Bitcoin, Crypto currency, Blockchain

Ethereum: Casper and the “Nothing-at-Stake”Problem

1ee4cacf59abe58e1a513c289d6d62d4 - Ethereum: Casper and the "Nothing-at-Stake"Problem

Ethereum programmers are already searching since almost four years after a viable Alternative to energy-intensive building consensus via Proof-of-Work-method. The Casper Protocol, (for the moment) a Hybrid of Proof of Work (PoW) and Proof-of-Stake (PoS), to enable Switching of the Ethereum network from PoW to PoS. An Overview of the underlying problems of consensus building and the current state of the Casper-development.

So far, the Proof-of-Work-method the most common way to build consensus in block chains. The mechanism comes not only in the case of Bitcoin, the currencies of the mother of all Crypto. With Ethereum, the market capitalization second largest crypto-currency relies on PoW. You want to be prepared but in the morning, for the case that PoS in the case of the miners, is popular, or other reasons a change is imperative. And so it began in 2014 with research into alternative mechanisms of consensus formation.

Weaknesses of the Proof-of-Work-method

The Proof-of-Work-method is notorious for its catastrophic energy efficiency. This is, in part, in the sense of the inventor. Finally, a high computational effort for a malicious Miner to deter against illegitimate transactions, or to fork the Blockchain at his discretion. Under this aspect, this procedure has proven successful, however, the environmental balance remains catastrophic. With increasing Mining Difficulty of computing – or the cost of energy increases quasi-proportionally. According to the estimates of the current energy is alone for the Bitcoin Mining at around 73,12 TWh in the year, tendency: to (inevitably) rise. With this amount of energy could supply nearly seven million U.S. households. The daily energy requirement for the Mining of Bitcoin, with over 200 million kilowatt-hours currently so high that he could cover 31 households of the day. Bitcoin Mining is for 0.33 percent of the world’s energy consumption.

However, there are also away from the energy consumption of a criticism of the Proof-of-Work-method. So financial can get strong individuals and organizations more and better Mining Hardware, which gives you an advantage over other, less liquid miners. Say: The “Large” tend to receive more Block Rewards, can buy from winning with better Hardware, more blocks, mines, and so on. What appears at first glance, perhaps from a social romantic perspective questionable, but ultimately legitimate, has tangible consequences for the degree of Decentralisation of the network.

Because you as an individual Miner is hardly a Chance to get a piece of the Block Reward pie, many to Mining Pools. The four largest Mining Pools Hashrate are, Antpool, BTC.TOP and SlushPool. Together, they currently have a share of 58.2 per cent of the total Hashrate of the Bitcoin network. In theory, you could join together to start a 51% attack and to manipulate the Blockchain in their favor. Decentralisation is different.

Proof of Stake

These weaknesses of the POW-method are known for quite some time. And so it is not surprising that Ethereum is out on this for so long. The developers focus on the implementation of a Proof-of-Stake mechanism (PoS). At the PoS, the Mining is virtualized process virtually. So-called “validators” to replace the Miner. These validators must first place a portion of their Coins as a “bet” (stake). Here, the use, the following applies: the larger The value, the higher the probability to be used as a Validator for the next Block is called. Who is, for example, Coins to the value of 100 Euro “the game”, has a ten times lower Chance to be used as a Validator selected, as someone of € 1,000 has her stalked.

A Validator has confirmed a Block, it will be the newest link in the Blockchain and the Validator receives the transaction fees as a reward. Conversely, a Validator for cheaters will be punished of operations, he loses a part of its use. As long as the stored application is higher than the sum of the transaction fees in a block, not worth a Manipulation on the part of the validator.

Under the aspect of Energy(sch)turn PoS has significant advantages over Proof of Work, because the energy-intensive Mining is virtually eliminated.

PoS does not solve the Problem of a possible 51% attack really, but: Would you change, for example, Bitcoin to PoS, would have to keep an attacker with 51% of the Bitcoin, the Blockchain control. Currently, he would have to buy Bitcoin to the value of over 55 billion US dollars – a relatively unrealistic scenario.

PoS, however, has an obvious weak. Since the amount of the stake for the probability to be used as a Validator is called, is crucial, have to win “Rich” a better chance to forge blocks (in contrast to the PoW-Mining is the process of the block generation PoS “Forging”, or alternatively “Minting”) and the transaction is fees. They can then use in turn to increase their Stake, which in turn increases your chances of more re-transaction fees in the us.

The “Nothing-at-Stake”Problem

Envision the following scenario: In a PoS Blockchain two blocks are propagated at exactly the same time, and both are valid. It comes normally to a Bifurcation of the Blockchain (Fork), where the majority of the participants decides which of the two blocks is the new link in the chain. The other Block is orphaned (“orphan block”). Since the Forging of blocks in the PoS System takes hardly any resources, could decide a Validator to work on multiple versions of the Fork, and to forge new blocks.

Unlike PoW, where the Miner must choose which Version of the Blockchain they spend their resources, can set the Miner for your Coins, so each Version of a Proof-of-Stake Blockchain. Since there is no opportunity cost for the Forging in a particular Blockchain, the Miner “nothing on the game” (nothing at stake). So shrewd Miner could be easy to forge on each of the competing branch, you see the blocks, in order to obtain the maximum amount of transaction fees.

Casper – The Solution?

Vitalik Buterin is aware of this weakness of the PoS system is aware of. The solution should provide the Casper Protocol. In the case of Casper it is less of a single project, but rather the Interaction of various research projects. These are currently being taken care of by the Ethereum development team and also look in terms of Use Cases now on the Ethereum-plate edge. However, there are two projects, which deal with dedicated to the Ethereum network. In accordance with the kind of film Ghost, Casper, the first project of “Casper the Friendly Finality Gadget” (FFG), while the second listens to the name “Casper the Friendly GHOST: Correct-by-Construction” (CBC).

Casper FFG

Casper FFG is a Hybrid of PoW and PoS-approaches. FFG was designed with the aim to facilitate the conversion of Ethereum-a Blockchain from PoW to PoS. In the case of FFG, a Proof-of-Stake is placed-log of an underlying log PoW method. That is: blocks are gemint, as usual, by PoW, but every fiftieth Block is a PoS Checkpoint. The time interval between the Checkpoints is referred to as the “epoch”.

During an era valida agree on goals about which Version of the Blockchain will continue to be used. At the checkpoints, the network of valida confirmed gates of the finality (finality) of the transactions. Finality means that a transaction is irreversible, complete, and no one can go there to drive fast and loose with the transaction history. Casper is intended to ensure finality in different ways. A lower incentive to manipulate the two-thirds of the validators, which put a maximum amount on the finalization of a block. If you wanted to attack the network, would you risk necessarily their deposits. To say it with the words of the Casper-developer Vlad Zamfir:

“Imagine a Version of Proof of Work before, at the time, if you take a 51-percent-attack part of your Mining Hardware would burn down.”

Two valid blocks are propagated at the same time, can decide the participants for a Version of the participants. This ultimately results in a Hard Fork.

Casper CBC

Casper the Friendly GHOST CBC (hereinafter “TFG”) is mainly developed by Vlad Zamfir. It describes a much more radical renewal of the consensus as a FFG. Unlike FFG TFG does not have an existing PoW-procedure put. The biggest difference to the FFG consists in the fact that in the case of TFG the blocks themselves are of votes cast in the Consensus. The validators to create, send, and receive blocks, while collecting the finality of blocks further back in the chain. The concept of the era is not intended for the TFG. Because of these differences, the Finality of the Gadget FFG for the existing Ethereum-a Blockchain to implement it significantly easier to use. Therefore, it will be used, the first of Ethereum (quasi-)PoS Protocol. A complete switch from PoW to PoS would be done by means of a Hard Fork.

PoS with the “Aftertaste”

The thought of a PoS-based System is familiar to many crypto-idealists is a horror. The “Aftertaste”, this is caused by the fact that voting depend on rights on the Blockchain from the wealth of the participants, remains the same, despite the similar Probematik with PoW-procedure. The environmental record speaks for PoS. Now it is up to the Ethereum developers, the Casper-to implement the Protocol so that on the Blockchain no plutocracy.

EDIT: In the section on the energy consumption of Bitcoin miners the cost of a single transaction were originally specified incorrectly with 200 million kWh. In fact, this is “only” 931 kWh. The 200 million kWh, however, the energy required for all Bitcoin transactions in the last 24 hours.

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