Proof of Burn: Creating New Currency by Burning Existing Currency
Proof of Burn is written as "Proof of Burn" in English, where "Burn" means to burn.
Literally translated, it refers to a mechanism in which new currency is obtained by burning old coins or banknotes, and it was devised by the developers of the Counterparty platform.
It is used as a method to distribute XCP, a coin usable on the Counterparty platform. Unlike Bitcoin, which is issued as a reward for generating new blocks, this is a unique mechanism that destroys existing coins to generate new ones. It is designed to allow users to acquire XCP fairly, rather than through competition among miners.
Counterparty exists as a layer built on top of the Bitcoin blockchain. As for how old coins are “burned,” the method involves sending Bitcoin to an address for which no one knows the private key. Since no one knows the private key
, no one can use the Bitcoin, effectively rendering it unusable and eliminating it—a unique approach.
This act of elimination, or “burning,” enables the issuance of a new currency.
