How does the Casper proof of stake algorithm work ?
Casper is the new Proof of Stake algorithm that is going to replace the current Proof of Work algorithm on the Ethereum blockchain. I already answered the difference between PoW and PoS.
Ethereum is trying to switch on PoS with it’s new PoS protocol called Casper, it is a feature which states that the malicious validator (in case of PoS, miner is called validator) who validates the block will lose money if he/she validates a malicious block that is not correct. In PoS, when a validator validates an algo or block, he just put some money or stake to validate that block, you cant get it back until the block is validated or you can actually lose your money which is put to solve that block, if you validate a false block in casper update.
Advantages of Casper protocol
PoS is faster for a validator to validate a block and bet on a block comparing to PoW (Proof of Work) which solve a cryptographic puzzle in order to append the block in the blockchain. If PoS is faster then the whole blockchain will become faster and more scalable. This casper update can make Ethereum ready for the world wide adoption.
In Proof of Work, if someone powerful (with powerful CPUs or GPUs) try to fool the system, he/she will not really be penalized but in Proof of Stake (Casper Protocol) if someone try to mess with the blockchain even if they are powerful (with CPUs or GPUs), they will lose their funds if they are validator and they have locked up their stake to validate a block in this protocol.