Ethereum (ETH), the second largest cryptocurrency by market capitalization and one of the most trusted and experimented blockchains by enterprises is preparing to move to “proof-of-stake” model by the end of 2017.
Launched in 2015, Ethereum is a decentralized software platform that enables Smart Contracts and Distributed Applications (ĐApps) to be built and run without any downtime, fraud, control or interference from a third party. The applications on Ethereum are run on its platform-specific cryptographic token, ether, which acts like a vehicle for moving around on the Ethereum platform, and is sought by mostly developers looking to develop and run applications within.
According to Ethereum, ether can be used to “codify, decentralize, secure and trade just about anything.” Following the attack on the DAO in 2016, Ethereum was split into Ethereum (ETH) and Ethereum Classic (ETC). (Related reading, see: The First-Ever Ethereum IRA is a Game-Changer)
Currently, proof-of-work underpins Ethereum as well as the major cryptocurrencies such as Bitcoin. A proof of work “is a piece of data which is difficult (costly, time-consuming) to produce but easy for others to verify and which satisfies certain requirements. Producing a proof-of-work can be a random process with low probability so that a lot of trial and error is required on average before a valid proof of work is generated.”
Given distinct advantages such as security and energy efficiency, Ethereum will be switched from proof-of-work to a new consensus algorithm under development, called Casper based on proof-of-stake mechanism, sometime later in 2017, as per Ethereum Foundation.
Vlad Zamfir, Ethereum’s blockchain architect, introduced the proof-of-stake protocol in one of his blogs and called it Casper – “the friendly ghost.” It’s called so “because it is an adaptation of some of the principles of the GHOST (Greedy Heaviest-Observed Sub-Tree) protocol for proof-of-work consensus to proof-of-stake.” Although, proof-of-stake is yet to be launched for Ethereum, it’s been worked on with the purpose to “benefit the overall health and security of the network.”
Vitalik Buterin in his latest Ethereum Dev Roundup said, “We have seen great progress for Ethereum research, and we are excited that the protocol is moving closer and closer to the point where it is ready for mainstream adoption. Progress on consensus algorithms, privacy, zero knowledge proofs and formal verification is happening at increasing speed, and our research and development teams are expanding substantially.”
Ethereum (ETH) has moved up from around $8 to $80 during 2017, displaying a 900% plus surge, pushing up its market capitalization to $7.33 billion.
*ETH price and market capitalization as on May 1, 2017