After the successful Ethereum Byzantium hardfork, Ethereum will be undergoing a significant hardfork part of the Serenity release. This upgrade is significant as it will convert the Ethereum Network from a proof of work to a proof of Stake Network.(PoW to PoS).
What is Casper exactly?
Casper is the consensus algorithm that allows current validators in a proof of Work environment to participate in the validation and creations of a Ether Blocks. Once the Ethereum Network is officially moved from a Proof of work to a proof of Stake network, the reward for validation (Ether tokens blocked for validators on the network) will need to be set. So far and according to Vitalik, it looks like it could be anything from 1000 to 100 Ethers.
At press time, there are two proposals for what the Casper Algorithm will look like and none of them is official yet. The first proposal was drafted by Vitalik Buterin and the 2nd draft was put together by Vlad Zemfir, an Ethereum Developer and Casper development Lead for the Ethereum foundation.
What is a Proof of Work Environment?
A Proof of work is
A piece of data which is difficult (costly, time-consuming) to produce but easy for others to verify. Producing a proof of work can be a random process with low probability so that a lot of trial and error is required on average before a valid proof of work is generated. Bitcoin wiki.
What is a Proof of Stake Environment?
A Proof of stake is
A category of consensus algorithms for public blockchains, which Ethereum’s upcoming Casper algorithm is a part of. The blockchain keeps track of a set of validators, and anyone who holds the blockchain’s base cryptocurrency (in Ethereum’s case, ether) can become a validator by sending a special type of transaction that locks up their ether into a deposit. The process of creating and agreeing to new blocks is then done through a consensus algorithm that all current validators can participate in. It has significant advantages. Ethereum wiki.
Advantages of a Proof of Stake versus a Proof of Work environment?
There are many advantages to this Ethereum upgrade from PoW to PoS that will definitely reflect positively on its mid and long term value:
- Reducing electricity and energy required to mine Ethereum.
- Reducing Ether transaction cost.
- Enhancing Ethereum security
- Reducing the risk of the centralization and mining monopoly to major mining companies since the costs to “validate” Blocks are reduced.