Ethereum and other smart contract chains like the BNB Chain, Avalanche, and Solana have risen in popularity because they leverage blockchain security for multifunctional computing purposes. This functionality is the driving force behind decentralized finance (DeFi), games, social networks, and more. Put simply: smart contracts have changed how average users experience blockchain technology.
Casper is another entry into the ever-growing space of smart contract platforms. It similarly creates opportunities for developers to launch decentralized applications (dapps) with standard computer code and deploy them for general use. Its network is secured by nodes that operate using a Proof of Stake consensus mechanism, which has gained popularity versus the more energy-intensive Proof of Work.
However, what sets Casper apart from its peers is its consensus protocol, which is called Highway. A consensus protocol determines the way a blockchain-based network comes to agreement on the state of the chain (and thus accepts transactions that make up the chain). Highway does away with the more traditional Byzantine Fault Tolerance (BFT), instead opting for something called a correct-by-construction (CBC) Casper method of reaching network consensus. Though a form of this is used by Ethereum, CBC-Casper is unique to Casper’s design.
The CSPR token takes a role in Casper’s ecosystem similar to Ethereum’s ETH. It is staked by nodes (and delegated by users) to secure the network, issued to reward those supporting the network, and used to pay for gas that facilitates transactions.
How was Casper developed?
Casper is developed by Swiss-based Casper Labs, which is led by Mrinal Manohar (CEO) and Medha Parlikar (CTO). Before co-founding Casper Labs, Manohar had been successful in private equity work, and Parlikar gained experience in project management for multiple software companies.
The story of how Casper developed goes as far back to 2013, when two developers described a novel rule for Bitcoin transaction processing called GHOST, which was intended to increase the scalability and speed of the chain. This idea was developed further by multiple blockchain researchers over the ensuing years. Vlad Zamfir (who later took the company to court over the use of the name “Casper”) was one such developer, working with the Ethereum Foundation and serving as lead architect of Casper Labs at its outset.
Ultimately, Ethereum founder Vitalik Buterin and collaborator Virgil Griffith published a paper in January 2019 called “Casper the Friendly Finality Gadget” (ostensibly named because it took inspiration from the GHOST rule and referred to the popular cartoon, Casper the Friendly Ghost). It described a Proof of Stake system that included slashing conditions (i.e. how validators can be punished for bad behavior), a way to determine chain forking, and dynamic sets of network validators.
In January 2021, a new paper was published by developers from Casper Labs and University of California San Diego (UCSD) describing how the approach could be used in a distinct consensus mechanism for the blockchain platform that would become Casper. Five months later, Casper’s genesis block was created. Although the CBC-Casper form of the model continues to be used on Casper’s network, a slightly different (but related) one called Gasper is used by post-Merge Ethereum.
How does Casper work?
Casper is a Proof of Stake (PoS) network, which means that validators (nodes) put up a “stake” of CSPR tokens in order to earn the right to validate transactions on the blockchain and claim rewards for this service. Nodes receive rewards proportional to the number of tokens they stake. If a validator behaves in a way that doesn’t benefit the system—like attempting to vote twice on the same network action—their deposit of tokens can be destroyed (slashed) as a penalty. This is a common model among blockchain-based smart contract platforms.
Small differences from familiar platforms (like Ethereum)
- Smart contract functionality: Smart contracts on Casper can be written in multiple programming languages because the platform relies on an interpreter (called WebAssembly, or Wasm) to translate these languages into usable code on Casper.
- Selection of network validators: There can be up to 100 validators on Casper. Of these, a subset is chosen using a type of auction (using CSPR tokens) to validate each block. This subset is designed to be dynamic, changing periodically in order to maximize both decentralization and the economics of the protocol.
Highway and Correct-by-construction
One of Casper’s most significant differentiators from other smart contract platforms is its Highway consensus mechanism. Highway uses an algorithm called correct-by-construction Casper (CBC-Casper) in order to facilitate agreement of the state of the chain among validators. By incorporating CBC-Casper, Highway improves on prior consensus mechanisms by 1) ensuring and proving safety through very strict rules, and 2) allowing for dynamic changes to how transactions are processed depending on how trustworthy nodes are acting at a given time. Although the benefits to CBC-Casper over other types of consensus is nuanced, highlights include: ensuring validators don’t conflict each other, ensuring validators make voting decisions to move network transactions forward, improving versatility, and speeding up finality (meaning faster transactions).
How is the CSPR token used?
CSPR is the Casper network’s native token. It can be considered similar to ETH on Ethereum’s Proof of Stake chain. It is used to execute transactions by paying gas and is used by nodes for staking. Users can also delegate their CSPR tokens to nodes in order to partake in staking rewards. Rewards are paid to stakers in the form of CSPR.
Token economics and distribution
At launch, the initial supply of CSPR was 10 billion tokens. Of these, 24% were allocated to the team, advisors, and Casper Labs. The non-profit Casper Association received 14.3% of the initial supply, and 16% were reserved to incentivize development of the protocol. The remaining CSPR were sold in private and public token sales.
There is no maximum cap on the total supply of CSPR tokens, as the network uses inflation (issuance of new tokens) to incentivize use of the network. The target inflation rate is approximately 8%.
Conclusion
- Casper is a blockchain-based platform that, like Ethereum and other popular projects, supports smart contracts and decentralized applications (dapps).
- The Highway consensus mechanism (based on a model called CBC-Casper) differentiates Casper from other similar platforms.
- The CSPR token provides Casper similar functionality as Ethereum’s ETH—it allows user to pay gas fees for transactions and is also used to secure the network through staking.