Ethereum developers have launched an alpha test network (testnet) for Casper, paving the way for the cryptocurrency to eventually transition to a proof-of-stake (PoS) consensus algorithm.

Like bitcoin, ethereum currently operates on a proof-of-work (PoW) consensus algorithm, meaning that the network is secured and new currency units are issued through “mining,” whereby participants solve cryptographic puzzles to validate transactions and create new blocks.

However, PoW has attracted criticism over the years, both for its tendency to centralize mining hardware into a few pools and for the amount of electricity it consumes.

Ethereum to implement Proof-of-Stake

Ethereum aims to address these problems by transitioning to Casper, a proof-of-stake (PoS) consensus algorithm. Under Casper, participants can become validators by locking up or “staking” ether. Validators will take turns proposing and voting on blocks, and both the weight of their votes and the size of their rewards will hinge on the size of their stakes.

According to developers, moving to Casper will greatly reduce the amount of electricity “wasted” through PoW mining. In addition to limiting its environmental impact, PoS will allow ethereum to dramatically reduce its rate of currency inflation since validators will have much lower overhead and will thus require smaller rewards to incentivize them to continue to serve as validators.

Moreover, PoS will also reduce the incentive that validators have to centralize their influence. With decreased centralization comes increased security and, importantly, resistance to dreaded 51 percent attacks.

Ethereum is not the first project to attempt to integrate a PoS consensus algorithm. However, most previous PoS implementations have been criticized because, in the event of a blockchain split, validators are incentivized to try to make blocks on top of every chain rather than resolving the consensus back to a single blockchain.

casper
Source: Ethereum/Github

Casper aims to solve this problem by imposing economic penalties on malicious validators that violate the network’s rules. This ensures that validators are properly incentivized to achieve consensus on a single blockchain in the event of a network split.

Following three years of development, Casper has officially entered alpha testing, and the first full-featured testnet has launched. The software must still traverse several release checkpoints before it is ready to launch on the main network, but this alpha release nevertheless marks an important step toward its eventual activation on the main ethereum network.

Casper
Source: Vitalik Buterin/Twitter

Users can join the testnet by following the instructions in this guide, and once online they can send transactions and become validators, just as they would on a normal network, although the network’s performance is not indicative of how production clients will operate once the project receives an official release.

cryptokitties

Business blockchain startup SophiaTX finally kicked off its initial coin offering (ICO) on Thursday.

SophiaTX had originally scheduled its ICO for Tuesday, but the project had to press pause on those plans due to extreme congestion in the Ethereum network. As been widely reported, the network has struggled to keep up with demand for what is currently its most popular application: a Neopets-style game called CryptoKitties that lets users breed — and sell — adorable cartoon cats.

cryptokitties
Source: CryptoKitties

And as adorable as these cats are, they have become big business. As of the time of writing, users had bought and sold more than $8.5 million worth of kittens, and four had sold for more than $100,000 each.

The CryptoKitties frenzy has turned into a serious headache for many ethereum users. Since CryptoKitties launched, the number of unconfirmed ethereum transactions has begun to pile up into a growing backlog, causing significant delays and a spike in the average transaction fee.

cryptokitties
Source: Etherscan

SophiaTX had not planned for this scenario — an incident no one could have foreseen even two weeks ago — so the company was forced to delay its ICO by 48 hours while it grappled with how best to handle the precarious situation.

SophiaTX CEO Jaroslav Kacina used the incident as an opportunity to demonstrate the perceived need for an enterprise-dedicated blockchain.

”The recent incident demonstrates why we have chosen to build SophiaTX as a proprietary blockchain technology. Businesses require sufficient speed, security, and features that are required for a mainstream adoption by businesses, currently not provided by either Bitcoin, Ethereum and others,” he wrote on the company’s blog.

Although CryptoKitties-related transactions continue to put a strain on the network, SophiaTX officially began its ICO on Friday morning. At the time of writing, the startup had raised approximately $5.7 million, which is 12 percent of its $49.4 million target.

cryptokitties

Cryptokitties are some man’s best friend. A cryptokitty has sold for over $100K. Ethereum allows users to execute smart contracts, and CryptoKitties uses this functionality to buy, sell, and breed CryptoKitties. Now, 13% of the Ethereum blockchain transactions are related to cryptokitties. Cryptocurrencies are often referred to in a very serious manner, and it’s easy to forget that the people using them are still human, and are prone to having fun on occasion. This is one of the funnier things that cryptocurrencies have been used for.

Cryptokitties are worth quite a bit

CryptoKitties are both something fun you can do with Ethereum and are a pretty good tech demo to show what can be built with Ethereum – not to be confused with CryptoCat. CryptoKitties can be bred together, taking into account some genetics from previous breed – specific breeding has the chance to create a ‘fancy cat’. ‘Fancy cats’ are based on real people and are extremely rare. For example, there is one named after Elon Musk with the name ‘Feline Musk’. The market for these cats is growing quickly, and the very first cat ever made, named Genesis, sold for 246.9 Ether. At that time, 246.9 Ether was worth $117,712.12, a shocking amount. the average kitty sale price at the time of writing was $44.62, according to kittysales.

Remember the Bitcoin Pizza?

On May 18, 2010, bitcoin user under the username ‘laszlo made a post on the bitcointalk.org forum, specifically the marketplace where trades for bitcoin were negotiated and executed. The user requested that someone order them two pizzas to be delivered to their address in exchange for 10,000 bitcoin, worth $41 on the now-defunct bitcoinmarket exchange according to a user on the thread. The trade was reported as complete on May 22, 2010 by laszlo. If the trade had been conducted today, these coins would be worth $116,681,758.46 USD at time of writing. Converted the other direction, the $41 originally paid would have been 0.003509819595950491 BTC.