What is the difference between Proof of Stake vs Proof of Burn?

Various protocols and algorithms are used in blockchain networks to achieve an agreement on the state of the distributed ledger and validate transactions. These protocols are called consensus mechanisms. These mechanisms ensure that all nodes in a network reach a consensus on the transaction's order and validity.

Various consensus mechanisms are used in blockchain networks. Among these mechanisms, two protocols, Proof of Stake (PoS) and Proof of Burn (PoB) are the most common.

While both protocols aim to achieve similar goals, they employ different approaches toward their goals. We will do a comprehensive breakdown of the two mechanisms to understand the key differences between them.

Proof of Stake (PoS)

Proof of Stake is a consensus mechanism used to validate transactions and achieve consensus in blockchain networks. PoS mainly relies on participants stalking or locking up their cryptocurrency holdings to secure the network and validate their transactions.

Concept

The participants in a PoS system, also known as validators, are selected to create new blocks and validate transactions based on the number of coins they hold and are willing to stake.

Selection process

The validators are selected randomly based on their stake. However, the selection probability depends on the number of coins they have staked in the network.

This means that validators with a higher stake are more likely to be selected. The selection process is often designed to discourage the concentration of power by implementing mechanisms that prevent a single entity from controlling the majority of the stake.

Validation process

After a validator is randomly selected to create a new block from the pool, they are responsible for validating transactions and, thus, adding them to the blockchain.

Validators are financially incentivized to follow protocols and act honestly because they risk losing the coins they have staked if they are a part of any malicious activities or an attempted attack on the network.

Advantages

PoS has several advantages over other blockchain consensus mechanisms, such as energy efficiency, faster transaction processing, and scalability.

PoS requires less computational power and consumes significantly less energy, making it more environment-friendly and cost-effective.

Applications

Various blockchain platforms have adopted the PoS mechanism like

• Ethereum 2.0

• Cardano

• Tezos

Similarly, many other platforms have already adopted or are planning to transition the Proof of Stake mechanism.

Proof of Burn (PoB)

Proof of Burn is a consensus mechanism where participants prove their commitment to the network by permanently destroying coins, also referred to as burning coins. Consequently, removing these cryptocurrency tokens from circulation permanently.

This act demonstrates a willingness to sacrifice value, thereby establishing eligibility to mine or validate transactions.

Coin burning

In order to burn their coins, participants send their cryptocurrency tokens to an unspendable address that essentially destroys the tokens. By going through these steps, participants showcase a willingness to sacrifice a certain amount of value.

Validation rights

Participants who have burned their coins gain mining or validation rights in proportion to the number of coins they have burned. The more coins a participant burns, the higher their chances of being selected as a miner or validator.

Block creation

Once validators are selected, participants can create new blocks or validate transactions based on the network's consensus rules. The block creation and validation mechanism can vary depending on the blockchain platform implementing Proof of Burn.

Advantages

The burned coins allow the blockchain system to have leverage over the participants. Participants risk losing the burned coins if they act maliciously and attempt to attack the network.

Moreover, another potential benefit of Proof of Burn is that it reduces the overall supply of cryptocurrency. By permanently removing coins from circulation, the remaining supply becomes more scarce, potentially affecting the value and scarcity of the token.

Applications

PoB has been used in a couple of blockchain platforms like

• Slimcoin

• Counterparty

However, its worth noting that Proof of Burn is not as widely adopted or as prominent as other consensus mechanisms like Proof of Stake or even Proof of Work.

Summary

The differences between the two blockchain mechanisms can be best illustrated in the table provided below.