Kaspa (KAS) — the "new Bitcoin" or another copycat?
This article is about the Kaspa project. Its creators seek to maintain the same level of decentralization as Bitcoin, using the mechanics of this network, but to improve the underlying technology to achieve high throughput and scalability.
What is Kaspa?
Kaspa is a scalable decentralized tier-1 protocol with instantaneous transaction validation. Satoshi Nakamoto's designs inspired the project's creators but sought to improve upon them.
Kaspa's architecture is based on the Bitcoin protocol and Proof-of-Work consensus mechanism, but its throughput is much higher due to improved block processing technology. Kaspa has become one of the few next-generation protocols based on Proof-of-Work, as developers increasingly prefer Proof-of-Stake.
The protocol has been in development for 10 years, and DAGLabs, the company responsible for the Kaspa network, was founded in 2013. Kaspa's developments, namely the Ghost protocol, were even mentioned in the Ethereum Whitepaper. The leading Kaspa network is set to launch in November 2021.
How does Kaspa work?
The Kaspa protocol provides high blockchain performance while maintaining security through a "proof-of-work" consensus. Kaspa is powered by the PHANTOM protocol, which simplifies Bitcoin consensus and utilizes the BlockDAG (Block Directed Acyclic Graph) mechanism, which allows multiple blocks to be processed in parallel, significantly increasing network throughput.
Kaspa's network generates a block every second. By comparison, it takes 10 minutes to mine one block in the Bitcoin blockchain.
Instead of the Nakamoto CM consensus mechanism, Kaspa uses the GhostDAG (Greedy Heaviest Observed Subtree Directed Acyclic Graph) protocol to check the state of the blockchain and validate it. GhostDAG removes blocks that are deemed invalid or unreliable.
According to the official documents of the project developers, the Kaspa network can process up to 400 transactions per second — this is 57 times more compared to the Bitcoin protocol, which processes only up to 7 transactions per second. However, the blockchain observation shows that real-time throughput ranges from 1 to 1.6 TPS, but this could be due to the still low network activity, as each block contains only 2 to 4 transactions on average.
KAS cryptocurrency
KAS is the native coin of the Kaspa network, much like BTC in the Bitcoin blockchain. The Kaspa protocol even uses the same UTXO address accounting model. The KAS cryptocurrency has two sole functions — rewarding miners and paying transaction fees.
KAS coins were originally generated as block rewards without prior mining (pre-mining). According to CoinMarketCap, 22 billion KAS have already been generated out of a maximum possible 28.7 billion.
Although the Kaspa network was launched in 2021, the cryptocurrency only began listing on exchanges in June 2022. At the time of listing, the price was just $0.00018 and has since risen to $0.11, about 611 times, making it one of the fastest-growing cryptocurrencies in the crypto market. Some believe that the price of KAS could reach $0.45 as early as 2023, but these predictions are unlikely to come true unless there is another strong surge in the crypto market. Other experts, such as those from CoinCodex, believe that KAS will reach such a price only by 2029.
KAS reached its historic high in November 2023 at $0.15, after which it fell back by about 26%. The capitalization of KAS as of December 2023 was $2.45 billion, and the cryptocurrency ranks 35th in the overall ranking.
What are the prospects for Kaspa?
Even though the network was launched only 2 years ago, its capitalization is second only to the largest PoW blockchains, such as:
- Bitcoin,
- Dogecoin,
- Litecoin,
- Bitcoin Cash,
- Ethereum Classic.
It is also essential to consider the growth rate: over the last year alone, Kaspa's capitalization has grown 31 times from $78.77 million to $2.45 billion. For comparison, Bitcoin Cash's capitalization increased only 2.3 times over the same period, and Ethereum Classic increased only by 27.8%. With such a high growth rate, Kaspa has every chance to become one of the leading PoW blockchains in the crypto industry.
However, this growth is partly due to the interest of miners. According to the coin generation graph, mining will cease in about 3 years, and it is still unclear how this will affect the Kaspa network. In the long term, this could be positive as new KAS coins will no longer be generated, and supply will remain limited. Still, in the medium term, it could be negative as miners' rewards will drop and their motivation will decrease.
The protocol has not yet passed the test of time, so it is unknown how stable the blockchain will be and how well the new BlockDAG/GhostDAG algorithms will perform during times of high network load. This could significantly affect the future of the Kaspa project.
On the other hand, Kaspa has good prospects, as it is an alternative to Bitcoin mining amid the constant growth of hash rate and network complexity. Currently, KAS is the most profitable cryptocurrency for mining according to the WhatToMine service, mainly due to the rapid growth of the coin's exchange rate in recent months.