Seven years after the introduction of Satoshi Nakamoto's Bitcoin creation to the world. The Ethereum network has grown phenomenally through the years since its inception in 2015. The Ethereum cryptocurrency has been battling ripple these days for the second position in terms of market capitalization. It is considered to be the second most valuable cryptocurrency on the market second to Bitcoin.
There is currently a handful of Dapps that are being run on the Ethereum blockchain and is responsible for thousands of tokens being created. Ethereum is definitely magnificent from a technical point of view, however, it can still use some work on its network capabilities. Scalability has been one of the most focused on topic of the cryptocurrency industry, as it has been a problem that developers have to workout around in order to achieve the best results.
The proof-of-work consensus algorithm of Ethereum has also been an issue because of what it is trying to achieve. Besides the basic network security issues, the PoW is also a mechanism that uses a lot of electricity in order to operate the network. This has led the Ethereum team to plan a long evolutionary part for the cryptocurrency. By making an update to the network, the implementation of a new PoS (proof-of-stake) consensus algorithm will power the new Ethereum network 2.0 soon.
Casper will be a major part of this change to the network, in making the Ethereum Casper protocol.
What is Casper and its implications
Casper has been in the works for some time now, and it has been one of the biggest and most anticipated upgrades of the Ethereum protocol. It is expected to be a hard fork of Ethereum. The team hopes that the Ethereum Casper protocol will push towards mass adoption, as the protocol will provide enhanced scalability capabilities and combat centralization of the network.
Bitcoin and Ethereum currently have a PoW consensus mechanism, which makes this type of algorithm use network participants known as miners. This is in order to solve cryptographic puzzles to validate transactions. Which is then entered into a block of transactions a then stored on the Blockchain. There are some risks of a pool being able to carry out a 51% attack on the network when considering the PoW algorithm mechanism.
There is a need for the Casper network because it will ensure that the Ethereum network will be able to switch from PoW to PoS when needed. There are two major differences between these two networks. Miners will be able to replace validators of the network. Validators will then achieve consensus by taking turns proposing and voting on the next blocks to be mined. Each vote will depend on the weight of the size of the validators' stake on the blockchain(the deposits or inputs).
Casper will be running on a hybrid consensus mechanism in combination with the PoW and PoS algorithm. This will ensure that the platform and network stay stable during the transition period. All ether holders will have the opportunity to stake tokens in a special wallet to help the network move along. While being rewarded with ether for their service and contributions. The more ether that is being staked the more rewards that staker will gain. The PoS algorithm will use much less electricity than PoW, while at the sametime reducing centralization through mining. This will also reduce the possibility of a 51% attack and improve the overall scalability of the network.
Casper has two versions in the works
The Casper protocol was formed from two research projects, which makes it seem like an encompassing development for Ethereum. However, there are two proposed versions of Casper called: Casper the Friendly Finality Gadget(FFG) and Casper the Friendly Ghost correct by construction (CBC).
The version will ensure the functionalities of the hybrid mechanism and will ensure a smooth transition from the PoW to the PoS system. New blocks will still be able to be created by using PoW, however, the FFG will be a layer on top of smart contracts.
In the Second version of the upgrade, there will be a design to fine-tune the partially-built PoS protocol, until the system can function properly.
Casper has its own risks with it, as the network is complex and has a few key challenges that are associated with the switching of the network to PoS in both versions of Casper. The system is designed to be safer than PoW, but it still has a few security risks with it.
The first implementation of Casper will feature 250 validators, which could compromise the network in case of any attacks happening. Staking promises to improve decentralization in its initialization.
Casper is one of the biggest developments within the Ethereum network, and will most likely take a few more years to fully develop. The upgrade is expected to move Ethereum into a new era of usability and will broaden the capabilities of the network in terms of scalability, security, energy efficiency, and decentralization. The community can look forward to Casper creeping in slowly throughout these coming months.