The Proof-of-Work cryptocurrency mining model has been criticized from the earliest stages of technology development. In addition to the obvious advantage in the form of "computing power" that cannot be faked and with which it is impossible to cheat, there are a whole host of disadvantages. This is the cost of equipment, and the domination of capital over ordinary miners, and even harm to the environment. That is, over the entire period of its existence, the PoW model has made many opponents for itself.
On the other hand, alternative mining methods have not yet taken root in large blockchains. Many commercially successful cryptocurrencies are mined, and according to the Proof-of-Work protocol. But are there any alternatives to this “barbarism”?
Of course have. First of all, this is a method of extraction. Proof-of-Stake or “proof of ownership”. And the first steps to implement this algorithm among popular cryptocurrencies were made by the Ethereum developers, led by Vlad Zamfir. In fact, he is the author of the Casper protocol. But in this whole story there are a couple of "BUT", because Casper, although a "friendly ghost", but tries too hard to please everyone at once.
Ok Google, what is Casper?
Casper is a good ghost of a dead boy. For the first time, mentions of the Casper protocol for Ethereum appeared in the second half-late 2017. Then, at the level of rumors, various publications wrote that the Ethereum team, under the strict guidance of Buterin, was working on a radical change in the paradigm of the ether blockchain and its transfer to PoS. For example, Forklog wrote about this in November 2017. At the same time, the development team published the Casper "manifesto" on GitHub and it turned out that the Ethereum network in the future will use a hybrid PoW / PoS approach.
Yes, they could not completely get rid of Proof-Of-Work.
In fact, such a gesture on the part of the "ether" command is an extremely accurate maneuver to make it "ours and yours", not "ours are waving at yours." Objectively, Buterin and company could not abruptly abandon PoW, because it would kill the entire network. Moreover, the PoS principle itself has a weak point in terms of the fact that it is not clear who will provide the infrastructure for conducting transactions within the network, while PoW blockchains are a self-sustaining structure. Of course, the manifesto appeared even before the growing popularity of crypto games like Cryptokitties, but Zamfir looked into the water: now, in addition to the impending threat of ASIC miners, Ethereum has a network performance problem on the horizon.
Some short-sighted publications are already uncovering trombones and are preparing to play a funeral march over Buterin's brainchild, but this is far from the case. Yes, “ether” has several problems, for example:
- Slow transaction speed.
- Growth in transaction costs.
- Inability of the network to serve large projects as a payment system.
- Looming, like a cloud on the horizon, Ethash-compatible ASIC miners.
But it is in order. Very seriously, Ethereum was hit by donat games, the same notorious Cryptokitties in which you can buy seals for esters or, for example, grow them. When they first appeared at the end of the 2017 year, it was just a bomb, but the more time passes from the moment they emerged, the more criticism sounds to Ethereum developers. For example, that transactions are getting more expensive and taking too long against standard banking services.
Experience with crypto games has shown that specifically “ether”, and the entire cryptosphere is not yet ready to provide mass transaction services. Of course, it is likely that there are blockchains more productive than Ethereum, but they do not have an “ether” audience, so we don’t take it into account.
And, of course, Casper is the answer to ASIC miners. We wrote that “Buterin doesn’t seem to mind,” but in fact Vitalik sets priorities: why rush around corners and worry about ASICs when such a “bomb” like Casper is on the way? According to the manifest of the new protocol, its implementation will make the following changes to the functioning of the network (if very briefly):
- Block reward will be reduced from 3 ETH to 0,6 ETH.
- Implementation of PoS mining.
“The Casper Phase 1 specifications presented describe the transition from pure Proof-of-Work to a PoW / PoS hybrid system. In this scheme, all Proof-of-Work mechanics are retained, but the block reward will be reduced (0,6 ETH), and the PoS mechanism will be added, ”the developers say.
Moreover, Buterin does not exclude that the reward for miners can be reduced to 0,22 ETH per block. It is not entirely clear where the “difference” between the reward of PoW miners and the block cost will go. Someone says that the remaining ~2,5 "ether" will be distributed among PoS miners, but there is no concrete confirmation of this. Moreover, the fact that PoS-Mining is not the most profitable enterprise.
According to preliminary information, the introduction of a “friendly ghost” will take place at the 5 900 000 block. That's when the reward will be reduced and PoS mining will be introduced. Adds intrigue to the situation and the fact that now, if you go down to trading terminology, ETH shows horizontal movement on exchanges, that is, the community does not know whether the course will go up or collapse down. This is affected by the general volatility of cryptocurrencies, and statements about the appearance of ASIC miners and the notorious “friendly ghost”. That is, until Casper is introduced, ETH is a very unstable altcoin that can either go up at any time or break through another bottom.
And what about the capacities?
Buterin’s ignoring of the problems of ASIC miners is only partially due to the implementation of Casper. Obviously, with a reduction in block rewards at least 5 times, the outflow of computing power of miners will follow, which will transfer their GPU farms to other blockchains. Now ETH is the most profitable direction, but the profit from mining is far from 500% compared to competitors. Rather, we are talking about a fork in 10-20% relative to the same PIRL or ELLA altcoin. As a result, ETH miners can “spread a thin layer” over various altcoins or leave in an unknown direction altogether.
It is not yet clear how the Buterin team will deal with a decrease in the number of miners in the network, given the radical nature of the upcoming changes. It is possible that Casper will only increase the attractiveness of developing high-performance ASIC miners, which will give green light to large capital in the ETH network. At the moment, there are no objective reasons to stay on ETH mining after the introduction of PoS for current miners without serious “ether” accumulations, given the decrease in profitability by 5 times.