Ethereum Casper Update: Is Proof of Stake Mining Decentralized?
Ethereum’s New Casper Update
Ethereum is a blockchain decentralize cryptocurrency that, along with Bitcoin, has been taking the world by storm. Its new Casper Update is likely to make the currency even more decentralized and make the system more efficient. Miners, the people who keep records of cryptocurrency transactions on their computers in exchange for money, have benefited immensely from this influx of interest in the cryptocurrency market. These miners are crucial to the operation of Ethereum and any cryptocurrency for that matter.
The miners job is to take information of an exchange of Ethereum and store it on their computer. This takes up a lot of processing power, so miners are rewarded based on how fast and efficient their computer is at taking this information. Large companies saw the opportunity to make a hefty sum of money by using their large resources to mine cryptocurrencies like Ethereum at unprecedented magnitudes. Roughly 50% of all Bitcoin and Ethereum mining occurs on the top 4 best mining operations.
When it comes to the amount of resources that individuals are open to versus corporations there is a stark difference of competition. Companies are able to have much more resources and computers available to them which means that they, by definition, are more likely to be used for mining opportunities. This is especially true under Ethereum’s current concept that it uses to dish out data to various miners.
Currently, Ethereum implores what is known as a proof of work program. This guide will go more into that system later on, but what it essentially does is reward large companies because of their near limitless processing power. Furthermore, it can sometimes seem as though the nature of Ethereum mining is set up so that small mining operations do not get to store data because they are beat out by larger operations
Proof Of Work Option
In the standard, centralized monetary system, there is usually an organization whose job it is to confirm that a sender delivered something of value, and that the receiver acquired it in a trade. In a decentralized world, this role is currently played by many different miners who validate transactions. Proof-of-work depends on miners using receivers on the network to confirm new blocks of trades. In exchange for contributing to this hashing power they get a financial reward.
While a proof of work system utilizing blockchain technology is an attempt to create a decentralized currency, it still does not create a truly decentralized currency. As mentioned earlier, much of the mining power is done by the top few mining companies. Under a proof of work option work is divided up by how much processing power the particular unit has. This means that rather than a truly decentralized currency, Ethereum is merely centralized in a few large centers.
Moreover, Ethereum’s Casper update is a drastic attempt to move Ethereum towards a more decentralized currency. Any shift from a proof of work option will prove to be a shift towards a more decentralized system for Ethereum. The more computers or nodes involved in a system, the more the currency will prove to be decentralized.
Proof Of Stake Option
Proof-of-stake operates on confirmer or validation nodes on the system to have turns creating and confirming the next block in the system. The weight of a validator’s unit—and the size of its reward—depends on the size of the Ether Bet in the confirmation process. With proof-of-stake, units on the network can confirm new transactions by “staking” a precise amount of Ether. They then take a vote to confirm trades on the chain.
Proof of stake is less resource intensive because individuals involved in the blockchain will not simply be vying for the dominant processing unit in the area. With proof of stake there will be interactions between large and small bandwidth users and the difference of processing power utilized will be based on the amount of Ether staked, not in the amount of processing power a unit has. This means that smaller operations will have the opportunity to preform just as much in the blockchain system.
This future form of distribution makes Ethereum a far more decentralized currency. With more incentive for smaller operations to mine Ethereum there is likely to be a shift where many small operations will pop up all across the world.
When the majority of Ethereum is logged on individual computers rather than on large a few large corporation’s computers then there is a more decentralized currency to be had.
No matter the implications that the Casper update has on Ethereum mining operations across the world, the cryptocurrency that has given Bitcoin a run for its money will likely continue to prosper and flourish. There is no stopping the hype and cultural acceptance that cryptocurrencies are getting in today’s society. Even if the update is disfavor able to a select few miners, individuals will likely still support and buy into Ethereum on a grand scale.