SOLVING THE TRILEMMA

Traditional cryptocurrencies suffer from a security-scalability-decentralization tradeoff: decentralized cryptocurrencies must limit their block creation rate in order to limit “orphans”, off-chain blocks created during the time it takes for a latent block to be propagated across the network. A high orphan rate decreases the effectiveness of the PoW network, thus decreasing its defense against attacks from malicious actors joining the open network. To solve this tradeoff, Kaspa’s consensus layer uses GhostDAG, a proof-of-work consensus protocol that generalizes Nakamoto’s chain into a directed acyclic graph of blocks ( blockDAG). GhostDAG incorporates”orphan” blocks into the chain to form a blockDAG, and then uses a novel greedy algorithm to order the blocks such that well-connected, honest blocks are favored, quickly and with high probability. GhostDAG allows Kaspa to circumvent the traditional tradeoff of blockchains, improving on block rate by orders of magnitude while maintaining the security guarantees of Bitcoin.

This results in a cryptocurrency that is supported by 51% security, has a high number of mining validator nodes, and has throughput on the order of one block per second. This is unlike existing cryptocurrencies, which inevitably trade off on having small numbers of validator nodes or lower BFT security (33% threshold for malicious actors).

Fast Confirmations

Traditional cryptocurrencies’ slow block rates indicate slow confirmations, i.e., the time it takes for a transaction to be published on the blockchain. Kaspa’s consensus layer supports fast, subsecond confirmations—importantly, a fast first confirmation, which enables use cases that need immediate proof of publication (but not immediate irreversibility), such as e-commerce.

High Throughput

Traditional cryptocurrencies’ slow block rate also indicates low transaction throughput. Using GhostDAG,Kaspa’s consensus layer removes security as a bottleneck for high throughput, allowing block rate and block size increase up to what the network can handle. Kaspa also optimizes bandwidth cost and network infrastructure for high throughput.

Mining Decentralization

Traditional cryptocurrencies’ slow block rate also indicates high variance of mining income (i.e. irregular mining rewards due to the difficulty of finding a block), incentivizing miners to join larger and larger mining pools—which combine computing power and distribute smaller, more regular mining incomes to participants—as the network grows and the block difficulty increases. This centralizes the consensus power into the hands of a few pool managers. Kaspa’s consensus layer’s fast block rate decreases the variance of mining income, which decreases the incentive to join mining pools, contributing to mining decentralization.