The crypto community can generally agree on at least one thing: a blockchain shouldn’t be valuable if it isn’t secure. Immediately after that rare instance of agreement, the finger-pointing and name-calling generally continues.
The fact is this: blockchain security is acknowledged as being essential, but how to best secure a blockchain (much less those meant to publicly service the entire planet) is still very much open for debate.
Bitcoin has used a proof-of-work (PoW) protocol to secure its network since the beginning. Briefly (very briefly), the network is secure because it’s economically worth far more to “work” for the system than it is to “work” to undermine the system. (Many articles have been written on Bitcoin’s PoW protocol, but I’ll add my own to the mix soon.)
When computers “work” they consume electricity and give off heat. In an arms race to “work” as efficiently and quickly as possible, machines that secure the Bitcoin network have grown extremely specialized and expensive. “Average users” have essentially been priced out of the ability to put their computers to “work” for the network even if they wanted to. Meanwhile – geographic, political, and hardware centralization have all increased within the network. What’s more, is that the amount of electricity (among other resources) consumed to secure the Bitcoin network has become staggering – and is continually swelling.
The sheer amount of electricity being poured into the Bitcoin network with PoW is raising eyebrows. Twitter memes flourish about paying for a coffee with Bitcoin and, in the process, using enough electricity to power a city for an entire day. If this sounds unsustainable and ecologically reprehensible… that’s because it’s meant to. However, many people think that the costs of securing Bitcoin are well worth the benefits it could provide humanity. Frankly, if Bitcoin secured via PoW was the only option, then I’d be inclined to agree…
Fortunately, PoW probably isn’t the only option for securing a worldwide public blockchain network. It just so happens to currently be the more “tried-and-true” method – with plenty of apparent pitfalls. As with all things, Ethereum is looking for ways to improve what others have already grown complacent with – the community, and especially the developers, have put an awful lot of thought into a solution… now, please, meet Casper.
Proof-of-Stake & Casper
If PoW was the old-school, energy-hungry, environmental-bully in the neighborhood. Ethereum’s proof-of-stake (PoS) would be the techno-nerd, self-reflective, conservationist next-door-neighbor. The biggest problem the neighborhood has with this PoS newcomer, is that it’s just moving in – and so nobody is yet comfortable with it. They have all heard rumors – but they want to observe how it behaves in the real world.
The crypto community has certainly seen PoS before. The basic idea is not at all complicated. Replace “work” in PoW with “money behind a claim” and you’ll probably have a decent intuition about how this system is supposed to operate. The PoS implementation that is Casper merely adds a few additional rules to this network security model – specifically, punishing undesirable behavior.
Essentially, PoS functions like this: the computers on the network vouch for the transaction on the blockchain by backing their reported transaction histories with something valuable (ether in our case). If they backed the version of reality that the majority of the network backed – then they would be rewarded by being given something valuable (more ether).
Casper adds more rules to this simple PoS concept – if a computer is caught misreporting reality, then they stand to lose the ether they put up. If they are caught misbehaving in other ways, then they stand to lose a smaller portion of their ether. The goal of this implementation of PoS is to keep everyone behaving in all circumstances. Just like in PoW – this version of PoS should make it more expensive to try to undermine the network integrity than it is to contribute to it.
Designing the system with the proper incentives (and disincentives) requires anticipating all of the ways in which actors on the network may interact with each other. Then it needs to be translated properly into code. It’s a challenge spanning mathematics, economics, game theory, computer programming, and network design – at the bare minimum. Admittedly, it might not be perfect in its first iteration – and that possibility makes people nervous.
The Ethereum community is not unaware of this – they are simply adamant about moving forward and innovating rather than watching their network stagnate. For this reason, in addition to undergoing examination on the testnet, the first version of Casper will be a hybrid implementation. PoW will not be completely discarded, but Casper PoS will be used to verify a certain percentage of blocks. This should make for a smoother transition from the past… to the future of blockchains.
In the end, Casper will, hopefully, allow more people to be involved in securing the network with even less inefficiency and at lower environmental cost. It has the added benefit of making the network faster, as well. Anyone hoping that Casper doesn’t go well must have seriously misguided incentives and does not have the best interest of the crypto space (and, arguably, the world) in mind.
When everyone is eventually more comfortable with Casper PoS and begins to have confidence in it as a viable solution for securing a worldwide public blockchain – then legacy PoW can be completely retired.
That is the future of Ethereum – and potentially blockchains more broadly, if everything goes as well as the Ethereum community hopes.
This article is meant to be a brief introduction to Casper PoS – it is, therefore, not comprehensive. I will publish additional articles shortly for those readers more interested in the finer details of the protocol as it stands today or for some of the philosophical considerations behind PoW vs PoS, etc.