Proof of Burn
Proof of Burn

Proof of Burn

In the current state of Bitcoin there is a unique input known as the coinbase which serves to promote the continuation of the transaction record as well as issue currency. With Proof of Burn, a portion of that coinbase is sent to an address where they cannot be spent (meaning there is no known private key) and thus the coins are burned off. The amount burned off is used to qualify for future coinbase rewards from new cryptocurrencies. This is like reversing the currency issue process. The recorded currency consumed on the transaction record is linked to the issuance of new currency elsewhere.

Proof of Burn is also a proposed method of earning mining rewards within the same cryptocurrency by using the burned amount as a sort of wager to be given the ability to mine a new block in the future.