes address gets a score called Effective Burnt Coins that determines chance to find blocks. Block creator rewarded with block rewards.

  • TGCoin (Third Generation Coin)

Pros

  • Keeping coins is not rewarded like in PoS

Cons

  • Burning coins doesnt guarantee that you’re selected to mine future blocks, whales are favored

  • security get better with huge market capital (attack costs increase)

  • As with PoS, the principle is not suitable for distributing the first coins.

Research

Proof-of-burn has been used as a mechanism to destroy cryptocurrency in a verifiable manner. Despite its well known use, the mechanism has not been previously formally studied as a primitive. In this paper, we put forth the first cryptographic definition of what a proofof-burn protocol is. It consists of two functions: First, a function which generates a cryptocurrency address. When a user sends money to this address, the money is irrevocably destroyed. Second, a verification function which checks that an address is really unspendable. We propose the following properties for burn protocols. Unspendability, which mandates that an address which verifies correctly as a burn address cannot be used for spending; binding, which allows associating metadata with a particular burn; and uncensorability, which mandates that a burn address is indistinguishable from a regular cryptocurrency address. Our definition captures all previously known proof-of-burn protocols. Next, we design a novel construction for burning which is simple and flexible, making it compatible with all existing popular cryptocurrencies. We prove our scheme is secure in the Random Oracle model. We explore the application of destroying value in a legacy cryptocurrency to bootstrap a new one. The user burns coins in the source blockchain and subsequently creates a proof-of-burn, a short string proving that the burn took place, which she then submits to the destination blockchain to be rewarded with a corresponding amount. The user can use a standard wallet to conduct the burn without requiring specialized software, making our scheme user friendly. We propose burn verification mechanisms with different security guarantees, noting that the target blockchain miners do not necessarily need to monitor the source blockchain. Finally, we implement the verification of Bitcoin burns as an Ethereum smart contract and experimentally measure that the gas costs needed for verification are as low as standard Bitcoin transaction fees, illustrating that our scheme is practical. by Kostis Karantias,Aggelos Kiayias,Dionysis Zindros September/2019, Financial Cryptography 2020 https://eprint.iacr.org/2019/1096.pdf

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