Kaspa (KAS) tokenomics

The token economics of Kaspa (KAS) are fundamentally modeled after Bitcoin's principles, emphasizing a Proof-of-Work (PoW) consensus, a deflationary monetary policy, and a fair launch without pre-mine or central allocation. Kaspa's unique architecture, the blockDAG (Directed Acyclic Graph), enables high-speed transaction processing while maintaining security and decentralization.

Issuance Mechanism

The issuance of the native token, KAS, is governed by a predictable, deflationary schedule designed to cap the total supply.

• Maximum Supply: The maximum token supply for KAS is 70 billion KAS.
• Emission Schedule: The token supply is emitted through block rewards paid to miners. The emission rate is subject to a continuous, geometric decrease known as "halving."
• Halving Mechanism: The block reward decreases geometrically each month by a factor of (1/2)^(1/12). This mechanism ensures a steady, decreasing rate of inflation.
• Initial and Current Rewards: Miners were initially rewarded 500.00 KAS per block. As of February 26, 2024, this reward had decreased to 81 KAS per block.
• Emission End Date: The emission schedule is projected to continue until the maximum token supply of 70 billion KAS is mined around the year 2057.
• Future Adjustments: Kaspa plans a codebase transition to RustLang, which is expected to increase the block time to 10 blocks per second (BPS), with an ultimate goal of 100 BPS. Following this transition, the KAS reward per block will decrease proportionally to the increase in blocks per second (e.g., if 10 BPS = 13.08 KAS per block, then 100 BPS = ~1.31 KAS per block). Crucially, the overall emission schedule and total supply will remain unchanged.

Allocation Mechanism

Kaspa was designed for a fair and decentralized distribution, avoiding initial centralized allocations.

• Fair Launch: Kaspa was fair-launched on November 7, 2021, with no pre-mine, zero pre-sales, and no coin allocations to the project team or founders.
• Distribution: All KAS tokens are distributed solely through the Proof-of-Work mining process, rewarding miners for securing the network.
• Community Funding: While there was no initial team allocation, the community has established a public development fund to support ecosystem initiatives. This fund accepts public donations and is managed by four elected Community Treasurers via a 2/4 multi-signature wallet. Community members can propose project ideas for funding, which are then subject to a community vote, typically lasting 24 hours on Discord.

Usage and Incentive Mechanism

The KAS token serves multiple utility functions within the network, primarily incentivizing security and facilitating transactions.

Token Utility (KAS)

1. Peer-to-Peer Payments and Value Storage: KAS functions as a medium of exchange, allowing users to send and receive funds without intermediaries.
2. Network Transaction Fees: Users pay transaction fees in KAS to incentivize miners to process and confirm transactions.

Incentive Mechanism (Miners)

The primary incentive mechanism is the Proof-of-Work (PoW) consensus, utilizing the kHeavyhash mining algorithm. Miners are compensated for securing the network and validating transactions.

• Rewards for Miners: Miners who successfully generate a block receive two forms of compensation:
  1. Newly minted KAS via the network's inflationary block reward (subject to the monthly geometric halving).
  2. All transaction fees included in the associated block.
• Transaction Fee Calculation: Transaction fees are calculated based on the transaction's size in UTXOs, with a base rate of 0.0001 KAS per UTXO. Users can adjust the fee to influence transaction priority.

Governance

Kaspa is an open-source project with no central governance. Development initiatives are communicated through pull requests and Kaspa Improvement Proposals (KIPs). Community members can submit project ideas for fundraising, which are approved via a successful vote in the project's Discord channel.

• Kaspa DAO: The Kaspa ecosystem also features the Kaspa DAO, the first decentralized autonomous organization on the network. This DAO, governed by KDAO token holders, funds projects that enhance the ecosystem, including developer tools, infrastructure, and educational resources. Funding is allocated through a decentralized voting process.

Locking Mechanism and Unlocking Time

Kaspa's token economics do not feature traditional locking or vesting schedules for team or private investors, as there was no pre-mine or pre-sale.

• Locking Mechanism: The Kaspa network does not involve staking or liquidity provisioning mechanisms for consensus participation.
• Unlocking Time: Since there was no pre-mine or pre-allocation, there are no specific token unlocking times or vesting schedules for founders or investors. All tokens enter circulation through the mining process. The full emission of the 70 billion KAS supply is expected to be completed around 2057.

Information regarding any specific locking mechanisms or unlocking times for the small amounts of KAS raised through community crowdfunding campaigns was not available.