Launched in November 2021, Kaspa is a cutting-edge protocol that draws deep inspiration from Bitcoin. And the market is taking notice. The protocol’s native token,KAS, has been on a 128% rip in the last 30 days alone. And in an industry currently dominated by proof-of-stake blockchains, Kaspa stands out because it’s innovative and uses proof-of-work (POW). So what’s the deal?

This is a deep-dive for understanding how and why Kaspa works the way it does. Note that a few Bitcoin core concepts are first reviewed. These are key to understanding Kaspa. Specifically, the following is explored:

Bitcoin:  Kaspa’s Foundation

-Single Linear Blockchain

-Nakamoto Consensus Mechanism

What is Kaspa

-BlockDAG

-GhostDAG

-Developers

-Performance, EconomicActivity, and Tokenomics

Let’s go.

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Bitcoin:  Kaspa’s Foundation

Kaspa draws heavily from Bitcoin, but makes two important changes. So understanding certain aspects of Bitcoin is important for understanding Kaspa.

Bitcoin is a decentralized, open source, POW blockchain protocol. Fundamentally,Bitcoin is a global network of computers that use processing power and electricity to secure a distributed blockchain ledger. Bitcoin uses a single linear blockchain structure and the “Nakamoto Consensus” mechanism to achieve remarkable security and decentralization.

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Single Linear Blockchain

Bitcoin uses a single linear blockchain structure. Bitcoin miners race each other to be the first to solve a cryptographic puzzle. The winner earns the right to form bitcoin’s next block. And each new block is placed at the end of a long, single, linear chain. A new block is added once every 10 minutes. One block at a time. Secure, steady, and slow.

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But only so many transactions can fit within one block. This means Bitcoin has a hard scalability ceiling. 7 transactions per second (TPS) to be exact. VISA processes 24,000 TPS. Long story short, bitcoin’s single linear blockchain hinders its scalability.

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Nakamoto Consensus Mechanism

The Nakamoto consensus mechanism (CM) is how Bitcoin determines its blockchain state validity. The CM always equates validity with the majority of processing power.

WithBitcoin, miners sometimes solve the cryptographic puzzle at the same time. When this occurs, two blocks are added to the blockchain at the same time, resulting in a blockchain fork. The protocol must decide which is valid and which is not.The CM rule is that the longest chain is the valid one. That’s because - as aPOW system - the longest chain has the most computational energy put into it.Therefore, it’s the most reliable.

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So, miners will eventually follow the longest forked chain. The loser block(s) get pruned off and discarded. Bitcoin’s single linear blockchain is restored, and double-spending is thwarted.

The Nakamoto CM achieves blockchain state validity in exchange for some computational waste (the energy used to create pruned blocks) and hindered scalability (delay of confirmation for the transactions inside the pruned blocks). So for the last decade, the big question has been:

How can a POW protocol be constructed so that the technology behind Bitcoin’s decentralization and security is preserved, but the scalability is vastly increased?

Enter Kaspa.

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What is Kaspa

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Launched in late 2021, Kaspa is a decentralized, open source, POW protocol. LikeBitcoin, these technologies make Kaspa decentralized and secure.

But Kaspa trades Bitcoin’s single linear blockchain for a “BlockDAG'' architecture.And Kaspa swaps the Nakamoto CM for the “GhostDAG'' CM. These changes vastly increase Kaspa’s scalability. That’s Kaspa, in a nutshell.

So what’s BlockDAG and GhostDAG?

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BlockDAG

BlockDAG stands for a block directed acyclic graph. In simple terms, a block directed acyclic graph is a linear blockchain web (as opposed to a single linear blockchain).

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Instead of forcing the formation of one consecutive block after another, Kaspa allows miners to propose blocks simultaneously. These simultaneous blocks are added to the ends of a linear blockchain web. New blocks are always connected to one or two previous “parent” blocks. Sometimes, two parallel blocks share a common parent. Sometimes they don’t. Moreover, BlockDAG architecture allows Kaspa to orphan and prune off less blocks as compared to Bitcoin (more on this in the next section).

Kaspa’s BlockDAG architecture increases its scalability because parallel blocks - and therefore parallel transactions - can be simultaneously confirmed on the protocol. Currently, Kaspa is confirming one block per second with a technical capacity to handle 400 TPS. You can watch BlockDAG live here.

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GhostDAG

GhostDAG stands for “Greedy Heaviest Observed Subtree Directed Acyclic Graph”. This is Kaspa’s CM for achieving blockchain state validity.

GhostDAGuses a method conceptually similar to Bitcoin’s “longest chain (most energy) is always valid” rule. But instead of referring to the longest chain, GhostDAG refers to the heaviest (most energy-intensive) BlockDAG subtree. By using the heaviest subtree as the valid state of the blockchain, Kaspa - like Bitcoin-  can protect itself from any adverse, minority computing power that’s trying to attack the network.

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And Kaspa still orphans and prunes blocks (or groups of blocks) that the network deems to be unreliable or invalid. This serves as an important security mechanism to ensure validity of the protocol. However, Kaspa does this less frequently than Bitcoin because the protocol allows for the simultaneous block formation. Less pruning means higher scalability.

And what about double-spending? Like other protocols, Kaspa verifies that the spender in each transaction legitimately received KAS in the first place. And if two contradictory transactions are simultaneously submitted, then GhostDAG chooses the transaction connected with the heaviest sub-tree. And the other one gets rejected.

These are the high level concepts of how and why Kaspa works the way it does.

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Developers

The technology behind Kaspa has been a work in progress for the past 10 years. Yonatan Sompolinsky and Aviv Zohar co-conceived GhostDAG in 2013. Sompolinsky currently holds a post-doctoral position at Harvard studying blockchain technology.

Sompolinsky founded DAGlabs, and DAGlabs created Kaspa. It appears that the developers take great inspiration fromBitcoin, given their technical approach and philosophy. Kaspa is an open sourceproject with no central governance.

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Performance, Economic Activity, and Tokenomics

Performance:

●      According to the Kaspa block explorer, Kaspa is currently processing approximately1.8 TPS. Note that this number is likely due to low network activity, and not from a technical limitation. Kaspa documents state that the protocol is currently capable of approximately 400 TPS.

●      Kaspa’s current hash rate is approximately 732 TH/s . Or 723 trillion hashes per second. For reference, Bitcoin’s is operating at 346 EH/s. Or 345 quintillion hashes per second.

Economic activity:

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●      Current KAS price:  $0.03 (15K% increase)

●      First Recorded Price:  $0.00019

●      Total Market Cap:  $529M

●      Twenty-Four Hour TradeVol.:  $49M

Kaspa documents state that future plans include smart contract integrations. Smart contracts would enable third-party developers to build DeFi applications, layer-two solutions, and other dApps on top of Kaspa. Note that these developments are not yet available, but they might be coming in the future.

Tokenomics:

●      Circulating / MaxSupply:  17B / 28B (60.74% mined)

●      Emission Schedule:  KAS halves once per year via monthly reductions ((1/2)^(1/12))

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●      Initial Coin Distribution:  Kaspa documentation states that there was no pre-mining of any coins, no pre-sales, and no initial coin allocations to any developers or investors.

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Final Thoughts

Kaspa is an interesting protocol in how it attempts to retain Bitcoin’s strengths ,but with increased scalability. It’s also refreshing to see real innovation happening in the proof-of-work space. If Kaspa’s developers are successful in achieving smart contract integrations, this protocol could have a bright future.

That being said, it will also be interesting to see how BlockDAG and GhostDAG holdup if and when the network experiences increased transactional activity.

Decentralization, security, scalability. That’s the goal. Let’s see if Kaspa makes it happen.