Despite resistance from the founder, Cardano relies on burning tokens

Despite resistance from the founder, Cardano relies on burning tokens
Despite resistance from the founder, Cardano relies on burning tokens
  • Cardano is examining a process for burning tokens, the “Proof of Burn” (PoB) from the technology company Iagon
  • Originally, founder Charles Hoskinson had strictly rejected this, but now seems to have given in to pressure to reduce the inventory of 45 billion ADA tokens

The Cardano blockchain is considering the introduction of a proof-of-burn (PoB) process. The PoB proposed by Cardano founder Charles Hoskinson is to be introduced by the decentralized cloud service platform Iagon.

PoB was invented by Iain Stewart in 2012 and is an alternative consensus algorithm for multiple applications. In proof-of-work blockchains (PoW), “burning” lowers energy consumption by reducing the amount of mining energy required. In addition, it enables miners to destroy virtual money in exchange for mining rights or the blockchain’s native currency, in this case ADA. And as Iagon notes on his blog, the burning mechanism can “be used as a proof of commitment in blockchain protocols”.

In order to burn a virtual coin, the miners must send it to an address that guarantees that said coin will never be sent to any other address under any circumstances. Such an address is therefore also called a “black hole” address. Tokens sent to this address can therefore never be retrieved. As a result, ADA tokens are becoming scarce due to deflationary pressures, which increases their value. In other token burning processes, such as Ethereum’s EIP-1559, part of the transaction fees are “burned” instead.

Cardano Proof of Burn creates deflationary pressure

The PoB solution is primarily a reaction to the criticism of Cardano because of the huge inventory of ADA tokens. According to our data, the network’s token inventory is limited to 45 billion, of which over 32 billion are currently in circulation.

Some members of the community are also concerned about the growing competition from rival networks Ethereum and Binance Smart Chain (BSC). Ethereum recently introduced a deflationary mechanism with the EIP-1559. Similarly, Binance Coin recently conducted its 17th token incineration, which removed 1 million BNB tokens from its offering. Hoskinson remarked:

“It is time for the Cardano community to grapple with hostile proposals.”

Lagon’s protocol turned out to be the best choice for due to its censorship-proof capabilities that apply to all customer wallets. The platform’s solution practically eliminates the possibility of miners resisting burning ADA tokens.

Cardano’s PoB application should start after the Alonzo update is complete on September 12th. Hoskinson noted that the new application will appeal to new developers in the Cardano ecosystem and be an ideal education for them. The tech entrepreneur even offered the best developer a reward in the form of an NFT.

Hoskinson had previously spoken out against a token burning function for the Cardano network. As reported by CNF, he said token burning is equivalent to drawing gasoline from someone else’s cars for your own use. Outraged by the proposal, he said it would only benefit those who want to make a little extra money and then jump on the next supposedly better bandwagon.

 
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