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The proof of burn consensus algorithm relies on miners burning their own coins to get the ability to mine new blocks.

How does Proof of Burn work? / image: Coinbold

How Does Proof of Burn Work

Here’s a quick rundown of how it works:

• Miners send coins to unspendable “eater addresses“, removing them from circulation. This is analogous to burning them.
• Burning those coins gives miners the right to mine the next block proportionate to the number of coins burnt.
• The more coins a miner burns, the better their chance of mining the next block and collecting the reward.
• Over a longer period, miners who burn more coins get to validate more transactions and receive more block rewards.
• Just like proof of work, proof of burn is a verifiable process. All users can check that coins were sent to eater addresses.
• Burnt coins represent a miner’s investment and commitment to the network, similar to buying expensive mining equipment in POW.

So in a sense, coins in PoB act like virtual mining rigs. Burning coins buys you the power to mine blocks on the blockchain. The process is provably scarce and randomized like proof of work, while also lower in electricity usage.

Proof of activity is a clever hybrid consensus mechanismProof of activity is a clever hybrid consensus mechanism that blends proof of work with proof of stake to validate new blocks and secure the blockchain.

Proof of activityProof of activity is a consensus mechanism used in decentralized blockchain networks to validate transactions. It is a hybrid approach that combines aspects of proof of work and proof of stake consensus mechanisms.

Proof of workProof of work and proof of stakeproof of stake are both designed to prevent 51% attacks - a malicious action in which one individual or party controls a majority of the mining power in the cryptocurrency network and can then include invalid transactions in the blockchain. Proof of activity combines these mechanisms into a single two step-process:

Proof of activity is a clever hybrid consensus mechanism that blends proof of work with proof of stake to validate new blocks and secure the blockchain.

How Does Proof of Activity work? / image: Coinbold

Here is an overview of how it works:

1. Like PoW, miners compete to solve a cryptographic puzzle using computational power to create a valid block header. This determines who gets to generate the new block.
2. The new block header is then broadcast to the network for the PoS validation phase.
3. Validators who have staked coins on the network then attest that they accept the new block as valid and sign the block header.
4. Once a majority of validators sign off on the new block, it is added to the blockchain.
5. The miner who created the valid header also submits a reward address to claim their mining reward.
6. So in summary, PoA goes through two phases: PoW competition to create the block followed by PoS majority validation before the new block is ready to be added to the chain.

This hybrid approach aims to get the best of both worlds – the security of PoW mining combined with the efficiency and scalability potential of PoS validators.

Proof of capacityProof of capacity and proof of capacity like algorithms which are known by a variety of names such as proof of storage, proof of space, and others are mechanisms which require the use of a tangible resource of some form of memory or disk space allocation to create a proof which shows a financial interest in the network. These proofs may then be used in a consensus mechanism for a blockchain or other decentralized protocol to guarantee that miners have correctly stored the information they have committed to store.

• Proof of capacity allows miners to use spare hard drive space instead of computational power to validate blocks.
• Plot files stored on drives contain precomputed hashes miners can quickly match to solve mining puzzles.
• PoC is more energy efficient and ASIC resistant than proof of work mining.
• However, PoC comes with concerns around storage, security, and accessibility.
• Major PoC cryptocurrencies include Burstcoin, Chia, Signum and SpaceMint.
• PoC aims for sustainability but needs more testing and development to reach mainstream potential.