Ethereum is ready to ditch mining in favor of using a proof of stake model, according to Bloomberg. Ethereum’s developers want to put a proof ...
Ethereum is ready to ditch mining in favor of using a proof of stake model, according to Bloomberg. Ethereum’s developers want to put a proof of stake model, called Casper, into place by the end of the year.
For Ethereum to realize the potential that companies such as IBM, Microsoft and JPMorgan see in its blockchain to reshape modern business and finance, it has to achieve wider adoption and become a de facto standard.
Replacing mining will make Ethereum more usable, secure and scalable, said Vlad Zamfir, who has worked on Casper since 2014.
Blockchain technology provides a cryptographically secured list of transactions that can be shared which could improve how financial services, supply chain and health care industries operate. Benefits include immediate settlement of bank transfers and securities trades, along with near-real-time tracking of research samples and food products. Ethereum, in addition to these benefits, offers “smart contracts,” pieces of computer code that allow the terms of such agreements operate automatically.
The market for ether, the digital currency that pays miners who support the Ethereum network, has soared 90% this year, compared to bitcoin, which has gained 24 percent in the same span.
As the cryptocurrency and blockchain becomes more popular, the computations its miners need to validate transactions become more difficult. This has created the potential for bottlenecks and has set off what many consider a wasteful arms race among its largest miners.
The proof of stake model, on the other hand, requires users to put up collateral to collect fees for validating transactions. The more collateral put up, the greater the reward for verifying transactions.
Such a method would take power away from miners who must approve software changes, making it easier to make improvements on the fly.
William Mougayar, the author of “The Business Blockchain,” said the change will make Ethereum more attractive in large scale applications.
Hyperledger, a blockchain venture that includes JPMorgan, IBM and American Express, could adopt Ethereum’s proof of stake model if it’s successful, said Brian Behlendorf, the consortium’s executive director.
Andrew Keys, head of global business development at ConsenSys, the biggest Ethereum-centric blockchain software engineering company, said the proof-of-stake method could put the network in a league of its own.
Also read: Ethereum at a crossroad as corporate interest grows
Casper’s rollout has suffered delays. In addition, the use of deposits brings a greater risk of hacking.
Ethereum suffered a big setback last summer when a hacker stole millions from the DAO. The software change implemented to fix the problem split the protocol into two blockchains.
But Zamfir says the benefits outweigh the risks. Unlike most blockchain technologies that require multiple verifications, settlement on Casper can occur much faster. This feature could allow Ethereum to process more payments faster, which is a key selling point for financial companies.
Mona El Isa, who runs Melonport AG, which builds software for fund managers that invest in assets on Ethereum, believes developers can work out any kinks with Casper.
One Ether miner said he would redeploy his servers to mine other cryptocurrencies or become a depositor on Ethereum if Casper comes to fruition. But implementing such a change won’t be easy and it’s still possible the plan could be scrapped altogether.
Image from Ethereum.