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When the Stakes are high: Casper and Ethereum

Ethereum’s long-planned consensus change from proof-of-work to proof-of-stake inches closer with every passing day. In April 2018, developers announced that Ethereum’s EIP 1011 / “Hybrid Casper FFG” was open for review. This change has the potential to both revolutionise and fragment the cryptocurrency industry in significant ways.

EIP 101(1)

The consensus shift involves migration to a hybrid system combining mechanics of both proof-of stake and proof-of-work in an attempt to make the transition easier as the network migrates to the former. The shift marks a hard fork for Ethereum. Given that the network’s staking mechanics will be incompatible with current software, a split may be inevitable. While a shift away from mining wold eliminate concerns over expensive ASIC mining rigs, as Ethereum’s co-founder Vitalik Buterin noted that the process would be “fairly chaotic”.

Consequentialism

On 26th October, CoinShares, a London-based cryptocurrency investment firm, noted that the Casper update had the potential to polarise the Ethereum community through the disruption of the status quo. Originally intended for release in 2018, the Casper implementation has been pushed back to 2020, amongst the hysteria surrounding a hard fork. The underlying matter is that user-run nodes must willingly update their software to run on the new work, however most nodes are so because of the mining power users have invested in. It is unlikely that those who are so deeply invested in mining would willingly relinquish their control over the Ethereum Network.

Next Steps

Ethereum has currently placed a “difficult bomb” within its blockchain such that transactions continue to become increasingly harder for miners to validate. The idea is that eventually users will feel encouraged to prepare for the Casper update and relinquish their hold on mining. With the update pushed back another two years, it will be interesting to see whether a fork becomes necessary or if the community rallies behind Casper. With Bitmain, one of the main manufacturers to ASIC-mining devices, reporting a profit of 1.1B USD in Q1 2018, it is undeniable that the Stakes remain especially high for all those involved with the Ethereum Network.

 

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37.00 RSI
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22.00 RSI
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