Different ways in which bitcoin can be burnt

Question

I'm interested in the different ways in which bitcoin can be burnt. I can see three ways:

1. Send coins to a 'made-up' address. There's no way to distinguish it from a real address (so the transaction will not be rejected), except that no-one has the private key
2. Send a de minimis amount (e.g. 1 SAT) to an address which already holds coins. These will get 'overwritten' and thence lost
3. Begin an output address with OP_RETURN

Both (2) and (3) demonstrate that coins are destroyed. (1) relies on trust.

Firstly, are the above descriptions accurate (and am I using terminology correctly)? Secondly, are there any other way of destroying coins? Finally, in reality do either (2) or (3) represent a material loss of coins?

Answer 1

there are indeed several ways of burning bitcoin:

comment on 1: you dont have to rely on trust, you can send bitcoin to 1111111111111111111114oLvT2. This address is spendable with if you have a keypair with RIPEMD160(SHA256(publicKey)) == 0 which nobody has (yet)

comment on 2: you can't send amounts under the dust limit (transactions doing that are not relayed) and those coins will not be burnt if the owner of the address spends them and thereby paying more fees than the UTXO is worth. Note that the fees are going to the miner and are thus not burnt

comment on 3: i think you meant scriptPubKey not address. it creates a provably unspendable transaction output

number 4: a miner can claim less bitcoins in his coinbase output. consensus rules only disallow claiming more, and coins cant go to fee in a coinbase transaction

Answer 2

As already mentioned in other answers, you can burn funds by sending them to an address with an unknown or provable non-existent private key, or by allocating them to an OP_RETURN output, which can never be spent.

I want to talk about the second suggestion from your question:

Send a de minimis amount (e.g. 1 SAT) to an address which already holds coins. These will get 'overwritten' and thence lost

Imagine if someone held ₿100,000 in a single address. Don't you think that someone would just send a single satoshi to destroy it for giggles? Clearly, this mechanic would be completely unsafe, and luckily, it doesn't exist. Whenever you send a transaction, new Unspent Transaction Outputs (UTXOs) are created. These "pieces of bitcoin" are tracked via their outpoint which is the combination of the transaction that created them and their position in the output list: txid:vout. Addresses are merely a shorthand to encode output scripts that define the spending conditions for funds. There is no issue with multiple outputs sharing the same spending conditions, except the obvious privacy implications.

Answer 3

1. Works
2. & 3. Don't work

You could also destroy your private keys to addresses you control. Then you know the coins are lost, but others do not know.

If you send to a known burner address, everyone knows the coins are burned. Popular addresses are 1BitcoinEater.., 1Counterparty.., 111111.., adding to Satoshis' coins.

Regarding 2, any address can receive an unlimited number of different coin amounts. Each is independently spendable.

Regarding 3, OP Return cannot contain coins.