What does it mean when we say Initialize Balances? It may not be clear from the initial introduction above and it does sound like a new concept.
It's not a new concept. See
https://en.bitcoin.it/wiki/Proof_of_burn. Certainly, it's similar to what Nxt and Mastercoin did (but better).
Right now no one owns any XCP, which we need a "fair, distributed and transparent" way of creating and distributing. Requiring people to publicly "destroy" BTC is a good way of doing that.