What Proof of Burn proves
Proof of Burn proves sacrifice. A participant sends an existing token to an address that cannot be spent from, permanently removing that value from circulation. The burn can then be used as evidence for issuing a new token or assigning protocol rights.
Unlike Proof of Work or Proof of Stake, Proof of Burn is often a bootstrapping mechanism rather than a full ongoing consensus system. It shows who paid a cost to join the new network or receive the new asset.
How Counterparty used it
Counterparty's XCP supply was created through a proof-of-burn period in early 2014. Participants sent BTC to an unspendable Bitcoin address, and the burn created corresponding XCP according to the rules of the launch.
The appeal was transparent distribution without the project team directly collecting the burned BTC. The tradeoff was irreversible: once BTC was burned, it was gone whether or not the new token later gained demand.
Chains that use Proof of Burn
Counterparty is the clearest Proof of Burn example. Burn mechanics also appear in token launches, fee-burning systems, upgrade migrations, and supply-reduction designs, though not every burn should be called proof-of-burn consensus.
For SEO and research, readers should separate Proof of Burn launches from routine token burns. A fee burn may reduce supply, but a proof-of-burn launch uses destruction as a participation or issuance proof.
Tradeoffs readers should know
Burns can show commitment, but commitment is not the same as utility. A burned token does not prove that the new asset has users, revenue, security, liquidity, or responsible governance.
A good Proof of Burn review checks the original asset burned, the burn address, issuance ratio, fairness window, insider access, resulting supply, and whether the new protocol has a reason to exist.