Ethereum network ready to test its proof-of-stake protocol

Ethereum founder, Vitalik Buterin, recently revealed that the digital currency’s network is all set to test its new proof-of-stake protocol, Casper.

The highly anticipated update, originally expected to occur next year, may happen ahead of schedule. This update is crucial to Ethereum’s highly crowded network, as it will shift the technology from a proof-of-work (PoW) protocol to a proof-of-stake (PoS) one.

Currently, both Bitcoin and Ethereum, the two largest cryptocurrencies, use a PoW method for validation of transactions. Both currencies’ networks are facing scaling issues. In an attempt to resolve this issue, Bitcoin went through the Bitcoin Cash hard fork back in August. Similarly, Ethereum can get over-crowded quite easily. The network is able to manage only 10 to 20 transactions per second. The situation can get even worse during an Initial Coin Offering (ICO), as seen during Bancor’s ICO back in June.

Buterin highlighted the software’s need for an update, stating, “the applications are there…all are on backburner now precisely because scalability is not there. I personally have cut down evangelism precisely because I see that the main bottleneck is now not interest, but tech.”

To address this issue, Ethereum’s top developers have decided to adopt a new consensus strategy that Buterin calls “consensus by bet”. The new strategy, Casper, makes use of PoS algorithm. The PoS protocol has many advantages over PoW protocol.

The latter requires a lot of powerful hardware and electricity to confirm a transaction through a process called mining. The former, on the other hand, uses a different approach to perform the same task while requiring far less computational power. The PoS protocol also discourages centralization as well as enhances security and energy efficiency.

According to an estimate, both Bitcoin and Ethereum spend over a million dollars every day in electricity and hardware for mining. Casper, being a PoS-based public blockchain, will remedy that by making the mining virtual. Furthermore, the update will also have built-in functionalities to punish participants that try to cheat the system.

Currently, the system is still far from widespread implementation and is only in the testing phase. Its final version is not yet complete and developers are still working on two versions of the protocol in order to decide on the best one.