By: Tiana Laurence, Author of Blockchain For Dummies
The Ethereum network has developed a reputation as the market standard for ICOs. However, while Ethereum is best known for this, it actually powers a huge range of companies and functions. Part of this stems from programming languages such as Solidity, making it easy to create ERC20 compliant tokens. Because of this, the ability to tokenize things has spanned much further than just cryptocurrency. Sometimes, the most surprising things can hit the zeitgeist and catch fire. When they do, it’s a good reminder that blockchains are still an emerging technology, and though it is stable enough for many purposes, extreme ramp-ups can have unintended consequences.
Even when that involves kittens.
Our feline friends seem to have taken over all manners of the internet, from social media to video streaming to the memes we share. In the realm of blockchain technology, the tokenized version of this is CryptoKitties. CryptoKitties is a digital cat breeding game, with each record registered via a unique token on the Ethereum Network. “Game” may not even be the correct term for CryptoKitties, as users breed and create individual cats, then put them up on the market for trading. To create a kitty, users pay a “birthing fee”, which is the digital equivalent of the Beanie Baby craze of the late 1990s. These microtransactions have powered millions in revenue, something’s obviously quite good for developer Axiom Zen despite only being around since Thanksgiving.
That’s all well and good, except for one problem: no one predicted just how popular digital cat breeding would be. In fact, considering the sheer quantity of ventures on the Ethereum network, the fact that CryptoKitties took up around 10% of the total transactions is staggering. (It also says a lot about our love of cats on the internet.) During this period, Ethereum transactions slowed to a crawl, and it even caused a few transactions to fail — a shockingly rare event in the age of the blockchain. The surge of digital felines, along with the ensuing hiccups up and down Ethereum, all pointed to one harsh truth: Ethereum simply wasn’t ready to scale up that quickly and at that volume.
Does that mean blockchain technology isn’t ready for primetime? Under some circumstances, the answer would be yes. However, because the industry’s top minds are already knee-deep into a solution, the CryptoKitties situation is a necessary evil, a growing pain — and the solution comes in the form of Casper.
Ethereum’s Proof Of Stake
Casper has been in development for some time, but it’s only recently gotten close to being deployed. To clarify, Casper isn’t a single project, but rather a protocol that is the amalgamation of something called Proof of Stake. The current blockchain works under the Proof of Work theory — in short, the data miners are individually rewarded for solving individual problems. Proof of Work is a one-for-one process, making it highly inefficient, though thorough. This makes scalability a problem.
Proof of Stake is a concept that has been kicking around for several years. The protocol is most often associated with developer Vlad Zamfir, and he has dubbed it Casper after the cartoon ghost. Proof of Stake scales the process up in massive numbers by relying upon the validator’s economic stake to provide consensus. The validity of blocks is determined by validators taking turns proposing and voting on the next block, and each vote is weighted based on the validator’s stake. Various Proof of Stake algorithms have been developed under different protocols, but Casper may be the most significant one.
If the technical differences between Proof of Work and Proof of Stake confuse you, don’t worry. All you need to know is that Casper is almost ready to launch. When it does, that means a significant milestone has been achieved in the history of Ethereum — in fact, we may see it in the next Metropolis fork. Contracts, validation, new blocks, all will change and hopefully for the better. It is believed that Casper will reduce the risk of centralization, cut the real-world energy necessary to supply the network’s hardware, and increase the overall speed of the network.
All of that optimization means that massive scalability becomes much more feasible. From an investor perspective, it is believed that Casper will reduce each block’s reward size due to fewer new Ether as well as validation occurring through holding Ether in a deposit. Less Ether in circulation should theoretically drive up its cost while reducing the cost to execute contracts. All in all, it simply makes Ethereum a better place to be.
A Blockchain Turning Point
Scalability, efficiency, and reliability are critical milestones, not just for Ethereum but for the blockchain industry as a whole. As this technology moves into the mainstream and is being considered for proprietary and critical data in an Internet of Things world, it must be able to withstand massive change up and down. Casper and its Proof of Stake protocol may just be one step, but it’s the biggest step the Ethereum blockchain has taken so far — and what lies beyond it is almost limitless.
— Tiana Laurence (@LaurenceTiana) December 24, 2017