EXCLUSIVE– If you are a crypto enthusiast, or an investor curious about how the following months will affect the value of your ether, then Casper is a project you should know about.

The proposed alteration to Ethereum’s blockchain would change the proof-of-work consensus system to a proof-of-stake consensus system. It has yet to be implemented, but is already affecting the way people talk about cryptocurrency.

Both bitcoin and Ethereum have so far functioned on a proof-of-work basis, and Ethereum’s switch could have a major impact on the value of ether, as well as on the global cryptocurrency ecosystem.

Bank Innovation held an exclusive interview on the topic with Jacob Eliosoff, manager of Calibrated Markets, which does business with firms dealing with bitcoin and other cryptocurrencies called Calibrated Markets.

According to Eliosoff, the benefit of using proof-of-stake, as opposed to proof-of-work consensus, is that it serves as an inexpensive way to verify information on the blockchain.

This is because computing power needs to be expended in order to verify information with  a proof-of-work consensus.

“With bitcoin,” he says, “you can get a situation in which two different people get a [new] block [on the chain] at the same time. In this case, you have two possible, different ends to the blockchain.”

These exist simultaneously, at least for a moment, but one of these two possible blocks will be quickly eliminated, or “orphaned.” When the time comes for the next block, miners essentially have to bet on one of those previous blocks existing, and one not.

The problem is: which one gets eliminated?

“There are a lot of factors that determine which block gets chosen,” Eliosoff says. “Sometimes, one miner will be much better-connected to the rest of the network, so their chain will be taken over the other,” which gets abandoned. Essentially, “the network will choose one [of these] blocks [to build up on] over the other,” and “the block that no one is on top of gets abandoned,” Eliosoff says.

However, “CPU power is a fixed resource.” One CPU cycle allows the mining of one block at a time, meaning that they have to choose between one block or the other. Therefore, in a proof-of-work situation, like with the bitcoin blockchain, “each miner can only be mining on one block.”

This is a problem that has been a part of bitcoin since its inception – though it hasn’t stopped miners from mining, and it hasn’t slowed the mining process by much. The “decisions” regarding which of the multiple outcomes in a situation like this have been made with relative ease, and the process used to deal with it is actually covered in the original whitepaper.

One of the bigger problems at hand with the bitcoin proof-of-work blockchain is the electricity usage it takes to run bitcoin, itself. Bitcoin’s blockchain, to put it mildly, is not an energy efficient system.

Some bitcoin specialists calculate that bitcoin consumes about as much energy as Syria.

Ethereum is also suffering from this issue.

Casper would change Ethereum from a proof-of-work system to a proof-of-stake system, which would require far less power; by design, it would not use electricity.
In a proof-of-stake system, two miners do not have to choose between blocks, Eliosoff said; they “would be able to bet on both.”

So far, the individuals in each system have essentially been able to “vote” on what they want from their blockchain by using their computing power to decide which blockchain gets eliminated, and which gets to live on.

With Casper, these votes are not carried out with computing power — but rather with the crypto coins themselves. Therefore, it is not necessary to eliminate either blockchain, and the two resulting chains can live on simultaneously.

In Eliosoff’s words, “it is about the difference between voting with your coin ownership versus voting with your computing power,” or, rather, that you vote with an “out-of-system versus an in-system resource.”

Casper would also address security issues.

“This is a contentious subject,” Eliosoff says. “You can read three different articles on the subject and have totally different impressions of what it is all about.”

Essentially, because decisions in the bitcoin blockchain are made by individuals using hash power, it is theoretically possible for a single party like a mining pool, to obtain enough power to influence the network to serve their own ends.

In Eliosoff’s words, “bitcoin cannot guarantee that no one can take over the network; it can only make it very expensive,” as computing power increases through purchasing expensive equipment. The security of bitcoin’s network therefore depends on keeping community members from holding the majority of decision-making power in the system, as “so long as at least half of the hash power is honest, then the network is safe,” Eliosoff says.

Again, taking over the bitcoin network would be extremely expensive, but “theoretically, if the United States or China decided to throw all the resources they had into taking over the system, it could be done,” Eliosoff says.

Theoretically, Casper could eliminate this security threat. Ethereum’s creator is reportedly set to release a whitepaper explaining exactly how Casper would eliminate this threat.

The matter remains a heavily-contested and controversial aspect of the cryptocurrency debate, related also to the upcoming, even-more controversial SegWit2x bitcoin hard fork, which is anticipated to come into full effect in November.