Here is the problem, that I'm stuck on.
There is no square root of $a$ in $\mathbb{Z}_p$. Is there square root of $a$ in $GF(p^n)$?
Well, it's certainly true that $$x^{p^n}=x$$ and $$x^{p^n-1}=1$$ for nonzero $x$.
If there is such an $x$ that $a=x^2$ then $$a^{\frac{p^n-1}{2}}=1$$ Now this actually is an equation in $\mathbb{Z}_{p}$ only, so I can write $$a^{\frac{p^n-1}{2}}\equiv 1\mod p$$
Now the answer seems to be just a touch away because I know that $x^2\equiv a \mod p$ iff $a^{(p-1)/2}\equiv 1 \mod p$. How can I tie the ends together, what am I missing?
If $a$ is not a square in $\mathbb F_p$, then it is a square in $\mathbb F_{p^n}$ precisely when $n$ is even. Indeed, $\mathbb F_p(\sqrt a)$ is a quadratic extension of $\mathbb F_p$, hence $\mathbb F_p(\sqrt a) = \mathbb F_{p^2}$. Now, we know that $\mathbb F_{p^m} \subseteq \mathbb F_{p^n}$ if and only if $m \mid n$. It follows that $a$ is a square in $\mathbb F_{p^n}$ if and only if $\mathbb F_p(\sqrt a) \subseteq \mathbb F_{p^n}$ if and only if $2 \mid n$.