It was recently announced by Ethereum developer Karl Floersch on twitter that Ethereum would begin implementing its Alpha Casper Testnet. https://twitter.com/karl_dot_tech/status/947498262780461056
While many Eth hodlers rejoice, many of those just diving into crypto have more questions than answers. What is Casper? What is Staking? How can I get in on the action?
The goal of this article is to briefly explain the Casper Testnet and highlight why it’s such a big deal.
While you might think Casper is some complex formula, you’d be wrong. When you think “Casper”, think Proof of Stake. If you’re unfamiliar with Proof of Stake vs Proof of Work, you should read this first before continuing.
Casper serves as the first testing model for Proof of Stake on the Ethereum network. To quote Vitalik Buterin himself, “Casper is a partial consensus mechanism combining proof of stake algorithm research and Byzantine fault tolerant consensus theory.”.
Vitalik continues, “The Casper overlay provides almost any proof of work chain with additional protections against block reversions.”.
The key difference between traditional proof-of-stake consensus systems and the Casper PoS is that validators can be punished for not following the rules and trying to validate malicious blocks.
One way to look at it is to think about it like you are betting on the outcome. You place 1000 ETH assuming that the next block will be the one you bet on. However, if it is a bad transaction/block then you will lose your stake and be removed from the list of validators. According to Vitalik, anyone can join as a validator, as long as they have enough ETH to stake into the staking Smart Contract. When the participants in the system is low, the rewards increase to attract more. However, if there are too many validators, then the rewards drop, which allows for the economic regulation of the number of active validators.
Proof of Stake FAQ – https://github.com/ethereum/wiki/wiki/Proof-of-Stake-FAQ
In layman’s terms, if you have enough Ether, you can stake it and get more Ether. Direct instructions to complete this task can be found here.
However, before you start staking there’s a few requirements. For starters, you must have a minimum of 1,500 testnet Ether. This can either be mined or given directly through an Eth address. This is done intentionally, with the hope that as the test-net improves, the requirement for staking will drop.
There are also talks of Staking pools from which people with less than 1,500 Ether can add their stake and claim their percentage of profit. Though any of this has yet to be seen, the details are fascinating.
Many believe that this will be the first step to fully moving Ethereum away from Proof of Work and towards Proof of Stake. While the result from this testnet is anything from conclusive, many hodlers are taking notice.
If successful, there’s little doubt that the crypto market will become much more interesting. Only time will tell.
For all those interested in viewing the Casper paper by Vitalik Buterin and Virgil Griffith, we’ll include a link here: https://arxiv.org/abs/1710.09437