KAS: What is Kaspa?

Kaspa is one of the fastest and most scalable transaction confirmation layers built on a proof-of-work (PoW) mechanism. Transactions sent to miners can be included in the ledger immediately, and the ledger is structured as a blockDAG. Kaspa is based on the GhostDAG/PHANTOM protocol, a scalable generalization of Nakamoto consensus (Bitcoin consensus). Its design stays true to the principles Satoshi built into Bitcoin: proof-of-work (PoW).

Kaspa stands out for its ability to support high block rates while keeping the high level of security that proof-of-work (PoW) provides.

The current Kaspa network produces a new block every second. Once the ongoing rewrite in the Rust programming language is complete, the developers aim to significantly increase the number of new blocks per second, in order to attract smart contract and DeFi development.

Kaspa: Solving the trilemma

Traditional cryptocurrencies face a trade-off between security, scalability and decentralization: decentralized cryptocurrencies have to limit their block rate in order to limit “orphans,” i.e. blocks created off the main chain (off-chain blocks) during the time it takes for a block to propagate across the network. A high orphan block rate reduces the efficiency of a PoW network, weakening its protection against attacks by malicious actors who join the open network. To solve this, Kaspa’s consensus layer uses GhostDAG, a proof-of-work-based consensus protocol that generalizes Nakamoto’s chain into a directed acyclic graph of blocks (blockDAG). GhostDAG includes “orphan” blocks in the ledger to create a blockDAG and uses a pioneering greedy algorithm to order the blocks so that well-connected, honest blocks are favored quickly and with high probability. GhostDAG lets Kaspa bypass the traditional trade-off of blockchains, improving the block rate by orders of magnitude while keeping Bitcoin’s theoretical security.

The result is a cryptocurrency that is backed by 51% security, has a large number of miners/nodes and processes on the order of one block per second. This is in contrast to existing cryptocurrencies, which inevitably trade off by relying on a small number of validating nodes or on the lower security of BFT (the 33% threshold malicious actors need in order to attack the network).

Kaspa: Fast confirmations

Traditional cryptocurrencies with slow block rates mean slow confirmations, i.e. the time it takes for a transaction to be published on the blockchain. Kaspa supports fast, sub-second confirmations: a quick first confirmation that enables use cases needing immediate proof of publication (but not immediate irreversibility), such as e-commerce.

Kaspa: High throughput

The slow block rate of traditional cryptocurrencies also means low transaction throughput. By using GhostDAG, Kaspa’s consensus layer removes the security constraint that prevents high throughput, allowing an increased block rate and larger block sizes, as far as the network can support. Kaspa also optimizes bandwidth costs and network infrastructure for high throughput.

Kaspa: Decentralized mining

The slow block rate of traditional cryptocurrencies means that mining income fluctuates (i.e. mining rewards are unstable because of how hard it is to find new blocks). This makes it more attractive for miners to join larger mining pools as the network and the difficulty grow. These larger pools combine their computing power and share the mining profits among their participants. This leads to something none of us who hold crypto want: centralization. By contrast, the fast block rate of Kaspa’s consensus layer reduces the fluctuations in mining income, which reduces the incentive to join large mining pools and so promotes decentralization in mining.

Kaspa’s vision

The idea behind this project is to build a Nakamoto-style system that runs faster, limited only by the speed of the internet.

Our goal was to push past the limits of Satoshi’s original protocol (known as Nakamoto Consensus), while keeping the same core principles found in Bitcoin.

Contrary to Satoshi’s vision, Bitcoin did not become a simple peer-to-peer cash system. Instead, it is becoming the ultimate store of value, or e-gold, which is quite different from Bitcoin’s original approach. This is not a trivial development: it represents one of the most important economic revolutions in human history. Even so, there is plenty of room for improvement in the base protocol (L1) and for the ability to choose different trade-offs (for the L1).

To better understand Satoshi’s vision, we recommend looking at a conspiracy theory about Satoshi’s intentions, as described by Elliot Olds.

As for Kaspa, we look to silver, which has historically been considered less valuable than gold but better suited to payments. In the original Aramaic text (Dahava versus Kaspa), silver is associated with the concept of money.

Kaspa was designed to tackle the challenges cryptocurrency faces in the second decade of the 21st century. The main problems include how fast transactions are included in the ledger and control over the ordering of transactions in the ledger.

We argue that fast inclusion times (also known as first confirmations) are critical for user experience and for integrating the system with other online applications. We also argue that the ability of smaller nodes to mine blocks frequently and asynchronously is important for tackling front-running and the problem of maximal extractable value (MEV), which affects miners and transaction creators. Sub-second block times enable anonymous programming and protect user privacy.

Finally, Kaspa aims to create a fast and scalable transaction sequencing system that will improve the user experience and make it possible to deal effectively with the challenges of modern cryptocurrency.

Kaspa tokenomics

To understand Kaspa’s tokenomics, let’s look at its total supply. The total amount of KAS on Kaspa is set at about 28.7 billion KAS and will never increase, preserving the coin’s scarcity and value. This creates a stable environment for the ecosystem.

Now let’s look at Kaspa’s monetary policy, which is split into two phases. The first phase, known as the pre-deflationary phase, began with the network’s launch in November 2021 and ended in May 2022. During this phase, the block reward was initially randomized, ranging from 1 to 1,000 KAS per block for the first two weeks. At the first hard fork, however, the block reward changed to a fixed rate of 500 KAS per second, equal to 500 KAS per block, since the block rate is 1 per second. This fixed reward lasted six months, ensuring a predictable emission rate.

After the pre-deflationary phase, Kaspa entered the chromatic phase, in which block rewards decline geometrically over time. Emissions are reduced not per block but per second. The initial block reward was set at 440 KAS and is halved every year. Every month, the block reward decreases at a geometric rate, ensuring a controlled emission rate.

According to the current emission schedule, about 15.3 billion KAS will have been mined by January 2023, representing 53.3% of the total supply. By January 2024, this is expected to rise to about 21.9 billion KAS, reaching 76.3% of the total supply. By January 2025, about 25.1 billion KAS will have been mined, representing 87.4% of the total supply.

Kaspa’s emission schedule provides a measured framework for issuing KAS, with small deviations due to factors such as the difficulty calculation and the creation of parallel blocks within the Kaspa network. These deviations have minimal impact on the overall emission schedule.

Overall, Kaspa’s tokenomics have been carefully designed to ensure a steady and controlled emission of KAS, supporting the coin’s scarcity and value. This approach provides a stable framework for investors and stakeholders as Kaspa evolves and pursues its vision in the blockchain technology space. We look forward to following this transformative journey, in which blockchain technology and tokenomics come together to build a future of limitless possibilities.

The Kaspa team

Kaspa at a glance