Proof-of-Burn

Proof-of-burn is a distributed consensus method and an alternative to proof-of-work and proof-of-stake. This method can also be used to form a new cryptocurrency from others. The method consists of miners who must show proof that they have burned coins - i.e. sent them to a verifiably impregnable address (i.e. it is not possible to spend the amount). Despite being costly from an individual point of view, just like proof of work, burn proof does not consume any resources other than the underlying burnt value. Until then, most proof-of-work-based cryptocurrencies work by burning cryptocurrencies generated by proof-of-work mining.

Motivation:

The central idea of ​​the method is to present a task that is difficult to perform (such as proof of work), but with a consumption of resources that are not reflected in the real world. With proof of work, real resources are consumed: mining equipment is manufactured, with labor and materials such as input, electricity usage, among other factors. While a cryptocurrency is in its initial phase of distribution, proof of work is the most used way. However, once a cryptocurrency is in operation, with its initial distribution phase close to success, new possibilities arise, with tasks that are “expensive” for a miner but that are not actually “expensive” from a mining perspective. economic.

The proof-of-stake is, in fact, an already existing example of such a task. It is too costly for a miner to accumulate a large amount of coins and become a major stakeholder - but from an economic point of view, this is an exchange of ownership of values, not an expense of electricity and other resources. .

The creator of the proof of fire, Ian Stewart, aimed to create a task that is an example of contrast between the two points of view. “Burning” a bunch of coins just means sending them to an address that doesn't spend those coins, ie coins that are sent to a txout and that will never be redeemed for a future txin. In the case of Bitcoin, such an address is a RIPEMD-160/SHA-256 hash from a script that has a calculation that evaluates to false.

With this definition, it is not immediately apparent to blockchain participants that the coins were burned at the time of the act. Later, when a miner who has burned the coins wants to display proof that they were burned (which basically consists of displaying the script that evaluates to false, and that its hash function results in the address where the coins were sent), the participants will have the proof. If it is desirable for the act of burning to be recognized from the start, burning can simply be defined as sending coins to a fixed unassailable address.

Therefore, miners would be creating blocks that, instead of being the result of a huge amount of calculations, are the result of burning a lot of bitcoins. Such an amount means an adjustable difficulty parameter, which the network can change from time to time (fortnightly in the case of Bitcoin) to filter miners to the extent necessary to regulate block creation at a desired rate (one every 10 minutes). , in the case of Bitcoin).

Additionally, burn proof must not be displayed immediately after burning coins. The act of burning can be undone due to a reorganization of the blockchain, allowing the same miner to be able to “reburn” the same coins in an attempt to obtain a new block after the organization. The protocol should require that the interval between a burn and its proof be of a sufficiently long time that there is no possibility of the burn being undone.

Under this protocol, miners will burn coins at a rate very close to the rate at which ordinary users tax them, minus the actual cost of miners' resources (i.e., equipment and electricity to administer transactions, blocks, and burn proofs - such costs will be much lower than costs acquired via proof of work, but will still exist). This follows the same balancing principle that miners will have to spend approximately the same amount on real resources on proofs of work - if they didn't, mining would be profitable beyond normal, and new entrants would be drawn into the market. If burning coins, rather than buying mining equipment, is the expense incurred by a miner to compete for the revenue stream, the same economic principles apply.

References

https://pt.wikipedia.org/wiki/Prova_de_queima

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