“Burning Coins” has emerged as a new tool for growth in recent times. In past few months, few projects used this approach to drive the market value growth to upto 10x. In this article we will cover about proof of burn and what is the economical implications of proof of burn coins.
Proof of Burn
According to BitcoinWiki – Proof of burn is a method for distributed consensus and an alternative to Proof of Work and Proof of Stake. It can also be used for bootstrapping one cryptocurrency off of another.
The idea is that miners should show proof that they burned some coins – that is, send them to a verifiably unspendable address. This is expensive from their individual point of view, just like proof of work; but it consumes no resources other than the burned underlying asset. To date, all proof of burn cryptocurrencies work by burning proof-of-work-mined cryptocurrencies, thereby making the ultimate source of scarcity remains the proof-of-work-mined “fuel”.
Counterparty protocol was designed for proof of burn
One of the most striking things about Counterparty is that its native cryptocurrency, XCP, was created and distributed by destroying bitcoins in a process known as “proof-of-burn”. All XCP that will ever exist were given out proportionally to those who recognized Counterparty’s value and were ready to “burn” their bitcoins to participate in Counterparty.
Counterparty’s developers built a distributed financial system on top of the Bitcoin blockchain. Like Bitcoin, the Counterparty community operates in a decentralized manner where everyone has an equal say in the project.
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Hitesh Malviya is the Founder of ItsBlockchain. He is one of the most early adopters of blockchain & cryptocurrency enthusiast in India. After being into space for a few years, he started IBC in 2016 to help other early adopters learn about the technology.
Before IBC, Hitesh has founded 4 companies in the cyber security & IT space.
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