The emergence of Burstcoin
Burstcoin, or BURST, is a cryptocurrency that was first introduced in 2014 as an open source project. Above all, it differs from other cryptocurrencies in its mining approach. To date, the real identity of its developer is unknown to the public.
The developer or developers appeared only under the pseudonym “Burstcoin”, and just over a year after the launch, retreated without providing a reason. Since then, other members of the network have been driving the development forward.
Burstcoin’s technology is based on the Nxt crypto platform, which gives programmers flexibility in developing new applications. Because of this, it’s considered one of the cryptocurrencies of the next generation; “cryptocurrencies 2.0”.
Architecture of the Burstcoin network
The payment system works with blockchain technology. This public journal contains all transactions within the network. The blockchain contains information about the owners of all outstanding Bursts. The network itself builds the blockchain and extends it.
As soon as a transaction takes place, all connected users validate the money transfer. If the verification confirms the transaction, a new record is created. All transactions are sorted chronologically in decentralized stored data blocks on the computers connected to the Burstcoin network.
The system saves the individual data blocks of the blockchain and concatenates them with hash values. Once written, records are protected against subsequent manipulation.
Proof-of-capacity versus proof-of-work concept
Burstcoin is the first cryptocurrency to use a proof-of-capacity (PoC) system as a consensus mechanism. This procedure ensures a consistent database. It is used when mining new Burstcoins and verifying transactions. The original developer translated the idea and proof-of-capacity rules into a computer program.
The predecessor to the PoC concept is the proof-of-work (PoW) approach. A proof-of-work system requires a user to solve a task before using the service. The aim is to prevent excessive use of the network by a participant. The time required to complete the task slows down the transaction execution.
Depending on the complexity of the task, a high computing capacity, powerful hardware and a considerable amount of energy are needed. The resulting costs make transactions in PoW systems more expensive. A proof-of-capacity approach relies on storage capacity rather than processing power. The review and execution of transactions is thus faster and cheaper.
A revolutionary mining process
With the proof-of-capacity approach, Burstcoin solves the mining problem of other cryptocurrencies that also rely on blockchain technology. They all depend on their users to participate in the validation of the data. As an incentive, every network participant who participates in this consensus building receives remuneration.
This process is called mining. Burstcoin mining offers no special barriers to participation, thanks to PoC. Anyone can, therefore, efficiently mine with unused disk space.
Mining in PoW environments often requires expensive specialized hardware with exorbitant energy costs, and therefore, remains reserved for large mining farms. With that, the original idea of developers of cryptocurrencies, namely, to create a decentralized currency, is lost.
Burst mining does not require special hardware or result in high energy costs. To participate in mining, a standard PC with free space is enough – the power consumption, whether a PC is mining or not, hardly differs.
The architecture of the Burstcoin system thereby strengthens its own decentralization. Burstcoin is therefore considered a “green”, environmentally-friendly cryptocurrency for everyone.
Automated smart contracts
The Burst system is the first cryptocurrency to enable the integration of smart contracts. The individual, digitally mapped contract contents run as automated transactions directly between the contracting parties. Trust and the controlling authority is vested in the totality of all network participants. You do not need a third institution with a trustee function for the contract.
One application of such smart contracts is a lottery. The world’s first lottery runs without an external site in the Burst network. The random drawing of the winner will be handled by a smart contract, which automatically transfers the total prize to the winning account. This lottery is the first raffle to be decentralized with blockchain technology.
Another application is decentralized crowdfunding. Donors transfer coins to a given account, and if the collected amount exceeds a certain threshold, the system releases the credit and the project starts. If the donation volume does not reach the threshold, the network posts all transactions back to the donors. The participants save themselves the fees associated with a central entity.
Transfer of foreign cryptocurrencies and dormant accounts
Another innovation is the possibility of Atomic Cross-Chain Transactions (ACCT). An ACCT is a decentralized transaction between two different cryptocurrencies without the involvement of a third party, so users can exchange, for instance, Burst against Qora.
The currency exchange takes place directly between the owners of the various cryptocurrencies. They use neither a broker nor a trading platform or online crypto exchange, only the consensus mechanisms of the blockchain.
Accounts within the network can adopt different states with the smart contract concept. This can be used to define an estate management or a password loss strategy. For example, an account that has not been accessed for a long time is initially assigned the status “dormant”. After a certain period of time, the credit will be transferred to another deposited account.
Dynamic transaction fees as a future model
In the future, the Burst developers plan to introduce dynamic transaction fees. A general lowering of transaction fees would increase the risk of spam or other system attacks. Therefore, the cost of a transaction should depend on the respective network load.
This creates an economic opportunity for micropayments. In times of high usage, users can pay a higher price to speed up their transactions. At high load, higher compensation encourages participants to mine.
Under the project name “The Dymaxion”, the Burstcoin development team is working on optimizing the underlying blockchain technology. A tangle architecture with its interconnected data strings replaces the sequential blocks of the previous blockchain. The Lightning network based on this creates the preconditions for arbitrarily scalable and anonymous transactions.