The first version of the much-anticipated Casper update has been released — representing a critical step forward for Ethereum’s transition from Proof-of-Work (PoW) to Proof-of-Stake (PoS).
The v.0.1 Casper code was announced by developer Danny Ryan on GitHub, who said that the release will allow auditors and existing Ethereum clients to review the code and experiment with integrating it into their software. Ryan wrote on Reddit:
"More than just the research team is using the contract now — auditors, client devs, etc — so we wanted to start issuing clearer versioning and changelogs to help everyone stay organized."
Since Casper will not be compatible with earlier versions of Ethereum, the release gives Ethereum software clients an opportunity to “track changes” and integrate the updated scripts into their system before the event of a hard fork.
While there is no definite timeline for the transition, the move signals that Ethereum's race to reinvent its blockchain is gaining momentum. But as this is only the first iteration, it is likely to be followed by others before we see the launch of a fully-fledged Casper protocol.
Casper - the friendly consensus mechanism
Casper, which has been in development since 2014, represents a radical change in how the Ethereum network forms consensus. The upgrade is the amalgamation of two research projects - Casper the Friendly Finality Gadget (FFG), and Casper the Friendly Ghost: Correct-by-Construction (CBC), led by Vitalik Buterin and Vlad Zamfir respectively.
This release pertains specifically to Casper the Friendly Finality Gadget (FFG) —which is a hybrid PoW/PoS consensus mechanism that will assist in the transition to PoS. The mechanism aims to benefit the Ethereum network by securing it against would-be hackers, helping it to scale more effectively, and mitigating the “wasted electricity” used in mining.
The FFG (Friendly Finality Gadget) will not replace PoW, but will act as a stepping stone to the adoption of PoS. This is achieved by an overlay that positions a PoS mechanism on top of the PoW chain. In this way the Casper FFG makes use of both PoW and PoS to validate and create new blocks.
In the initial stages of the transition, Casper will retain Ethereum's current PoW protocol to process most of the demand, only using PoS to validate "checkpoints" periodically. In subsequent releases, we can expect the PoS algorithm to take on a heavier workload, until eventually the hybrid consensus algorithm moves to a completely PoS system.
Secure transaction scaling for Ethereum
Much of the Casper specification is aimed at mitigating the disadvantages of PoS, which critics argue depends on risky economic theory for network security—rather than the reliable computing power model of PoW. This is addressed by establishing explicit finality (as opposed to probabilistic finality). Finality in this instance means that once an operation is complete, it cannot be reversed.
Explicit finality allows the underlying chain to determine how final the transaction is, and enables the security of the network to be maintained while scaling through sharding. This should allow the Ethereum network to move away from the issues associated with mining, and securely scale beyond the current ~10 transactions per second.
Ethereum development stops for no one, and the transition to PoS will make Ethereum mining a thing of the past. While it might remain viable for a short time as the transition happens, it will already be less lucrative—the Casper specification states that the block reward will be reduced to 0.6 ETH from the current 3 ETH.
To prevent miners from rebelling and creating their own PoW fork, the developers have stated they will detonate a “difficulty time bomb” on the PoW chain shortly after Casper is implemented. This would exponentially increase mining difficulty until it becomes impossible—a scenario that has been termed the ‘Ethereum Ice Age’.
Because the updated network will only be able to handle so many validating nodes, those keen to support the Ethereum network in its new form will need around 1,500 Eth for staking as a solo validator— a cool $1.1 million at the current price. Alternatively they can join a staking pool.
Creator of Ethereum Vitalik Buterin is positive as ever, and addressed the upgrade at an Ethereum conference last week as what should be “hopefully one of the more joyous experiences in Ethereum in a fairly short time.”