As you’re hopefully aware, Dogeparty is a new application being released, based around Dogecoin. I’m not even going to attempt to summarise what it is or how it works, because they’ve done a much better job than I can; I’d suggest reading their site [note - their site is long since inactive and the link removed).
If you saw their original post you’ll know they need to find a way of issuing the XDP tokens for Dogeparty. There are three options presented:
- Exodus address: Dogecoins go to an address held by an individual or organisation for their own use, such as the Dogeparty developers, Dogecoin developers, or otherwise.
- Proof of burn: Dogecoins are sent to an unrecoverable address, effectively destroying them, by meaning no-one can use them.
- Proof of charity: Dogecoins go to an address, to be held in trust until a charity can be identified to send the coins to. From my perspective, this is functionally identical to an exodus address, except that the coins go to a charity rather than developer.
Now, I can understand at first glance proof of charity sounds like the obvious choice; charities get Doge, donators get XDP, what’s not to like? Well… we have the issue of value. By destroying Dogecoin through proof of burn, and creating XDP in their place, we effectively give those XDP value from the burnt Dogecoin.
In contrast, if we give the Dogecoin away and also create another coin, then the value of the Dogecoins is functionally shared between the original Dogecoin and new tokens; in reality this primarily means keeping it with the original coins, but still it’s a sharing. Nothing is actually given up; in fact, the receiving charity could theoretically decide they want XDP, and send the same Doge through the loop again, causing all sorts of headaches.
Further, by burning the original coins, we avoid all sorts of complex questions about who holds the coins, where they go to, and a lot of drama that can unfold there.
Please do read up on the topic, and vote; my recommendation is proof of burn though, trying to both keep the coins we have and create new ones from them is effectively trying to have our cake and eat it. /u/fiddy_doge has also addressed the topic on reddit