Ethereum Casper Upgrade & Consensus Algorithms
In this blog, we are going to take a look at Ethereum and the Ethereum Casper upgrade. Ethereum is the global blockchain super computer that is working on transitioning from a Proof of Work (PoW) consensus algorithm to a hybrid proof of work/proof of stake system called Casper the Friendly Finality Gadget.
You see as Ethereum, Bitcoin and the current proof of working consensus blockchains continue to grow, expand, and increase in network demand, so does the computational power, energy consumption, and hardware requirements. These increases are making it more difficult for those wanting to contribute as a miner as it becomes more financially infeasible, in addition to the overall process consuming more and more energy.
Currently, Ethereum’s network consumption is equivalent to the combined consumption of around 1.46M households, or as another comparison, is using more energy than the Dominican republic, which has a population of around 10.6 million people.
The total cost to run Ethereum’s network per year is estimated to be around $2B US, which is a significant cost, and given Ethereum’s energy consumption is rapidly increasing everyday with network demand, the need to develop a more long term sustainable solutions is becoming more and more critical.
This is where the Ethereum Casper technology comes in, which is a hybrid proof of work/proof of stake system that has been intentionally designed to facilitate a transition of Ethereum’s existing consensus algorithm. Think of it this way, its an upgrade that has been designed to allow the two consensus algorithms to co-exist as the network remains live and operational, allowing a calculated and planned transition from one to another without (hopefully) disrupting the live network, which is very very important.
By implementing a proof of stake layer, holders of the Ethereum token will be able to stake their Ether to become a validator and thus contribute to the network by validating blocks. The size of their Ether deposit will determine the how big their contribution or stake in the network is.
History of Byzantine Fault Tolerance
Caspers consensus algorithm is called Byzantine Fault Tolerance, or BFT, and actually has roots in a software system called Tendermint.
Tendermint is a blockchain protocol that emerged from a need to create a more efficient and secure consensus algorithm than Bitcoin’s Proof of Work. It is a general purpose blockchain consensus engine that can be used as a replacement of other blockchains.
This was actually completed on two occasions, with one being called ‘Ethermint’, and the other being called ‘Hyperledger Burrow’, where Ethereum’s code was successfully run using Tendermints proof of stake Byzantine Fault Tolerance algorithm.
Tendermint is now being used to build an opensource internet of blockchains called the Cosmos Network, which aims to be a Network of blockchains allowing sovereign and easy to develop blockchains scalability and interoperability.
The Ethereum Casper technology
So what is Casper in a nutshell? Well as previously mentioned, Casper is a hybrid proof of work/proof of stake system that has been intentionally designed to facilitate a transition of Ethereum’s consensus algorithm. It does this by adding additional mechanics and something called the fork choice rule, which directs the client to determine which chain is the ‘canonical chain’.
Some of the of the key features;
- Casper contracts will allow anyone to deposit Ether and then come a validator, allowing them to participate in the consensus process.
- A feature called ‘Slasher’ which enforces node accountability by penalizing bad actors by taking the validating nodes entire ETH deposit, thus creating a strict security layer against potential attacks.
- The network can remain operational ever is 1/3 of all network validators go offline.
- Easier upgrade process from proof of work to proof of stake by creating a Modular overlay, allowing the POS system to overlay the existing POW system.
- Significant reduction in hardware and electricity costs.
Criticism of Casper
At the recent Financial Cryptocurrency conference, Distributed Systems expert Dahlia Malkhi expressed her criticism of the Ethereum Casper proposal, saying that she thinks proof-of-stake is fundamentally vulnerable, as authority is being given to a group to call the shots, and that in her opinion its giving power to people who have lots of money.
Her remarks are likely in relation to similar proof of stake systems that require significant holdings of the cryptocurrency to act as a validating node. Dash, for example requires 1000 dash tokens to become a masternode. At todays rate, 1000 Dash costs approximately $502K USD.
Ethereum Casper Research Progress
So where is the Ethereum Casper work up too now in terms of development? On the 31st of January 2018, a Casper PoS testnet was released on Github. With reports from Karl Floersch (an Ethereum developer) describing the Casper code as working exactly as it should with no hiccups. According to the active test net block explorer, there are currently 57/68 active nodes on the network, showing an increase of 54 nodes since January.
Developers who have run the Casper test net software report the installation and operation is very straight forward and reliable. It seems it is not yet known how much Ethereum will be required to stake and earn rewards as a validator, or when Casper testing will be complete and rolled out.
The fact that the test net is up and running is operational, and given it has only been live for a few months, I think we can expect at least several months of testing before Capser will be implemented.