Incentives in Ethereum’s Hybrid Casper Protocol. (arXiv:1903.04205v3 [cs.CR] UPDATED)

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.