Casper Weaknesses

There are challenges and risks associated with the Ethereum’s switch to PoS.

First Days Security Threats

Since the first iteration of Casper will only feature up to 250 validators, a physical disaster or regulatory crisis could could cause the entire network crash in the first days.

Early Days Centralization

Casper doesn’t actually promise true decentralization at the start. Participation will initially require a minimum deposit of 1,500 ETH, approximately $500,000 at the time of this writing. This situation will put Ethereum PoS participation out of the reach of the average user, and into the domain of so-called “whales” and collaborative staking entities. Vitalik Buterin estimates the minimum requirement will drop to 32 ETH once Ethereum achieves 100% PoS post-CBC.

Illiquidity-driven Adoption Resistance

Casper may not seem so friendly to Ethereum miners. Validators lockup ether in a Casper smart contract for 3 to 12 months. Ether price volatility will expose validators to significant illiquidity risk during the staking period. The risk associated with the illiquidity native to Casper’s staking process may leave most ETH holders unwilling participate.

Illiquity risk is veiwed technically as a “capital lockup cost” caused by “sacrifice of optionality”. Ethstakers can simulate the freeing up of their locked ether by shorting an equivalent amount on an exchange, but this itself costs exchange fees and interest payments.

System Complexity-driven Adoption Resistance

There is a sentiment within Ethereum community that Casper will never be fully understood by most validators. Complicated fixes to newly identified threat vectors leave the definition of bad behavior somewhat fuzzy, thus reducing transparency for validators who are not experts.

Casper’s development team tries to predict and prevent every type of imaginable attack. Though Whitepapers and Reddit feeds explain the complex nuances of Casper’s cryptoeconomic protocols with granular detail, the complexity may deter new validators from joining the Ethereum PoS network.