Glossary

Casper (Ethereum)

Hard

Casper is a project designed to implement PoS into the Ethereum network.

What Is Casper (Ethereum)?

The existing Proof-of-Work (PoW) consensus mechanism for Ethereum is being replaced by an improved version of Proof-of-Stake (PoS).

The Proof-of-Work (PoW) consensus mechanism relies on computational processing power and is plagued by several shortcomings. The Proof of Stake (PoS) consensus algorithm, conversely, relies on token-holder deposits to achieve consensus.

What Is the Difference Between PoW and PoS?

Proof-of-Work (PoW) and Proof-of-Stake (PoS) are the most widely used consensus mechanisms.

The main idea behind Proof-of-Work (PoW) is that miners compete to solve a complex cryptographic puzzle. The winner who solves the puzzle first is allowed to create a new block on the blockchain and receive a reward.

In contrast, in Proof of Stake (PoS), instead of miners competing against each other, they are required to lock up some of their coins as stakes. A validator is chosen at random to validate the block depending on his stake weight (how many coins he has staked).

The Casper Protocol Will Be Implemented in Two Phases

Phase 0: Beacon Chain. This phase will introduce the Proof of Stake concept to the Ethereum blockchain. Beacon Chain will be a new blockchain that will run in parallel to the current Ethereum blockchain. It will be used to manage and coordinate validators without executing smart contracts or having accounts.
Phase 1: Sharding. This phase will provide massive scalability by dividing the Ethereum network into multiple shards, each capable of processing transactions in parallel. At the moment, the Ethereum network can only process about 15 transactions per second (TPS). Sharding would enable it to process thousands of TPS if not more.
Ethereum Casper is a protocol that combines Proof of Work and Proof of Stake. The Proof of Work part is the same as what we have now, using the Ethash algorithm. The Proof of Stake part is a new consensus mechanism called "Casper the Friendly Finality Gadget" (FFG).

The goal of Casper FFG is to eventually replace proof-of-work mining with proof-of-stake. This means that people who currently use hardware to mine Ethereum would be able to participate in validating and securing the network without having to buy expensive hardware.

Advantages That Casper Offers to Ethereum

Reduced Environmental Impact

Proof of Stake (PoS) systems don't require as much effort to validate transactions, meaning miners don't need high-powered hardware or spend as much on electricity. This means lower costs and less environmental impact — something that's especially important now that Bitcoin mining consumes more energy than many countries.

Increased Scalability

Proof-of-Work requires every transaction to be validated by every node in the network before it can be completed. It uses a different validation method which would allow Casper to process more transactions per second, leading to faster and cheaper transactions overall.

Energy Efficiency

The big benefit of moving to proof-of-stake is that it will be more energy-efficient. In the long run, this will allow the amount of Ether in circulation to grow at a controlled and sustainable rate.

Casper protocol’s ultimate objective is transforming Ethereum to its version 2.0, which is also given the name of “Serenity.” Ethereum 2.0 aims to be faster, more efficient, and highly scalable.