What is Casper

Casper is Ethereum’s chosen Proof of Stake protocol, headed up by team leader Vlad Zamfir. The code is available here on Github.

The protocol implements a process the dev team claims can punish malicious elements:

The validators stake a portion of their Ethers as stake.

After that, they will start validating the blocks. Meaning, when they discover a block which they think can be added to the chain, they will validate it by placing a bet on it.

If the block gets appended, then the validators will get a reward proportionate to their bets.

However, if a validator acts in a malicious manner and tries to do a “nothing at stake”, they will immediately be reprimanded, and all of their stake is going to get slashed.

Anyone who acts in a malicious manner will get immediately punished by having their stake slashed. This is where it differs from most other POS protocols. Malicious elements have something to lose so it is impossible for there to be nothing at stake.

The protocol also designs incentives that punish miners who go offline, intentionally or otherwise (source: Blockgeeks)

Now, while it sounds like a well-thought out system, there’s the possibility that miners won’t take kindly to the penalties induced for going offline. They could lose their stake through a simple accident or power cut, meaning they have to be extra careful.

In a moment we’ll get into whether this could create a rift within the mining community, but we’re not quite done exploring Casper’s features yet.

Two Sides to the Story

Casper is actually divided into two parts:

Casper the Friendly Finality Gadget (FFG)

Casper the Friendly GHOST: Correct-by-Construction (CBC)

Casper FFG is also referred to as Vitalik’s Casper, and it’s is a hybrid POW/POS consensus protocol.

1. Today I am going to make a tweet storm explaining the history and state of Ethereum's Casper research, including the FFG vs CBC wars, the hybrid => full switch, the role of randomness, mechanism design issues, and more. — Vitalik Non-giver of Ether (@VitalikButerin) August 16, 2018

Casper is going to start off with FFG which is essentially phase one of the big move to POS. After that the project will transition into phase two, making Ethereum ready for POS.

With FFG, every 49 blocks will still be PoW but the 50th block will be a “PoS checkpoint” where finality is assessed by the miners/forgers.

Finality basically means that when a process or transaction has been completed, it’s irreversible.

The CBC protocol will see the network position itself to make the change to PoS smoothly. But why?

The Advantages

The Advantages are pretty clear.

The enormous energy consumption of Proof of Work is crazy and posing a real threat to the environment. From a more local standpoint, advocates of PoS claim that it is more decentralized and helps improve scaling opportunities, economic efficiency, and rarity – Ethereum will become a rarer commodity after Casper is implemented due to mining incentives. Blocks will soon be rewarded with 0.82 ETH as opposed to 3 ETH which will reduce the inflation rate.

The Disadvantages – Mining Incentive

The only potential problem foreseeable, at the moment, is the potential for miners to abandon ship, potentially turning to Ethereum Classic (ETC), the orignal Ethereum PoW protocol requiring miners to validate transactions.

The issue with the Proof of Stake protocol is that miners don’t play the same role as they do in Proof of Work – miners running ASIC mining rigs or computers kitted out with top of the line GPUs working overtime to crack complex algorithms in order to validate block transactions and receive rewards aren’t required here, with a democratic system of validators taking their place. Is there a possibility that members of the Ethereum community will switch over to the ETC team in order to preserve that role? Yes, it’s a distinct possibility – the question is, how many?

Two weeks ago redditor called beezer0005 stated:

“Not a single care with miners. Lol, if you’ve been following eth, they actually don’t care with miners. The reason casper is always delayed is simply it’s not ready yet.”

Another user called FaceDeer said:

“If the miners want to keep mining the PoW fork, but the users have moved over to the PoS fork (because it’s got significant improvements in how it functions for users), that’s fine. The miners can have their irrelevant little fork that nobody is interested in paying them to secure. It won’t affect the PoS fork in the slightest.

In fact, I’d say it’d be a good thing to have them keep the PoW chain running for a little while just in case PoS suffers an unforeseen catastrophic failure right after launch. PoS will be a big and complicated upgrade, the old PoW chain would serve as an emergency backup in that case.

Comments like these speak to the potential rift growing into the Ethereum community which already fractured recently with a hard fork leading to two prominent cryptocurrencies.”

The Developer’s Outlook

Vitalik Buterin has previously warned against a war on Ethash mining and ASIC mining within the Ethereum community.

“Worst case scenario is basically like that Bitmain controls a very large portion of the Ethereum network for some period of time,” Buterin added. “This is not Bitcoin, right? Miners are not in control here. If there comes a day when they have majority hashpower and try to use it for evil, then it will basically just speed up Casper development.”

Casper is seen by the team as a means to decentralize the network and take the power from the hands of those capable of shelling out millions for state of the art crypto-mining farms and facilities with hundreds of GPU or ASIC rigs churning away to grant the owners a disproportionately influential voice in the community when it comes to voting and validating transactions. The move is designed to discourage the possibility of mining cartels taking over and positioning themselves to carry out a 51% PoW attack, as we have seen in many PoW coin networks recently like Bitcoin Gold.

It’s not going to make the miners happy to see a reduction in block reward, and yes, many of them may leave by Casper FFG in advance of their role being completely changed as opposed to applying for validator roles in the upcoming PoS system. Casper may prove to be a success in the Ethereum network, or it may prove to be yet another divisive element that splits the community yet again.

However, with the multitude of problems being faced by PoW coins recently – all I can say is that Casper is worth a shot.