Casper: What Will the Upgrade Bring to the Ethereum’s Network?

New friendly protocol to solve the problems of scalability and high transactions costs in Ethereum network. The upgrade means more decentralization, functionality and competitiveness to the system.

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 emerged that 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.

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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.

Ethereum archipelago

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.

Cryptocurrencies Transaction

Image source: HowMuch

For these reasons, the Ethereum team plans to move from the PoW to the PoS algorithm. The difference between the two is that in the PoW case, users buy real computers that consume energy and calculate blocks at a rate proportional to costs. The subject of purchase in the PoS case is virtual coins inside the system, which are then converted into virtual computers calculating blocks. Under this approach, the probability of signing a block depends not on the processing power, but on the number of coins on the account of a user-validator. If the validator decides to participate in the confirmation of transactions, their funds are frozen with each confirmed block rewarded.

Proof of work

The Casper protocol would become an intermediate step in the transition from PoW to PoS, combining the possibilities of both principles:

“Through the use of Ether deposits, slashing conditions, and a modified fork choice, FFG allows the underlying PoW blockchain to be finalized. As network security is greatly shifted from PoW to PoS, PoW block rewards are reduced.”

Sharding

In addition to the PoS algorithm introduced in Casper, there is another technological novelty being developed – sharding. The idea is that the nodes store only part of the distributed registry, and the underlying mathematics would ensure the system’s transparency and accountability in such a way that each node could rely on the information of others.

The founder of the Ethereum network, Vitalik Buterin, compared the elements of the sharding with islands belonging to the same archipelago:

“Imagine that Ethereum has been split into thousands of islands. Each island can do its own thing. Each of the islands has its own unique features and everyone belonging on that island, i.e. the accounts, can interact with each other and they can freely indulge in all its features. If they want to contact with other islands, they will have to use some sort of protocol.”

In other words, Ethereum’s main chain will be divided into separate chains, or shards, that associated with each other and the main block. The purpose of shards is to provide parallel processing of transactions. Each node can process its shard separately, while together nodes can work in parallel, increasing the network’s bandwidth and transaction speed by several times. At the same time, the task of scalability is solved.

Miners and validators: rescue rangers

The verification of transactions inside each shard will be performed by validators who are the main marshals of the Casper system along with the miners. The validators will ensure the legitimacy of operations with coins and act as a kind of escrow in the system, confirming transactions with their deposit. It should work the following way – if the validator has found a block that, in their opinion, should be included in blockchain, they will be able to approve it by placing a part of the deposit on this block. In the event that this block is added to blockchain, the validator will receive a reward proportional to the share that they invested. Otherwise, if they approve an incorrect or malicious block, they will lose their deposit.

Another task of validators is to create checkpoints every fifty blocks. This will ensure the completion of the blockchain and significantly increase the security of the network, since it excludes the possibility of returning transactions before the checkpoint. According to Ethereum developer Vlad Zamfir, economically any manipulation or an attempt to attack will be of no interest for validators:

“It’s as though your ASIC farm burned down if you participated in a 51 percent attack.”

The minimum deposit size the validator can make for confirmation is set at 1500 ETH which is a significant enough amount to lose and the more reason to think twice before taking part in any manipulation schemes.

The developers also provided a solution to the scalability problem which has been a critical condition for the further development of the network and Ethereum’s ability to compete with more advanced blockchain systems like Graphene.

The increase in processing speed has been reached by developers by means of participation of smaller amount of nodes and delegation of the major work to light clients. Therefore the transaction processing speed will be much higher than on a separate computer, and at the same time the entire network will be able to work on a large number of conventional laptops, while maintaining full decentralization.

Additionally, the network’s security is significantly shifted from the complexity of PoW to the completeness of PoS with the reward given to both validators and miners. At the same time, the reward for the miners for the production of ethers will decrease fivefold – from the current 3 ETH to 0.6 ETH. This will make the coin less attractive for ASIC miners and will reduce the risks of network centralization.

Validators will also become the recipients of rewards, however, in a smaller amount. Their total award is to be only 0.82 ETH per block, which is almost four times lower than the current amount. In the future, according to Vitalik Buterin, Ethereum developers will completely get rid of the PoW algorithm, leaving the reward only for validators in the amount of 0.22 ETH per block:

“Come up with an estimate for the annual rewards given out by the full Casper and sharding mechanisms. Currently, an expected value is 10 mln ETH staking at 5 percent interest, which is 500,000 ETH per year – approximately 0.22 ETH per block.”

At the same time, the efficiency of the network will increase significantly for two reasons. First of them is behind the PoS algorithm consensus which to be provided without mining, reducing energy costs and ensuring the necessary emission of ETH. Secondly, the generation time of the block will be reduced to a minimum, since it is easier to check who owns the largest share rather than to find out which of the miners has the greatest computing power.

Latest news

At the Edcon conference in early May 2018, the creator of Ethereum Vitalik Buterin reported new details about the “friendly ghost”. In particular, Casper, in addition to the reward system of validators, will provide a system of penalties. The main principle of the new reward system is the following – the greater the stake is, the lower the interest rate. For example, the owner of 2.5 mln ETH will receive an annual fee of 10 percent, and the owner of 10 mln ETH – only 5 percent.

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Image source: HowMuch

The amount of penalties will depend on the severity of the validators’ faults and can reach 100 percent. In particular, the validators will be subject to fines in case of frequent absence from the network. The emergence of problems with the shard or disk on which the wallet is located will be punished with a fine of 2 percent of the deposit amount. For a group of validators whose shards are simultaneously out of order, penalties will be much higher and measured in double digits. At the same time Buterin notes that the main problem of this approach will be the risk of hacker attacks, because in this case, collective penalties can leave validators without any deposits.

The last news related to the “friendly ghost” came on May 8, when one of Ethereum developers Denny Ryan published the first version of Casper’s updated code on GitHub:

“v0.1.0 marks us more clearly tagging releases to help clients and external auditors more easily track the contract and changes.”

He also added that client developers can now start writing and testing software in their own languages.

What can we expect from Casper?

The launch of the Casper FFG is planned for the summer – autumn of 2018. Since the system will be incompatible with previous versions of Ethereum software, the update will be implemented through a hard fork.

As a scalability solution, Casper remains an important blockchain upgrade and solution for both developers and ordinary users. The Ethereum foundation spent three years to apply all the accumulated experience in making the network decentralized, efficient and competitive industry improving in the long run.

With the bandwidth increased, more transactions are expected to be processed at higher speeds, which means that big companies will be able to build complex structures and develop ecosystems based on the network. A loyal enthusiastic community behind the platform will help to contribute to its development and improve its functionality.

There is still a lot of work to be done on how a new reward system will work in practice and how validators will manage the protocols, but one thing is obvious – Casper is getting closer.

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‘Smart eCard’ Stores 30 Crypto Accounts, Credit And Debit Cards In One Place

A “smart eCard” allows users to store up to 30 crypto accounts and credit cards, with an ePaper panel showing balances in real time.

Buying a bottle of water quickly and spontaneously using cryptocurrency is still a massive challenge, but the company behind a new ecosystem says its technology will make it easy for crypto holders to use their funds for everyday purchases – all without creating a headache for merchants.

FuzeX has created a smart eCard that enables shoppers to store up to 15 cryptocurrency accounts, 10 debit or credit cards and five reward accounts in one place. Buttons integrated into the eCard allow users to decide which account they want to use to make a purchase, with the current balance for each shown on an ePaper display so they can be aware and confident of having adequate funds. The eCard’s battery life lasts for 45 to 60 days, and it is easily rechargeable.

Although furnished with industry-standard technology such as near field communication (NFC) – the tool that makes contactless payments from old-fashioned debit card readers possible – FuzeX says other security features were added to help it to stand out from traditional cards. For example, its eCard can be locked whenever a Bluetooth connection to the user’s accompanying FuzeX wallet is deactivated, and the eCard can also be wiped remotely if it is lost or stolen. Through the wallet, available as an app for iOS or Android, users can also see where their card has been used on an interactive map – as well as send, receive and exchange cryptocurrencies.

“A proven concept”

FuzeX’s technology has been tried and tested, with the company saying it has already “successfully developed, brought to market, sold and shipped more than 20,000 Fuze cards.” These smart eCards only offered payments through credit, debit or reward cards – and in 2017, the company says it managed to reach the dizzying heights of crowdfunding success, soaring to the top 0.01 percent of projects on Indiegogo after raising $2.2 mln.

The company says its proven concept and distinctive features mean there are high barriers to entry for rivals who may try to replicate its product. When compared with competitors, FuzeX says it is the only provider offering a smart eCard, with other providers supporting cryptocurrencies and nothing else. Rival cards also have to be prepaid, while FuzeX users can get payments debited directly from their account.

FuzeX says it takes pride in offering a legitimate, dependable service. Another card issuer, TenX, suffered a severe service disruption when its cryptocurrency card ceased working because its issuer Wavecrest allegedly violated Visa’s policies.

Listed on cryptocurrency exchanges

The company has now concluded its initial coin offering. For now, it says FXT tokens can be used to purchase FuzeX charges and pay for “small annual memberships” necessitated by its partnerships with issuers. Although it is possible to pay for membership using other cryptocurrencies and fiat, FuzeX offers discounts when FXT is used.

FXT tokens have now been listed on four cryptocurrency exchanges. As of May 10, they are available on the Taiwan-based Cobinhood exchange, where promotions are taking place to herald the arrival of FXT. It has also been listed on HitBTC, COSS and Livecoin.

Disclaimer. Cointelegraph does not endorse any content or product on this page. While we aim at providing you all important information that we could obtain, readers should do their own research before taking any actions related to the company and carry full responsibility for their decisions, nor this article can be considered as an investment advice.

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HTC Reveals Plans To Launch Blockchain-Powered Smartphone

HTC reveals plans to release a multiple blockchain-powered smartphone to allow customers to “truly own their data.”

Consumer electronics corporation HTC has unveiled “the first native blockchain phone”, HTC Exodus, which will launch with support for multiple blockchains, including Bitcoin (BTC) and Ethereum (ETH) networks, PCMag reported May 15. HTC Vive creator Phil Chen announced the forthcoming project at the Consensus conference in New York City today.

Chen highlighted that the upcoming phone will support “multiple blockchain protocols,” such as Bitcoin, Ethereum, Lightning Network (LN), and Dfinity network. He said the company’s mission is to support the entire blockchain ecosystem in order to “help underlying protocols expand their base of dedicated nodes.”

The Android mobile device will reportedly feature a universal cryptocurrency wallet as well as a “secure hardware enclave.” Chen also stressed that the HTC Exodus would provide high standards of security and data protection:

“I want to see a world where the end consumers can truly own their data—browsing history, identity, assets, wallets, emails, messaging—without the need for central authorities.”

While Chen did not specify either the estimated price of Exodus or the expected release date, he said that the company may consider cryptocurrency as a means of payment for the upcoming multiple blockchain-powered phone.

HTC has seen its global market share in mobile devices shrink from nearly 11 percent in 2011 to less than one percent last year. While HTC’s high-end smartphone production could reach 500,000 to 1 mln this year, that number pales in comparison to Samsung, who reportedly shipped 20 mln units of the Galaxy S8 in 2017.

HTC is not the first to develop a blockchain-based mobile phone. In April, the blockchain-oriented OS developer and supplier Sirin Labs found a manufacturer for its blockchain smartphone. FIH Mobile, a subsidiary of Foxconn Technology, has agreed to help develop the phone. Foxconn is a giant in electronics contract manufacturing, with clients including Apple, Google, Cisco, Huawei, and Amazon.

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European Central Bank’s Mersch Says Banks Should ‘Segregate’ Crypto Trading

The European Central Bank’s Yves Mersch stated that banks should “segregate” their dealings in cryptocurrencies from other activities, saying crypto doesn’t “qualify” as money

European Central Bank (ECB) board member Yves Mersch has said that banks should “segregate” their dealings in cryptocurrencies from other activities, Reuters reported May 14.

Reuters quotes Mersch as raising concerns over the high volatility of crypto markets, emphasizing that digital tokens “do not qualify as money,” and that their issuers, as well as dealers, exchanges, banks, or clearing houses, should be regulated.

Mersch reportedly noted that even at its peak market capitalization in January 2018 –  which Mersch mistakenly reports as $432 bln rather than the actual $800 bln – the crypto market is still too small to threaten financial stability. He said however that if cryptocurrencies were to be used as collateral for bank loans or for settling trades at clearing houses, there would be an argument for such activities being “ring-fenced” from other trading and investments.

As Reuters notes, the European banks regulated by ECB are not currently dealing in crypto. In the US, investment banking giant Goldman Sachs recently announced it would be opening a crypto trading desk “within weeks.”

ECB’s Yves Mersch has been a staunch critic of the increasing interconnection of the traditional financial sector with the cryptocurrency space, saying that cryptocurrencies pose a risk of “contagion and contamination of the existing financial system” in February this year.

Notwithstanding Mersch’s concerns – that are shared by others such as the Bank of International Settlements’ (BIS) Augustín Carstens – the ECB’s Chair of the Supervisory Board Daniele Nouy told CNBC in February that future involvement of the ECB in cryptocurrency regulation was likely to be “very, very low”.

In March, ECB and BIS issued a statement on Bitcoin, as well as central bank-issued digital currencies (CBDCs), saying they are “not the answer to the cashless economy.”

ECB has however championed blockchain’s potential for transforming securities settlements, against the backdrop of the European Commission’s Blockchain Observatory, which aims at “uniting” the European economy around the technology.

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Bitcoin Cash Hard Fork Increases Block Size, Reactivates Op Nodes

A Bitcoin Cash hard fork was activated earlier today, increasing the block size up to 32MB and reactivating several previously deactivated Op nodes

A Bitcoin Cash (BCH) upgrade that will both increase block size from 8MB to 32MB and add or reactivate Bitcoin script operation codes (Op codes) has been activated today, May 15.

The hard fork used the Median Time Past (MTP) for initiation, going live on next block after the MTP timestamp of 1526400000 at 16:14 UTC.

Bitcoin ABC, a Bitcoin Cash full node implementation, posted on April 1 that the Bitcoin ABC 0.17.1 full node upgrade testnet was available, noting that all BCH full nodes needed to upgrade and that major exchanges and wallets were being notified. BitcoinCash.org also wrote that this is the first of several planned upgrades for the currency.

An explanation of the new upgrade on Reddit says that the upgrade is “paving the way for future adoption as well as new functionality being added such as op codes.” User Steve Shadders-a co-author for reenabling disabled Op codes – posted on his blog that the reactivation of formerly disabled Op codes is compelling to developers and could bring value to the BCH economy.

The arguments against an increase in block size include making operation of full nodes more expensive, leading to less decentralization of the network, as well as lower propagation speeds, according to BitcoinWiki.

Although outspoken BCH advocate Roger Ver did not directly mention the upgrade today, he did post on Twitter about his belief that BCH–above all Bitcoin forks–follows Satoshi’s vision:

BCH, which is a hard fork of the Bitcoin blockchain from August 2017, touts itself as the original Bitcoin (BTC) and superior to BTC due to its lower transaction fees. However, at the end of February this year, BTC’s transaction fees were cheaper than those of BCH.

BCH’s large block size is another characteristic that sets it apart from BTC. This is due to Satoshi Nakamoto’s attempt to avoid splitting the blockchain in the case of some miners produced big blocks that other miners couldn’t accept. In order to solve the scalability problem caused by BTC’s block size limit, the Segregated Witness (SegWit) upgrade was proposed, with many crypto exchanges like Coinbase, Bitfinex, and GDAX exchange having already accepted the upgrade.

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US Prosecutors Indict Three Co-Founders Of Floyd Mayweather-Backed ICO For Fraud

A US District Court in Manhattan has issued a formal indictment of the three founders of Floyd Mayweather-backed Centra Tech ICO for securities fraud, among other charges.

The three co-founders of cryptocurrency startup Centra Tech have been formally indicted for running fraudulent ICO, according to a statement May 14 from the U.S. Department of Justice.

According to the four-count indictment issued by the U.S. District Court in Manhattan, all three Centra Tech co-founders Sohrab Sharma, Robert Farkas, and Raymond Trapani are being charged with securities fraud, wire fraud and two conspiracy counts.

Centra Tech’s Initial Coin Offering (ICO) raised $32 mln from investors in 2017. The Florida-based defendants had misled investors by falsely claiming that their company had partnered with Visa  MasterCard to issue virtual currency debit cards.

Centra Tech was previously promoted by celebrities Floyd Mayweather and DJ Khaled.

Late last month, US Securities and Exchange Commission (SEC) Commissioner Robert Jackson expressed criticism of ICOs in general, claiming that investors “are having a hard time telling the difference between investments and fraud.”

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Microsoft’s Search Engine Bing Says It Will Ban Crypto-Related Ads By July 2018

Microsoft’s search engine Bing announced it will remove crypto ads from its network by July 2018 to protect customers from ‘bad actors’.

Microsoft-powered search engine Bing has joined other internet giants in announcing it will ban cryptocurrency-related advertisements on its network by July 2018, according to an official blog post today, May 15.

According to the statement, the main reason for the company’s decision to ban “advertising for cryptocurrency” and “cryptocurrency related products” is the current unregulated status of cryptocurrencies, which allegedly increases risk for Bing’s users:

“Because cryptocurrency and related products are not regulated, we have found them to present a possible elevated risk to our users with the potential for bad actors to participate in predatory behaviors, or otherwise scam consumers.”

As the report further says, Bing Ads tool plans to fully implement the ban worldwide between June until early July.

Bing’s crypto ads ban is the latest move in a search engine and social media crypto-boycott, initiated by Facebook in late January of this year. Google announced an analogous crypto ad ban in mid-March, and Twitter confirmed its own ban soon after.

Last week, multiple mainstream media outlets reported that Facebook is reportedly “exploring” the launch of its own cryptocurrency.

Earlier in April, the co-founder of LinkedIn told Cointelegraph that the recent crypto ad bans are, in his opinion, most likely “temporary” and due to the current absence of clear crypto market regulations.

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Amazon And ConsenSys’ Startup To Offer Simplified Blockchain Platforms

Amazon’s cloud computing arm is teaming up with ConsenSys’ blockchain startup Kaleido to develop simplified blockchain cloud platforms for its clients.

Amazon Web Services (AWS), the tech giant’s cloud computing arm, is partnering with ConsenSys’ blockchain startup Kaleido to offer simplified blockchain cloud platforms for its clients, CNBC reports today, May 15.

Kaleido is a blockchain business cloud that helps enterprises build and manage blockchain platforms without having to start from scratch, and is based on the Ethereum blockchain. It is one of the emerging ventures supported by Joseph Lubin’s blockchain incubator ConsenSys, who introduced the project today in New York:

Lubin told CNBC that Amazon’s move “is a heavy duty, full stack way of getting the company into blockchain solutions.”

Kaleido is already listed on AWS marketplace, where it explains that the blockchain solution is designed to accelerate the “entire journey from experimentation and PoCs [proofs-of-concept] to pilots and production.” Clients can choose “between Ethereum protocol packages Geth and Quorum” as well as “consensus algorithms such as RAFT, IBFT, and POA.”

As Steve Cerveny, one of the founders of Kaleido, told CNBC, companies can therefore “focus on their scenario, [without having] to become PhDs in cryptography.”

Before its latest partnership with Kaleido, in April AWS released a blockchain framework for Ethereum (ETH) and Hyperledger Fabric, allowing its users to build and manage their own blockchain-powered decentralized applications (DApps). Last year, a petition directed at Amazon founder Jeff Bezos demanded that cryptocurrencies be accepted as a mode of payment on the e-commerce platform, but the company has to date not made this option available.

Ethereum is currently trading at $737.75 at press time, down 0.33 percent over a 24-hour period.

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