The Cost of Testing Ethereum’s Casper

ethereum casper-hybridEthereums’s Hybrid Casper FFG (Friendly Finality Gadget), the new consensus protocol, has received special attention at the Toronto Ethereum conference. According to Vitalik Butering, the creator of Ethereum, testing the protocol will require the submission of 1,500 Ether, minimum.

Friendly, but Costly
Casper FFG is, essentially, a hybrid POW / POS consensus protocol. The idea is to have the blocks mined via POW (Proof of Work), with every fiftieth block being a POS (Proof of Stake) checkpoint, at which a network of validators would assess the finality.

In the recent months, the community has seen a considerable progress in the development of Casper. In April 2018, the code for the protocol was announced to be ready for review. During the Toronto conference which took place at the beginning of May this year, Vitalik Buterin initiated the discussion of the new protocol. He would not announce any particular dates but said that his expectation was for the development to go quicker from now on.

During his talk, Butering described the Casper algorithm and outlined the way it would change the current state of things.

Proof of Stake is seen by many as a much more just way of ensuring the global synchronization. With POS, the users lock up a number of coins as stake. According to Buterin, an initial submission of 1,500 Ether (approximately $1 million) into the smart contract is going to be required to participate in Casper. That is, obviously, a lot of money, and Buterin accentuated that the nodes that do not have the necessary sum can pool their resources or work in a group and then share the profit.

Buterin seems to be very optimistic about Casper’s future. He said that it “will hopefully be one of the more joyous experiences in Ethereum in a fairly short time.”

It is the scaling challenges currently faced by Ethereum that are to be blamed for such a large sum of money required. The new consensus protocol can only support a particular number of nodes. On the bright side, Buterin expects the number to go down to about 32 Ether (around $25) after the implementation of the sharding solution that divides the blockchain into smaller bits.

Also, even those who do not have the sufficient crypto funds will have a chance to stake on the testnet that at the moment runs only a small number of nodes.

A Simple Process

Apart from startling the public with numbers, Buterin explained what steps need to be taken to set up the validator or the node that would take part in the Casper POS protocol.

According to Buterin, Casper FFG is highly customizable and allows a lot of freedom for the developers. For example, the nodes may introduce such features as extra security and multiple keys during the initial stage of the set-up process.

Of course, for those who are somewhat less familiar with software development, the process of setting up Casper may seem a difficult task, but, as Buterin said, it is, in fact, very simple: “The good news is … that in practice, you personally as a user probably don’t need to worry about which validation code you’re using. You as a user basically just click a button that says deposit.”

Once Casper has been set up, the user would need to select the wallet for the returns, but, again, Buterin promised that the client “will do all this magic” for the users. After that, the user needs to submit a deposit of at least 1,500 Ether and run the software. The size of the rewards is going to be proportional to the sum at stake. Voting on the potential blocks will occur automatically, so that the users don’t need to completely understand the intricate mechanics of the process – all they need to do is make sure the node stays online and watch the incoming returns. Buterin assured the audience that “as a regular user you just need to keep your node online, keep your node running, and your node will just do all this voting automatically.”

How Much does Casper Return?

There is still no final information on what returns are to be expected by the nodes. However, Buterin was able to give some approximate numbers. If the validators constantly stay online, a 10 million Ether deposit would, presumably, earn a regular return of around 0-5% annually. As Buterin optimistically stated, “Probably closer to five than to zero.”

The exact sum of the returns depends on the user’s activity in the system. Casper’s slasher concept goes beyond simply rewarding the users for good performance: it also punishes those who misbehave by curbing such actions as double-voting or forming large staking pools. The users caught in the act could lose 1-100% of the deposit, depending on the scale of the mischief.

The Friendly protocol is also going to penalize the users for inactivity, so that a node that mostly stays offline will eventually begin losing some of the deposit. Yet, staying online for a period between 2/3 and 1/2 of the time will still result in returns. Even if a user only has a laptop, it is fairly safe to become a validator, provided there is a guaranteed Internet connection.