On May 8, developers released a planned improvement to Ethereum’s network – a new version of the code of Casper. Hybrid Casper Friendly Finality Gadget was introduced to move network away from mining-related problems, as “excessive energy consumption, issues with equal access to mining hardware, mining pool centralization, and an emerging market of ASICs”, the ultimate goal being to move the network from a PoW to a PoS system.
Let’s see what is known about “possibly the most significant” change to the network to date, according to Ethereum News.
Energy consumption and commissions
While 2017 was exciting due to the exponential price speculation of cryptocurrencies, it emergedthat neither Bitcoin nor Ether in their present form would be able to become a fully fledged alternative to fiat currencies because of their very low transaction speeds.
An additional concern was the high amount of energy required to mine leading cryptocurrencies. Therefore, it should come as no surprise that among journalists and analysts, the latest trend has been comparing mining costs to the rate of the energy consumption in each country to determine where mining would be most profitable.
Image source: Powercompare.co.uk
To date, developers of leading cryptocurrencies have failed to solve the issues related to scalability. In particular, Ethereum scales poorly despite a huge number of miners. Hypothetically, it may seem that as more people mine the cryptocurrency, the more transactions the network can handle. The reality is that as all these miners simultaneously try to process one block, the complexity of production increases and the network bandwidth remains the same. This means that even if the number of miners grows a thousand times, one block will still be produced in ten seconds and the cost of electricity would noticeably increase.
A direct consequence of poor scalability is high commissions. Miners choose transactions with a higher commission, as they are hunting for a greater reward. This leads to thousands of low commission transactions which accumulate and await processing for several days to infinity, turning the blockchain into a universe of unprocessed requests – not to mention small payments which are impossible to process.
Moreover, in recent months a fundamentally new problem has emerged. The arrival of super powerful ASIC miners in the market has become a serious threat for decentralized networks, as they increase the chances that one of the mining pools will occupy a significant share of the hash and make the network centralized.
Attempts to solve these problems led to an epidemic of Bitcoin hard forks aimed at creating a “new Bitcoin” with higher transaction speed. They were followed by a wave of forks among the most popular cryptocurrencies, such as Ethereum, Monero, and Litecoin. This movement was assigned the name of “ASIC resistance” and has started to gather more and more supporters as the threat of ASIC mining dominance becomes more real.
So far, one of the reasonable approaches to solving this avalanche of problems was demonstrated by the Ethereum team, who decided to create a protocol combining the parameters of two algorithms – Proof-Of-Stake (PoS) and Proof-Of-Work (PoW).
This new protocol is called Casper – Friendly Finality Gadget (FFG) and it completely changes the principles of creating and distributing Ethereum blocks, while reducing the overall complexity of the whole blockchain.
Ethereum developers are sure that the root of all the problems faced by leading cryptocurrencies is the principle of PoW:
“Although effective in coming to a decentralized consensus, PoW consumes an incredible amount of energy, has no economic finality, and has no effective strategy in resisting cartels.”
Furthermore, the performance of the blockchain operating on the PoW algorithm is limited and can hardly provide several dozen transactions per second.
Original URL : https://cointelegraph.com/news/casper-what-is-known-about-the-new-ethereums-network-upgrade