When will Ethereum switch to Proof of Stake?
Ethereum currently uses GPU-mining proof-of-work to perpetuate the blockchain, but I've read that the Ethereum foundation and developer team aims to move to proof-of-stake at some point in the future. What is the difference between the two and when will the switch be made?
Answer
Right now, ethereum uses “proof of work” mining. This means miners use their graphics cards to essentially guess random numbers until somebody guesses the right number. Each guess is based on the past Ethereum transaction ledger and therefore represents a “vote” for what a miner believes is the “correct” chain. It is in miners’ economic self-interest to make guesses based on the “correct” chain because they won’t get rewarded (or rewarded as much) for guessing on the wrong chain. This is what keeps the ledger consensus intact.
The downside to PoW is the ridiculous energy usage it takes to keep all these graphics cards running 24/7. Proof of Stake (PoS) is a different type of mining based on ether holdings. Rather than graphic card hashpower representing a miner’s right to make guesses for the next block, their ether holdings do. No more graphics cards necessary.
A mechanism is built into the Ethereum protocol to make PoW (GPU) mining insanely difficult sometime in mid-2016, which will force miners to switch to Proof of Stake if they hope to stay competitive.
The main developer for the proposed proof-of-stake algorithm (CASPER) is Vlad Zamfir. Radio interview: https://www.reddit.com/r/ethereum/comments/3t2cph/vlad_zamfir_bringing_ethereum_towards/ Slide deck from DEVCON day 1: https://docs.google.com/presentation/d/1bV_vXJBko-DmhAgnOFYg8ZNbAvCZCZrlf0KBFPqwVIw (The DEVCON day 1 video was removed by Youtube for some reason.)
EDIT: Ethereum entered the Homestead phase on 3/14/2016 and there's still Metropolis to go before Serenity, which is supposed to be the PoS "final" phase, so PoS in mid-2016 seems unrealistic. Here's the phases announcement from a year ago. My summary TL;DR summary is in the comments.
https://www.reddit.com/r/ethereum/comments/2xsin2/the_ethereum_launch_process_vinay_gupta/