Incentives in Ethereum's Hybrid Casper Protocol

Abstract: We present an overview of hybrid Casper the Friendly Finality Gadget (FFG): a Proof-of-Stake checkpointing protocol overlaid onto Ethereum's Proof-of-Work blockchain. We describe its core functionalities and reward scheme, and explore its properties. Our findings indicate that Casper's implemented incentives mechanism ensures liveness, while providing safety guarantees that improve over standard Proof-of-Work protocols. Based on a minimal-impact implementation of the protocol as a smart contract on the blockchain, we discuss additional issues related to parametrisation, funding, throughput and network overhead and detect potential limitations.