Among the most pressing challenges faced today on the path to mainstream adoption of blockchain technology, achieving the level of sustainable scalability that is required is atop the list. For blockchain to process the world’s massive volume and variety of transactions, protocols that support sustainable scalability must be developed. Scalability, in this context, refers to the ability for a blockchain network to, in near-real time, securely handle the volume of transactions necessary for real-world use cases across widespread geographies. Furthermore, it is a requirement that this scale is achieved in a manner that is environmentally and socially sustainable. In the face of this challenge, numerous startups, organizations, and developers are actively working to implement solutions that will help blockchain technology scale effectively without sacrificing the immutability, finality, and security that makes blockchain so unique. One of those startups, called Casper Labs, has been developing an alternative mechanism by which consensus can be reached in a blockchain environment. On an episode of the Evolvement Podcast with Michael Nye, Casper Labs team members discussed the state of scalability and the alternatives that exist for reaching consensus. As Casper Labs team members clearly articulated, the ephemeral desire to use blockchain as an enterprise is squashed by the lack of ability for blockchain to handle the volume of transactions required. However, before delving into the details, it is important to understand the genesis of the problem.
The highly effective, yet intrinsically wasteful consensus mechanism used in Bitcoin and Ethereum, called Proof-of-Work (PoW), is often lamented as an environmental disaster, and a system that potentially rewards large centralized pools of miners. In a PoW environment, miners compete to calculate a hash value within a given target set out by the protocol to win the right to append the latest block to the chain and get the block reward. This iterative hashing requires immense amounts of compute-resources, and when the round of consensus is complete, the work that is done has no utility for the network after that single round of consensus. To put this in perspective, the conservative estimate of the annual energy expenditure for Bitcoin in 2019 is nearly 40 TWh, which is greater than the country of Ireland’s net usage annually. Furthermore, the intensive processing required in this approach becomes a bottleneck for the effective transaction volume of a blockchain.
These problems spurred the creation of alternatives like Proof-of-Stake (PoS), which is often touted as the answer to the environmentally unfriendly and poorly-scalable hashing mechanism employed by PoW. Proof-of-Stake (PoS) is, at its core, a consensus mechanism that relies on a statistically fair and random game of chance that determines the miner(s) whose right it will be to append the latest block of transactions to the chain and collect the reward. This creates an environment where one live node’s chance of attaining that block-mining responsibility is equivalent to their “stake” in the network, or their overall percentage of total ownership of the network token. In other permutations of the protocol, the ‘stake’ of tokens is a concerted action where a node stakes their token holdings on a delegate or representative that will serve as a blockmaker by election. It is clear that these methods are deeply rooted in game theory, where those who hold the most stake in the system, and more importantly, have the most wealth tied up in the network token, would be disincentivized to conduct malicious behavior that could devalue the very token they hold vast wealth in. In contrast to Proof-of-Work, which relies on the sheer cost and effort of hashing iteratively towards a target hash-value to disincentivize bad behavior and prevent Sybil attacks and Denial-of-Service attacks, Proof-of-Stake uses economic theory and psychology to its advantage.
Still, there has yet to be a Proof-of-Stake implementation that has fully solved the issue of scalable network consensus in a blockchain environment without significant trade-offs, such as its tendency towards the Matthew effect of accumulated advantage, the sociological concept behind the adage “the rich get richer, and the poor get poorer”, as the most wealthy entities on the network win the right to append blocks and accumulate even more wealth. More work must be done to create protocols capable of reconciling these complex requirements. As Casper Labs team member, Medha, aptly stated “[Casper Labs wants to create] somethings that is real-world usable, that is the hope and goal”. The concept behind the work Casper Labs is doing with their CBC Casper protocol is to create a mechanism that can flex with the requirements of the various types of transactions one would issue. To illustrate this point, Medha used a pair of MasterCard Black credit card transactions as an analogy, one for a hundred thousand dollars and one for coffee. Both are valid and necessary transactions, but one can be instantaneous with few controls in place, and the other must be diligently verified and subject to further checks. Can you guess which one is which? The concept at play is adaptability of a consensus process to the risk profile of a transaction, which in effect, load balances the verification of transactions to make things more efficient. Within the CBC Casper protocol that is being built by Casper Labs based on the calculated vision of the highly regard Ethereum researcher, Vlad Zamfir, this concept of variable levels of transaction security runs core to its design.
In essence, Medha described the vision of a CBC Casper enabled blockchain as a “braid” of blocks rather than one main thread of blocks like we have today. More specifically, every block producer can propose and issue blocks synchronously, in other words, each block producer can produce their own blocks at the same time without waiting for others to produce a block first. Each of these blocks build on others’ blocks, and the network’s state is evaluated over time rather than at each block. Much like a multithreaded processor in a computer, multiple activities can occur at once. Furthermore, the concept of the commutative property of transactions is built into CBC Casper, which refers to the concept that two or more transactions that don’t conflict can be represented as one merged unit. These methods are by nature far faster and far more efficient than the current solutions in use today. This CBC Casper protocol is the foundation for a brand new peer-to-peer protocol that will seek to serve the solution to the scalability problems of today.
However, the protocol is still under development in its early stages. Medha describes the process of building such a complex, nuanced solution as “kind of like eating an elephant. One bite at a time”; breaking the pieces down and completing them one by one. In an industry that is packed full of trailblazers, Casper Labs is blazing an even more fresh trail with a protocol unlike any other in the world today. In 2019, Casper Labs team members stated that the goal is to have a readily available decentralized application ecosystem for developers to use with their current early-versions of the node software for CBC Casper by the end of the year. With the grand vision of a fully-integrated development environment, a widely-used Dapp store, and a protocol that is scalable for global adoption, Casper Labs has its sights set on the next great evolution in blockchain technology.
In the world of technology, generational shifts occur in an almost eerie cyclical pattern as the human hunger for innovation continues to grow. When bitcoin was created, the digital asset was born, then Ethereum brought the ability for decentralized application logic to manage those digital assets, and now, Casper Labs is aiming to bring the next generational shift with a scalable protocol that will unlock the true the potential of decentralized applications and digital assets. Without the introduction of the Transmission Control Protocol / Internet Protocol (TCP/IP), the internet itself would not have achieved widespread adoption despite its clear usefulness because it simply would not have been able to scale to the magnitude required by its use cases. Synonymously, a protocol solution to scale the blockchain will undoubtedly provide the final catalyzing force required to deliver the promise of digital assets and decentralized applications into widespread global adoption.