There is usually nothing that excites an Ether (ETH) holder more than the Casper update. The protocol, which will transition Ethereum from a Proof-of-Work (PoW) to a Proof-of-Stake (PoS) consensus model, will be its biggest move yet.
But in amongst the fanfare, one new report suggests the Casper update could create a rupture in the Ethereum community. A shift to PoS might cause a chain split on a size not seen since the DAO debacle in 2016.
A study on Ether released by CoinShares – a London-based cryptocurrency investment firm – today argued that the Caspar update would likely antagonize members of the community vested in the status quo. “We deem it unlikely that Ethereum miners will accept the implementation of Casper without a fight,” the report said.
The Casper update has had a long developmental road. Originally slated for release sometime this year, the launch has now been pushed back to sometime in 2020. A blockchain update, like Casper, would be implemented through a hard fork; where the network effectively splits into two separate entities. Nodes update software to run on the new fork; the older fork, which has not been changed, (should be) abandoned by the community. The privacy coin Monero (XMR) hard-forked last week to implement new changes to keep the network ASIC-resistant.
The CoinShares report suggested that there would be nothing to stop miners remaining on the PoW fork. Ethereum currently has a ‘difficulty bomb’ in place, to make validating transactions increasingly harder for miners. The idea is this will encourage users to begin preparing for the Casper update. However, the study suggested miners could fork the network, again, to remove or adjust the difficulty bomb to continue mining on the network.
“While the Difficulty bomb will make mining increasingly difficult on the original chain, we see no reason why miners cannot themselves simply hard fork to remove the Difficulty Bomb,” the study said. “After all, hard forks are regular occurrences in the Ethereum community so another one should not be any more problematic than the others.”
The state of Ether mining
Cryptocurrency mining is big business. Although Bitmain – the Beijing-based ASIC manufacturer – made a reported loss of $400m in Q2 this year, it nonetheless raked in $1.1bn net profit in the first quarter. It’s initial public offering, registered in Hong Kong, is expected to be the biggest in the sector’s history. The company has even established a facility on the site of an old smelting factory in Texas, to house its own mining operation.
There are now alternatives, most notably PoS, but advocates still highlight that mining is the only consensus mechanism that’s fully functional, with a proven track record. Some like to point out that EOSIO (EOS), which uses a delegated staking mechanism (known as dPoS), encourages greater centralization than mining.
Ethereum is the second biggest network on the market. Most people in the sector have owned Ether; it was the moneta franca during the ICO craze last year. Although the mining infrastructure is nowhere near the same size as that surrounding Bitcoin (BTC), it is still substantial. Bitmain announced at the end of August that it was adding two new mining pools, specifically designed for Ethereum’s Proof-of-Work function, Ethhash.
Casper update could open fresh wounds.
The Ethereum community is no stranger to inner conflict. When the community decided not to honor the DAO hack, a small fragment disagreed and continued into what became known as Ethereum Classic (ETC). A majority may still disagree, but a hard fork doesn’t automatically invalidate the old fork. If members of the community still want to use it, there’s nothing stopping them.
In a tweet earlier this month, Vitalik Buterin tweeted to say that the Ethereum Casper update was “roughly finished”. Although there was still work to be done, he said that it was in the refinement stages.
Casper is on the horizon. Although it may still be two years before its actual implementation, Ethereum miners will be getting worried. Some sink millions of dollars into industrial-scale operations. They have an interest in keeping mining alive on the Ethereum blockchain. This could split the community; older members may have to relive the past.
Casper may not be so friendly after all.
The author is invested in ETH, which is mentioned in this article.