PoB protocol analysis

Iagon recently completed a challenge, developing a burn proof ( PoB ) protocol suitable for the Cardano ecosystem in response to the posed questions. This article will introduce the Iagon team's solutions, mainly covering the following aspects:

1. Overview of the Proof of Burn Mechanism and Its Applications
2. Iagon Burn Proof Scheme Implementation of Smart Contracts on the Cardano Network
3. The deployment and testing process of smart contracts
4. Execute burn proof by sending tokens to the "black hole" address.

1. Proof of Burn and Its Applications

Token burning ( destruction ) is a common operation, essentially sending tokens to an inaccessible "black hole" address. This address has no access keys, and the burned tokens cannot be retrieved. The public can verify that the destruction has indeed occurred, but only knows a "secret" commitment value. This mechanism prevents intermediaries from scrutinizing the destroyed funds.

The burning mechanism has multiple uses, it can help appreciate remaining tokens and also serve as proof of commitment for blockchain protocols. Large-scale burning will reduce the total amount of circulating tokens, which may trigger deflationary pressure. Although burning transactions need to be accepted by miners, Iagon is committed to developing an uncensorable burning protocol.

The security of proof of burn is based on cryptographic hash functions. These functions are easy to compute but difficult to reverse. Essentially, a slight change in the input will result in a huge random change in the output. By flipping the least significant bit of the cryptographic hash function, a black hole address can be created, and the content sent to that address will be difficult to recover.

2. Cardano Network's Proof of Burn Smart Contract

Cardano smart contracts consist of three parts:

• Redeemer Script: Control the use of eUTxOs
• Wallet script: Represents user execution, used to redeem funds and create new eUTxOs
• eUTxOs: contain funds and data point ( datum ), used to determine the conditions under which funds can be reused.

Cardano smart contracts have no centralized state; each eUTxO has an independent state. Possible operations include:

• Burn: Send funds to the black hole address
• Verification of Burn: Confirm that the burn of a specific commitment value has occurred
• Lock: Send funds to an address with a key
• Redemption: Retrieve locked funds

The endpoint runs in the user's wallet, and the generated transaction will be sent to the blockchain. The transaction transfers funds to the redeemer's script, which verifies that the funds can only be accessed by an address with a specific hash value.

In the burning operation, the hash value points to a black hole address. This is accomplished by giving the hash a secret commitment value and flipping it. Due to the use of cryptographic hash functions, it is nearly impossible to find a matching original value.

Intermediaries cannot know whether a transaction is a burn or a lock. This mechanism prevents selective scrutiny of burn transactions. The burn value can be verified by publishing the commitment value. Before publication, no one knows the specific amount that has been destroyed.

3. Smart Contract Deployment Process

The steps to deploy a smart contract on the testnet are as follows:

1. Install the Haskell toolchain
2. Build Plutus script
3. Start Cardano node and wallet container
4. Restore the wallet and obtain the wallet ID
5. Run the burn token
6. Verify Burn

4. From Smart Contracts to Wallet Scripts

To further prevent censorship, wallet scripts can be used without relying on smart contracts. In this approach, the only possible way to censor the burning is to censor all Cardano transactions.

To achieve this, it is necessary to replace the public key hash with the hash of the commitment value and flip the least significant bit of the commitment value. Additionally, the address format check of Cardano needs to be handled. The Cardano API library can be used to generate burn addresses, submit transactions to the blockchain, and verify the burn.

Conclusion

This article introduces two implementations of the Proof of Burn protocol: smart contracts and wallet transactions. Due to the current lack of some necessary infrastructure for Alonzo smart contracts, it is recommended to use wallet scripts. In the future, as the PAB library improves, combining complex smart contract solutions with wallet scripts may become more feasible and help create a censorship-resistant environment.