Proof of Work (PoW)</strong></a> consensus mechanism of <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-ethereum-eth/">Ethereum is being replaced with a better version &ndash; the <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-proof-of-stake-pos/">Proof of Stake (PoS)</strong></a> mechanism.</p>\n<p>Ethereum Casper <strong>is a protocol that combines PoS and PoW consensus mechanisms</strong>. The PoW part, which uses the <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-ethash/">Ethash algorithm</strong></a>, is the same as what we have now. However, <strong>Casper the Friendly Finality Gadget (FFG)</strong> is a new consensus technique that is used in the PoS part.</p>\n<p>Casper FFG's ultimate goal is to replace PoW mining with PoS mining. This means that those who<strong>&nbsp;mine Ethereum</strong> using hardware at the moment will be able to help validate and secure the network without having to invest in additional expensive hardware.</p>\n<h3>The Difference Between PoW and PoS</h3>\n<p>PoW relies on computational processing power while <strong>PoS relies on token-holder deposits</strong> to achieve consensus.&nbsp;</p>\n<p>Besides, PoW is based on the premise that miners have to compete to solve a complicated cryptographic puzzle. The first person to solve the riddle receives a reward as well as the ability to create a new block on the blockchain.</p>\n<p>On the other hand, PoS requires miners to <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-token-lockup/">lock up</strong></a> some of their money as stakes, instead of <strong>competing against one another</strong>. A <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-validator/">block validator</strong></a> is chosen randomly based on his/her personal stake weight (the number of coins staked).</p>\n<h3>The Benefits of the Casper Protocol for Ethereum</h3>\n<ul>\n<li><span style=\"color: #169179;\">Energy Efficiency</span>. One of the main benefits of switching to PoS is that it will <strong>save electricity</strong>. In the long run, this will result in a regulated and sustainable increase in the amount of <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-ether/">Ether in circulation.</li>\n<li><span style=\"color: #169179;\">Reduced Environmental Impact</span>. PoS systems demand less effort to validate transactions, which means miners don't need as much high-powered hardware or <strong>money for electricity</strong>. This results in reduced costs and a smaller environmental footprint, which is especially crucial given that <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-bitcoin-btc/">Bitcoin mining consumes more energy than many countries.</li>\n<li><span style=\"color: #169179;\">Increased Scalability</span>. Every transaction in a <strong>PoW network</strong> must be validated by every <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-node/">node before it can be completed. PoS employs a different validation approach, allowing Casper to execute more transactions per second, resulting in quicker and less expensive transactions.</li>\n</ul>\n<h3>The Implementation Phases of the Casper Protocol</h3>\n<ul>\n<li>Phase 0: <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-beacon-chain/">Beacon Chain</strong></a>. The PoS concept is introduced to the Ethereum blockchain in this phase. Beacon Chain is a new blockchain that is meant to run in parallel to the current Ethereum blockchain version. Beacon Chain is intended to be used to coordinate validators without having accounts or executing <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-smart-contract/">smart contracts</strong></a>.</li>\n<li>Phase 1: <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-sharding/">Sharding. This phase is meant to <strong>provide massive scalability</strong> by separating the Ethereum network into numerous <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-shard/">shards, each capable of processing transactions in parallel. The Ethereum network can currently process roughly 15 <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-transactions-per-second-tps/">transactions per second (TPS)</strong></a>. <strong>Sharding</strong> would allow it to process thousands, if not millions, of TPS.</li>\n</ul>\n<p>The Casper protocol's ultimate goal is to upgrade Ethereum to version 2.0, which is also known as <strong>Serenity</strong>. Ethereum 2.0 aspires to be quicker, more efficient, and more scalable than its predecessor.</p>","level":"medium","meta_title":"What is Casper (Ethereum)? Definition & Meaning | Crypto Wiki","meta_description":"Casper (Ethereum) meaning: Casper (Ethereum) - Casper – a protocol aimed at converting the Ethereum network into a Proof of Stake (PoS) blockchain.","meta_keywords":null,"language":"en","created_at":"2022-04-06T07:54:51.000000Z","updated_at":"2022-05-13T14:32:24.000000Z","preview_url":"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-casper-ethereum"},"prevSection":{"id":227,"original_id":null,"author_id":41,"translator_id":null,"title":"What is Cypherpunk?","slug":"what-is-cypherpunk","section":"C","keyword":"Cypherpunk","status":"published","definition":"a movement focused on cryptography and privacy-focused technologies.","content":"<p><strong>Cypherpunk</strong> is an activist movement that originated in the late 1980s. It advocates for personal privacy and freedom through the use of <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-cryptography/">cryptography.

/n

Cryptography, as many new computer technologies at the time, was initially used exclusively by governmental agencies and military departments. In the 1970s, <strong>the US National Bureau of Standards</strong> (now the National Institute of Standards and Technology) and the National Security Agency (NSA) published the <a href=https://www.bitdegree.org/"https://en.wikipedia.org/wiki/Data_Encryption_Standard/" target=\"_blank\" rel=\"nofollow noindex noopener\"><strong>Data Encryption Standard</strong></a> algorithm, which was developed by IBM.</p>\n<p>In 1976, Whitfield Diffie and Martin Hellman authored the <a href=https://www.bitdegree.org/"https://ee.stanford.edu/~hellman/publications/24.pdf/" target=\"_blank\" rel=\"nofollow noindex noopener\"><strong><strong>New Directions in Cryptography</strong></strong></a> paper. Diffie and Hellman are considered to be the pioneers of public-key cryptography.</p>\n<p>The Cypherpunk movement came together inspired by the two publications on cryptography. In 1992, Cypherpunks established a mailing list which in two years gained <strong>700 subscribers</strong>. By 1997, around 2000 users were part of the Cypherpunks mailing list.</p>\n<p>The mailing list was used to talk about subjects such as computer science, cryptography, and mathematics. The Cypherpunks would also discuss the topics of <strong>politics</strong> and philosophy and question the issues related to government surveillance and corporate control. Between 1996 and 1999, roughly 30 messages would be transmitted daily.</p>\n<p>One of the key goals for Cypherpunks was to bring their concepts of widely available cryptography to the real world. Cypherpunks worked on numerous cryptography-based applications. Their technological developments are used to this day.</p>\n<p><strong>Some of the projects that Cypherpunks developed</strong> or contributed to are the secure data communication program <a href=https://www.bitdegree.org/"https://en.wikipedia.org/wiki/Pretty_Good_Privacy/" target=\"_blank\" rel=\"nofollow noindex noopener\"><strong>Pretty Good Privacy (PGP)</strong></a> and anonymous communication software <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-tor/">Tor.

/n

Cryptography played a massive role in the development of <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-blockchain/">blockchain and <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-cryptocurrency/">cryptocurrencies. Many of the people referenced in the Bitcoin <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-whitepaper/">whitepaper were part of the Cypherpunks movement, and their ideas were implemented in the development of blockchain technology.</p>\n<p>Some of the well-known names in the crypto world, such as <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/who-is-adam-back/">Adam Back</strong></a> or <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/who-is-nick-szabo/">Nick Szabo</strong></strong></a>, are members of the Cypherpunk movement.</p>","level":"medium","meta_title":"What is Cypherpunk? Definition & Meaning | Crypto Wiki","meta_description":"Cypherpunk meaning: Cypherpunk - a movement focused on cryptography and privacy-focused technologies.","meta_keywords":null,"language":"en","created_at":"2022-03-01T09:35:04.000000Z","updated_at":"2022-05-13T14:32:23.000000Z","preview_url":"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-cypherpunk"},"currentChapter":"C","currentSection":"what-is-custody","chapterTitle":"C","readingLevel":"medium"},"url":"/crypto/learn/crypto-terms/what-is-custody","version":"cdd198d50cbe5c9c21c9329d7c096ffc"}" class="container-fluid d-flex crypto-book p-0">

Handbook Cover Page
Crypto Terms: Letter C

What is Custody?

Custody MEANING:
Custody - is the process through which financial institutions hold and safeguard the financial assets of their clients in order to prevent asset fraud or loss.
Medium
2 minutes

Let's find out Custody meaning, definition in crypto, what is Custody, and all other detailed facts.

Custody is the procedure through which financial organizations keep and preserve their clients' financial assets in order to prevent asset fraud or loss. It might be seen as a protection service offered by a financial institution.

The primary goal is to safeguard the cryptocurrency assets that use private keys. The private keys allow users to perform transactions and access their crypto assets. Besides, the keys are complicated to remember and have the potential to be stolen or hacked.

Custody had changed from being a personal relationship to engaging with a managed institution. This evolved into a new level of financial complexity, further dividing daily life and decentralized banking. Besides, the institution that offers custody is designated as a custodian, and it gathers earnings, interest, and gains from asset sales in exchange for a fee and redistributes money according to the client's orders.

Custodians are fairly essential in the financial environment, they provide advanced trading tools to advanced users.

Crypto custody providers are those who hold crypto assets such as Bitcoin, Ethereum, Terra, and Cardano. They serve customers who want to maintain and protect their virtual assets in a user-friendly, protected, and regulated custodial system.

Custodians can maintain assets in two forms - digital and physical. Custodial enterprises are often large banks or other reputable institutions in charge of safeguarding the assets of a large number of clients. In most situations, this refers to billions of dollars.

There are different types of crypto custody alternatives though, such as self-custody, meaning having control over your crypto assets with software, hardware, or paper wallets. Exchange wallets are another option, as well as a third-party custodian.

From a blockchain perspective, the services are usually offered by a third-party crypto exchange provider. The exchange keeps the secret keys of its cryptocurrency users as well as the crypto assets.

The custody of cryptocurrencies is completely maintained by crypto exchanges, which deploy security technologies to protect their users' digital assets against fraud or unexpected losses. In the event of a breach or robbery, the custodian is entirely liable for repaying their customers.

Important to note though that users should be cautious when utilizing cryptocurrency custodians as a way to keep virtual currencies. There is no guarantee that a major hack won’t happen to take their holdings away for good.

Skilled crypto investors advise users to put virtual currencies in cold storage if they are not regularly using them or do not intend to use them in the nearish term. This is necessary to protect the funds against fraud and other harmful activities.

Overall, blockchain and cryptocurrency are actively revolutionizing the financial world, and custody is essential for the growing ecosystem.
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