How Casper Contracts Will Change Ethereum (ETH) Mining

8989 6 17 17 21 17 (8)


Ethereum, an open-source, public, blockchain-based distributed computing platform and operating system featuring smart contracts, has published the roadmap to transition out of a miner-based network (proof of work) into a new "distributed consensus" (proof of stake) network know as Casper contracts. This shift in the foundation algorithm functionality has certainly created waves within the crypto community, with individuals taking either the proof of work or proof of stake positions. Let's look at the differences between the two. 

PoW vs PoS

* Proof of Work (PoW) is a "requirement" to define a costly computer calculation, also called mining. These specific conditions need to be performed in order to create a new group of trustless transactions (the so-called block) on a distributed ledger called blockchain.
* Proof of Stake (PoS) still is an algorithm to validate transactions, however, there are no block rewards. Instead, miners (known as forgers in PoS) receive transaction fees.  

PoW has great incentives for miners, but the energy costs to sustain this network is troubling blockchain developers. According to a study conducted by Blockgeeks, one Bitcoin transaction required the same amount of electricity as powering 1.57 American households for one day! The Ethereum community has been troubled by the growing electrical costs, and wants to exploit the proof of stake method for a more greener and cheaper distributed form of consensus. Also, as the electrical costs are paid with fiat currencies, this factor continually inflicts downward pressures on cryptocurrency valuations.

When will the switch out of PoW mining occur?

Vitalik Buterin, Ethereum's creator, has stated that the switch from PoW to PoS would take place sometime between 2018-2019 as part of the Constantinople hard fork, however, he has been coy to the true date. Keen observers following the Casper implementation would note some interesting comments coming from the founder on Feb. 28, 2018. As Vitalik indicated, testing is currently underway, this could certainly be a signal that the Casper PoS algorithm is not far from being implemented. During this transition, a "difficulty time bomb" in the PoW network would occur, leading to exponential increases in the mining difficulty until the chain becomes impossible to mine, an event miners call the 'Ethereum Ice Age'.

While miners are understandably distraught by the switch to proof of stake, the Ethereum community collectively recognizes that PoS would help address the current network scaling issues, while also reducing centralized control and energy consumption. If Ethereum didn't make the transition, eventually they would lag behind other competitors involved in the smart contract specialized sector, such as Cardano and NEO.

Ether miners, don't fret. Plenty of back-end work and validation testing still has to be done. Don't forget there are plenty of other profitable coins to GPU mine out there, such as Monero or Ethereum Classic.

Disclosure:

I have received no additional compensation other than the Ethereum that Hade Technologies pays to produce Exclusive content

I have mined Ethereum, Monero, and Ethereum Classic.

Comments (8)

image

Pos really seems like a grift to me.

   0   Reply (2)   Follow(55)  

    image

    It will quickly become an old boys club with no room for newcomers.

       0  

      image

      POW is also an old boys club as well.

         0  

        image

        Unless you’re wealthy, you’ll likely have to join a PoS virtual mining pool to see any rewards.

           0   Reply (1)   Follow(55)  

          image

          Proof-of-Stake should eventually be able to support validator pools.

             0  

            image
            • Jesse
            • ,  Member
            • 03 May 2018, 10:05 am

            How much ETH do I have to stake to offset the gas costs?

               0   Reply (0)   Follow(55)  

              image
              • John R
              • ,  Member
              • 03 May 2018, 10:05 am

              So once the contract code is complete, only the daemon and fork choice rule remain.

                 0   Reply (0)   Follow(55)  

                image

                Thank you for taking the time to illuminate a very important and quite complex topic. Really appreciate the efforts.

                   0   Reply (0)   Follow(55)