What is Casper protocol?
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If you follow cryptocurrency news and events, then it is expected that you have heard of Ethereum Casper and the shift to a Proof-of-Stake consensus algorithm. “What is Casper?” is one of the foremost questions many people ask when they hear of Casper. Well, in this article, you will get to know what it is and how it could be useful for ethereum.
So, what is the Casper Protocol?
Casper, in simple terms, is an economic consensus protocol that is based on the principle of security deposits. What this means is that nodes, commonly known as “bonded validators” will have to place/stake a security deposit (ether deposited in bound wallet) to be able to participate in the blockchain consensus by securing and verifying blocks.
Who came up with the Casper Proof-of-Stake idea?
Well, the Casper protocol has had a team of developers who have been working to fine tune it. However, it is Vlad Zamfir who is credited with originating the idea of Casper. He is often regarded as the “Face of Casper”.
Who’s the team behind Casper?
Apart from the lead researchers Vlad and Vitalik, other team members include developer Rick Dudley, Peter Szilagyi, Jon Choi and computer science student Loi Luu.
What is Casper protocol good for?
The Casper protocol is particularly significant because it has the direct control of the node’s security deposits and therefore primarily affects incentives of the bonded validators.
Casper has been designed to provide users with a sort of fairness when it comes to validating blocks using the Proof-of-Work consensus mechanism.
Ethereum’s shift from Proof-work consensus to the Proof-of-Stake consensus mechanism was a subject of debate right from the beginning. However, traditional PoS systems had a shortcoming in relation to what happened if a validator or validators misbehaved and intentionally produced invalid blocks.
This situation is referred to as the ‘Nothing at Stake’ problem and is the reason why Ethereum had to come up with the Casper protocol to address it. Ethereum wanted to have a new protocol that could safely implement the Proof-of-stake consensus and at the same time remove the problem of ‘Nothing at Stake’.
Casper ethereum addresses the problem explained above through the security deposit and as a result if it is objectively verified that a bonded validators misbehaved, then they lose their deposit.
What makes Casper different from other POS protocols?
What distinguishes Casper from other traditional Proof-of-Stake mechanisms is the implementation of a process by which it punishes those participants who for any reason behave in a malicious manner.
Such malicious validators have something to lose and, therefore, Casper PoS helps remove the “nothing at stake” scenario.
So, how does Proof-of-Stake under the Casper protocol work? Let’s have a look at the process.
- The validators on the network place a stake using their locked/ bonded Ether.
- After this, they start the process of identifying and validating the blocks.
- When a validator discovers a block that they believe is valid, they place a bet on it and validate it.
- If the particular block gets accepted and added to the chain, then the validator gets rewarded proportionally to the bet staked.
- However, if that validator had misbehaved and it is objectively verified, then the stake is null and void and validator gets punished by forfeiting the stake.
- The protocol can also prevent the particular node/validator from participating in the consensus.
In essence, Casper implements its unique “slashing” system to discourage nodes from behaving in a malicious manner.
The ‘slashing’ goes even further. It is applied to any node that for whatever given reason goes offline. This measure helps to reduce the issue of transaction censorship and improves the overall availability of nodes for transactions.
April 2018 update- Casper protocol now under review
The developers of Ethereum have made an announcement regarding the new protocol update of the network that leads a step closer to the transition from Proof of Work aka PoW to Proof of Stake aka PoS algorithm. The protocol is referred to within the frames of the Ethereum Improvement Proposal aka EPI 1011. Here the number 1011 is the codenamed Casper. Please note, EPI 1011 is also recognized as Hybris Casper FFG aka Friendly Finality Gadget. Up until this moment, Ethereum is still implementing the PoW protocol, despite considering to start using PoS already for quite some time. The reason the Ethereum team is more attracted with PoS is the efficiency and the productivity of the protocol, especially compared to PoW. When Ethereum fully transitions to the PoS protocol, the users will stake ETH instead of mining it.
As soon as the company brings EPI 1011 into life, it plans to start moving towards an improved framework that will lead to a better future of the network. The vast majority of the cryptocurrency enthusiasts are looking forward to the release of the Casper protocol. In the meantime, the team is examining, reviewing and testing the technology with the infosec community as well as big technology companies such as VMware. As a matter of fact, VMware is one of the few who does not fully believe in Casper and considers it a weak option taking into account the flows it has. Some other critics claim that the transition will lead to some revenue cuts. One of the EIP 1011 developers – Danny Ryan, has claimed that they are open to suggestions, comments and that they are ready to implement some of those ideas in the final stages before the release.
Casper FFG vs Casper CBC
The Casper protocol implementation isn’t a single project. It actually is a combination of two distinct projects that have been under research by the Ethereum development team.
The two projects are:
- FFG- Friendly Finality Gadget
- CBC- Correct-by-Construction
What’s Casper FFG
Also known as Vitalik’s Casper. The FFG is basically a network protocol that combines the previous PoW mechanism and the new PoS consensus mechanism.
It is the first in line for implementation and its main objective will be to help in the transition from PoW to PoS.
This is how it works:
- The PoS protocol overlays the normal ethash PoW protocol.
- Mining of ether goes on normally by Proof-of-Work consensus mechanism.
- Every 50th block becomes a checkpoint where PoS validators assess the block’s finality.
So what’s the friendly finality gadget in simple terms? This basically implies that once a transaction has been verified and recorded, it becomes an irreversible part of the blockchain.
The Casper protocol is designed to put in place a ‘plan B’ in case of a double finality.
- In such a case, users have a choice of going for whatever chain they wish.
- The chain with most of the nodes becomes the dominant chain.
It, therefore, simply means that a double finality undertaken in Casper will lead to a hard fork and not a reversion.
The correct-by-construction protocol (CBC) was developed by Vlad Zamfir. CBC specifically focuses on developing protocols that allows one to extend the local view of a particular node’s safety estimates to gain consensus safety.
After the full implementation of FFG, the CBC will be deployed to manage the Ethereum network consensus mechanism. It will achieve this by deriving a safety proof through the utilization of what is called “an ideal adversary”.
The aim will be to use that ideal adversary to constantly and consistently fine-tune the protocol to a point it gets completed and perfected.
In the Casper CBC protocol, you can,
- Specify the protocol formally but in a partial manner.
- Define the properties you want the protocol to specify.
- Derive the protocol by ensuring that it satisfies each and every one of the properties specified.
Do we really need Ethereum Casper?
The bottom line is, most people want to know exactly why Casper is needed. So, the question then is: “Do we really need the Ethereum Casper?” As it turns out, it actually seems we do need it.
Here is what the Casper protocol can do that makes it a good approach to the PoS consensus system.
The current proof-of-work protocols do not appear to be decentralized anymore. Most times, the hashrate is dominated by some powerful mining pools which simply mean that they will always have an advantage when it comes to mining.
Proof-of-stake, however, provides mitigation against this by making mining with hardware irrelevant. By having validators instead of miners, the Casper protocol moves the reward system towards proportional distribution.
There won’t be any need for giant pools to use their mining power to dominate individual miners or smaller pools. Anyone with a stake will be able to secure and verify a block.
Better energy efficiency
Proof-of-work consensus mechanism has been criticized for being too wasteful of energy, specifically electricity. In fact, Ethereum mining at the moment consumes almost 2.5 TWh of electricity annually. This is an equivalent of what some third-world consumes yearly. Casper, nevertheless, will remove the need for mining by allowing staking. The concept renders mining and the accompanying energy costs redundant and so helps to improve energy efficiency.
The Casper PoS will lead to low costs of getting consensus due to the fact that there would be no power or expensive hardware costs.
POS instead of POW
It is common knowledge that any kind of change is usually met with skeptics and sometimes resistance.
This is especially true with regard to how people perceive the change. In Ethereum’s case, an outright jump from PoW to PoS could be detrimental leading to loss of faith in the value of ethereum. Prices could in turn drop. That’s why Casper is important. It provides for a smoother and gentle adaptation of the PoS protocol which could essentially maintain public faith in the value of Ether.
Casper is going to improve issues of scalability in the long term. The ethereum network has become so popular there are challenges of how it would scale. However, Casper will help achieve this by making the network faster leading to thousands of transactions being handled on the Ethereum network.
The basic and most appropriate way by which Casper will help scalability is through allowing for sharding. Sharding makes transaction processes faster by splitting the transaction into smaller vertical shards.
Worries of malicious take over are mitigated by the fact that Casper removes the need for mining.
Security of economics
One of the main advantages of Casper PoS will be on issues of security of economics. Look at it this way; imagine you were a validator who has money locked up as a stake. For all intents, it isn’t in your interest to act in a malicious manner, knowing that you will get punished for that through slashing and forfeiture.
Casper’s “slashing” also does remove the remote chances of what we call “spawn camping attacks”. It is achieved by ensuring that a single attack leads to slashing. Furthermore, it’s only those validators with an invested stake that can participate in transaction verification.
So, what in a nutshell is Casper all about?
The main goal of Casper is to have a Proof-of-Stake network that is arguably more egalitarian than what is currently made possible under the Proof-of-Work system. With respect to the challenge of economies of scale, the ethereum Casper protocol will men that validators play within the rules.
The first testnet of the Casper protocol has already been rolled out and the impact is that Ether gained massively due to the increased interest. It’s now not a question of ‘if’ but more of ‘what next?’
The future of Casper? Judging from the testnet, it is not preposterous to say that Ethereum is on the verge of successfully implementing the Casper protocol. If it does, then expect similar shifts from other cryptocurrencies.
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