1.

Understanding Kaspa’s Economic Model

Kaspa’s economic model is designed around principles of fairness, transparency, and long-term sustainability. Unlike many cryptocurrencies that allocate tokens to founders, investors, or development teams before public launch, Kaspa ensures that 100% of its tokens are distributed through proof-of-work mining. This approach creates a truly decentralized distribution where no single party controls a significant portion of the supply.

The economic model consists of two key components: a fixed maximum supply and an emission schedule that gradually reduces the rate at which new tokens are created. This design creates a deflationary monetary policy over time, where the supply growth rate decreases until it eventually approaches zero, making newly mined tokens increasingly scarce.

Key Characteristics

Kaspa’s tokenomics are distinguished by several important characteristics:

• Fair Launch: No premine, pre-sales, or token allocations to founders or investors
• Fixed Maximum Supply: Approximately 28.7 billion KAS, with no plans to increase the cap
• Deflationary Emission: Block rewards decrease smoothly over time, halving approximately once per year
• Time-Based Emission: Rewards are calculated per second, not per block, ensuring consistent emission regardless of block rate
• Predictable Schedule: The emission schedule is deterministic and transparent, allowing anyone to calculate future supply

This economic design aligns with Bitcoin’s philosophy of sound money while incorporating unique innovations like the chromatic phase that provides smoother transitions than traditional halving events.

2.

Kaspa’s Fair Launch: No Premine, No Pre-sales

Kaspa was launched in November 2021 following a fair launch model that ensures equitable distribution and decentralization. The fair launch approach means that every single KAS token must be earned through proof-of-work mining-there were no shortcuts, no early advantages, and no reserved allocations.

What Is a Fair Launch?

A fair launch in cryptocurrency means that the network starts with zero tokens in existence, and all tokens are distributed through the same competitive process available to everyone. In Kaspa’s case, this means proof-of-work mining. No tokens existed before the mainnet launch on November 7, 2021, and no tokens were allocated to developers, founders, investors, or any other parties.

This approach stands in contrast to many other cryptocurrency projects that:

• Create tokens before public launch (premine)
• Sell tokens to early investors (ICOs, pre-sales)
• Reserve tokens for development teams or founders
• Allocate tokens to venture capital firms or advisors

These practices can create centralization risks, as large portions of the supply may be held by a small number of parties, potentially allowing them to influence the network or create selling pressure at specific times.

Kaspa’s Fair Launch Characteristics

Kaspa’s launch demonstrates what a true fair launch looks like:

• No Premine: Zero tokens were created before the mainnet launch on November 7, 2021
• No Pre-sales or ICOs: No tokens were sold to investors before or after launch
• No Founder or Team Allocations: The development team received no tokens-they had to mine like everyone else
• No Coin Allocations: No tokens were reserved for marketing, partnerships, or any other purposes
• Public Declaration: The fair launch was publicly declared and verifiable by anyone

This means that 100% of Kaspa’s supply is distributed through proof-of-work mining in a highly competitive environment. Every token that exists today, and every token that will exist in the future, must be earned through the same mining process available to anyone with the hardware and electricity to participate.

Why Fair Launch Matters

The fair launch model is important for several reasons:

True Decentralization: When tokens are distributed through mining rather than allocations, ownership is spread across many miners rather than concentrated in the hands of founders or investors. This creates a more decentralized network where no single party controls a significant portion of the supply.

Equal Opportunity: Everyone starts from the same point. There are no early investors who bought tokens at a discount, no founders who received free tokens, and no special treatment for any party. This creates a level playing field where success is determined by participation in the network rather than early access or special privileges.

Community Trust: Fair launches build trust because they demonstrate that the project prioritizes fairness and decentralization over enriching founders or investors. This aligns incentives-the development team succeeds only if the network succeeds, not because they hold a large allocation of tokens.

Nakamoto’s Philosophy: This approach follows the philosophy established by Bitcoin’s creator, Satoshi Nakamoto, who also ensured Bitcoin had no premine and no special allocations. Kaspa continues this tradition of fair distribution.

3.

Total and Circulating Supply

Understanding the difference between total supply, maximum supply, and circulating supply is crucial for evaluating Kaspa’s tokenomics. These metrics tell different stories about the current state and future potential of the network.

Maximum Supply: 28.7 Billion KAS

Kaspa has a fixed maximum supply of approximately 28.7 billion KAS. This is the hard cap-the maximum number of tokens that will ever exist. Unlike some cryptocurrencies that have unlimited supplies or adjustable caps, Kaspa’s maximum supply is fixed in the code and cannot be increased.

The exact figure of 28.7 billion is an estimate based on the emission schedule and various factors, including the initial random reward phase, DAA score-based halving transitions, and potential block rate changes. The hard cap in the code is set at 29 billion, but the actual emission is expected to reach approximately 28.7 billion over the 36-year emission period.

Circulating Supply: Current Status

As of late 2025, the circulating supply is approximately 26.87 billion KAS, representing about 93.6% of the maximum supply. Circulating supply refers to the number of tokens that have been mined and are in active circulation-they can be bought, sold, or held by anyone.

The circulating supply increases as new blocks are mined and block rewards are paid to miners. Since Kaspa uses a time-based emission schedule (tokens per second), the rate of new token creation is predictable and decreases over time according to the chromatic phase schedule.

Supply Milestones

Understanding key supply milestones helps put Kaspa’s distribution into perspective:

• By January 1, 2023: Approximately 15.3 billion KAS (53.3% of max supply)
• By January 1, 2024: Approximately 21.9 billion KAS (76.3% of max supply)
• By January 1, 2025: Approximately 25.1 billion KAS (87.4% of max supply)
• By July 10, 2026: Approximately 95% of max supply will be mined
• By November 2057: Block rewards will effectively reach zero (36 years from mainnet start)

These milestones show that the vast majority of Kaspa’s supply will be mined in the first few years, with the emission rate slowing significantly as the chromatic phase continues. By 2026, most of the supply will already exist, and the remaining tokens will be released very gradually over the following 30+ years.

Why These Numbers Matter

The relationship between maximum supply, circulating supply, and the emission schedule has important implications:

Scarcity Over Time: As more tokens are mined and the emission rate decreases, newly created tokens become increasingly scarce. This creates natural deflationary pressure as the rate of new supply decreases relative to existing supply.

Predictable Inflation: The current inflation rate (new tokens created relative to existing supply) decreases over time. This allows market participants to understand and anticipate supply changes, reducing uncertainty about monetary policy.

Network Maturity: The fact that most tokens will be mined by 2026 means Kaspa will reach supply maturity relatively quickly. After this point, the network will rely more heavily on transaction fees for miner incentives, similar to Bitcoin’s long-term model.

4.

The Emission Schedule

Kaspa’s emission schedule determines how new tokens are created and distributed to miners. The schedule consists of two distinct phases: a pre-deflationary phase that established the initial emission rate, and a chromatic phase that gradually reduces block rewards over time. Understanding this schedule is essential for understanding Kaspa’s monetary policy.

One important characteristic of Kaspa’s emission schedule is that it’s time-based, not block-based. This means rewards are calculated per second rather than per block. If the block rate changes in the future, the reward per block will adjust automatically to maintain the same emission rate per second. This design ensures consistent token creation regardless of network performance changes.

4.1.

Pre-Deflationary Phase (November 2021 - May 2022)

The pre-deflationary phase lasted from Kaspa’s mainnet launch on November 7, 2021, until May 8, 2022-approximately six months. During this phase, the emission rate was constant, providing a stable reward structure for early miners.

Initial Random Rewards (First 2+ Weeks): During the very first weeks after launch, block rewards were randomized between 1 and 1,000 KAS per block. This random distribution was designed to create more variability in early mining rewards. However, the average reward turned out to be approximately 750 KAS per block (rather than the expected 500), which added about 300 million extra tokens to the total supply beyond what a constant 500 KAS reward would have created.

Stable Reward Rate: After the first hardfork (which occurred a few weeks after launch), the random rewards were replaced with a constant reward of 500 KAS per second. Since the block rate was also 1 block per second at that time, this effectively meant 500 KAS per block.

This constant reward rate made it easy for miners to predict their earnings and provided stable incentives during Kaspa’s early days when the network was still establishing itself.

4.2.

Chromatic Phase (May 2022 - Present)

The chromatic phase began on May 8, 2022, and continues to the present day. This phase implements Kaspa’s unique deflationary emission schedule, where block rewards decrease geometrically over time. The name “chromatic” refers to the musical scale analogy used in the design.

Geometric Reduction: In the chromatic phase, block rewards decrease smoothly each month by a factor of (1/2)^(1/12). This factor is chosen so that block rewards halve approximately once per year, but instead of a sudden halving event (like Bitcoin), the reduction happens gradually month by month.

Initial Block Reward: The chromatic phase started with an initial block reward of 440 KAS per block. At the original 1 BPS block rate, this equated to 440 KAS per second. Following the Crescendo upgrade to 10 BPS in May 2025, the reward per block adjusted accordingly to maintain the emission rate per second. This reward decreases smoothly each month according to the chromatic reduction factor.

Annual Halving: Over the course of one year (365.25 days), the block reward decreases by exactly 50%. This creates the same deflationary effect as Bitcoin’s halving events, but with smoother transitions that avoid the sudden supply shocks associated with traditional halvings.

The chromatic phase will continue until block rewards effectively reach zero, which is expected to occur approximately 36 years after the mainnet launch (around November 2057). After this point, miners will rely entirely on transaction fees for rewards, similar to Bitcoin’s long-term model.

5.

Understanding the Chromatic Phase: Octaves and Semitones

The chromatic phase gets its name from the musical scale analogy used in its design. Understanding this analogy helps explain how the emission schedule works and why it’s structured the way it is.

The Musical Analogy

In music theory, a chromatic scale consists of 12 semitones (half-steps) that make up one octave. The frequency ratio between two consecutive semitones in a tempered chromatic scale is constant, and the frequency doubles over one octave (12 semitones).

Kaspa’s emission schedule uses this same mathematical relationship:

• Month = Semitone: Each month represents one semitone in the chromatic scale
• Year = Octave: Each year (12 months) represents one octave, where the reward halves
• Initial Reward = A4: The initial block reward of 440 KAS corresponds to the frequency of the musical note A4 (440 Hz)
• Reduction Factor: The monthly reduction factor of (1/2)^(1/12) is exactly the same as the frequency ratio between consecutive semitones

This creates a beautiful mathematical symmetry: just as each semitone represents a consistent frequency ratio in music, each month in Kaspa’s emission schedule represents a consistent reduction in block rewards. And just as 12 semitones make an octave (doubling or halving frequency), 12 months make a year (halving the block reward).

Why This Design?

The chromatic phase design provides several advantages over traditional halving events:

Smoother Transitions: Instead of a sudden 50% reduction every few years (like Bitcoin’s halving), Kaspa’s rewards decrease gradually each month. This creates smoother market dynamics and avoids sudden supply shocks that can cause price volatility.

Predictable Reductions: The geometric progression means that miners and investors can always calculate the exact block reward at any point in the future. There are no surprises or sudden changes-everything is determined by the mathematical formula.

Consistent Deflation: The deflationary pressure is applied continuously rather than in discrete jumps. This creates a more consistent economic environment where supply changes are gradual and predictable.

Same Net Effect: Despite the smoother transitions, the chromatic phase achieves the same overall deflationary effect as traditional halving. Block rewards still decrease by 50% per year, creating the same long-term scarcity dynamics.

Calculating Future Rewards

Because the chromatic phase follows a geometric progression, you can calculate the block reward at any point in time using the formula:

Reward = Initial Reward × (1/2)^(months_since_start / 12)

Where “months_since_start” is the number of months since May 8, 2022 (the start of the chromatic phase). This formula shows how the reward decreases smoothly over time, halving every 12 months.

For example, after 1 year (12 months), the reward is exactly half of the initial reward. After 2 years (24 months), it’s one-quarter. After 3 years (36 months), it’s one-eighth, and so on.

6.

Supply Milestones and Timeline

Understanding key supply milestones helps visualize how Kaspa’s supply distribution unfolds over time. These milestones show that the vast majority of tokens are mined in the early years, with increasingly smaller amounts released as time progresses.

Historical and Projected Milestones

Here are the key supply milestones based on the emission schedule:

These milestones illustrate an important characteristic of Kaspa’s emission: most tokens are mined relatively quickly. By 2026, approximately 95% of the total supply will already exist. The remaining 5% will be released very gradually over the following 30+ years.

Implications of Early Supply Distribution

The fact that most tokens are mined in the early years has several important implications:

Rapid Supply Distribution: Kaspa achieves broad distribution quickly. By 2026, when 95% of tokens are mined, ownership will be spread across many miners and holders, creating strong decentralization.

Early Network Maturity: The network reaches supply maturity relatively quickly. After 2026, the focus shifts from block rewards to transaction fees as the primary miner incentive, similar to Bitcoin’s long-term model.

Scarcity Acceleration: As the emission rate decreases and most tokens are already in circulation, newly mined tokens become increasingly scarce. This creates deflationary pressure as the growth rate of supply slows relative to existing supply.

Long Tail Emission: The remaining 5% of tokens (approximately 1.4 billion KAS) will be released over 30+ years. During this period, block rewards will be very small, and miners will rely primarily on transaction fees. This gradual tail emission provides minimal additional supply while maintaining some block reward incentive.

Block Reward Reduction Timeline

Beyond supply milestones, it’s also important to understand when block rewards effectively reach zero. Currently, with a block rate of 10 blocks per second (10 BPS) following the Crescendo upgrade in May 2025, block rewards will fall below 1 Sompi (0.00000001 KAS, the smallest unit) approximately 32 years after the mainnet launch-around November 2053 (adjusted for the 10 BPS rate).

At this point, block rewards become effectively zero because values below 1 Sompi cannot be expressed in the Kaspa protocol. From this point forward, miners will rely entirely on transaction fees.

7.

Deflationary Monetary Policy

Kaspa’s monetary policy is fundamentally deflationary over the long term. While the network is currently in an inflationary phase (new tokens are still being created), the emission rate decreases over time until it approaches zero. After this point, the supply becomes fixed, and any lost tokens or increased demand create natural deflationary pressure.

From Inflation to Deflation

Kaspa’s monetary policy transitions through different phases:

High Inflation Phase (2021-2026): During the early years, when emission rates are high and most tokens are being mined, the network experiences relatively high inflation. New tokens are created at a rapid rate relative to existing supply, which can create downward pressure on price if demand doesn’t keep pace.

Moderate Inflation Phase (2026-2030+): As most tokens are mined and the emission rate decreases, inflation slows. By 2029, Kaspa will have a lower inflation rate than Bitcoin, making it one of the lowest-inflation cryptocurrencies in existence.

Low Inflation Phase (2030-2057): During this period, very few new tokens are created. The emission rate is very low, and block rewards are minimal. Most miner rewards come from transaction fees rather than block rewards.

Deflationary Phase (Post-2057): Once block rewards effectively reach zero, the supply becomes fixed. If tokens are lost (forgotten seed phrases, lost wallets, etc.) or if demand increases, the effective supply decreases relative to demand, creating deflationary pressure.

Comparing to Bitcoin’s Model

Kaspa’s monetary policy shares similarities with Bitcoin’s deflationary model:

• Fixed Maximum Supply: Both have a hard cap on total supply
• Decreasing Emission: Both reduce block rewards over time
• Fee-Based Future: Both eventually rely on transaction fees for miner incentives
• Scarcity Over Time: Both create increasing scarcity as emission decreases

However, Kaspa’s approach differs in its smooth transitions (chromatic phase) versus Bitcoin’s discrete halving events, and Kaspa reaches supply maturity much faster (by 2026) compared to Bitcoin (which will continue significant emission for over a century).

Economic Implications

Deflationary monetary policy has important economic implications:

Store of Value: As supply becomes increasingly scarce, Kaspa may function better as a store of value. The decreasing inflation rate means that holding KAS becomes more attractive relative to spending it, as the purchasing power may increase over time.

Price Discovery: With predictable, decreasing supply, price discovery becomes more straightforward. Market participants can calculate future supply changes and factor them into pricing decisions.

Miner Economics: As block rewards decrease, miners must rely increasingly on transaction fees. This creates incentives for higher transaction volume and fee markets, which are essential for long-term network sustainability.

Hard Money Characteristics: By 2029, when Kaspa’s inflation rate drops below Bitcoin’s, it will exhibit strong “hard money” characteristics-money that is difficult to produce and maintains or increases purchasing power over time.

8.

Mining and Decentralization

Kaspa’s tokenomics are deeply connected to its mining mechanism. The proof-of-work mining process is what creates and distributes new tokens, and the design of the mining system directly impacts decentralization. Understanding how mining works helps explain why Kaspa’s tokenomics support a decentralized network.

Mining Hardware Evolution

Kaspa mining has evolved through several hardware phases, each representing different levels of accessibility and decentralization:

CPU Mining (November 2021): During the first month after mainnet launch, Kaspa was mined using CPUs (central processing units). This made mining accessible to anyone with a computer, creating the most decentralized distribution possible.

GPU Mining (December 2021 - April 2023): By December 6, 2021, community members developed and released open-source GPU mining software. GPUs (graphics processing units) are more efficient than CPUs and made mining more accessible to enthusiasts with gaming computers. For almost a year and a half, GPUs dominated Kaspa mining, maintaining good decentralization as many people already owned GPUs.

FPGA Mining (2022-2023): Field-programmable gate arrays (FPGAs) began appearing, though the exact date is unclear because public FPGA bitstreams emerged later than private usage. FPGAs are more efficient than GPUs but still more accessible than ASICs.

ASIC Mining (April 2023 - Present): On April 13, 2023, ASIC miners were introduced when IceRiver announced their Kaspa mining hardware. ASICs (application-specific integrated circuits) are highly specialized and efficient but also more expensive and less accessible. The introduction of ASICs raised concerns about centralization, but Kaspa’s blockDAG architecture and high block rate help maintain decentralization even with ASICs.

The kHeavyHash Algorithm

Kaspa uses the kHeavyHash proof-of-work algorithm, a modified version of HeavyHash optimized for energy efficiency and compatibility with various mining hardware. The algorithm is designed to be:

• Energy Efficient: Optimized to reduce power consumption while maintaining security
• Core-Dominant: Relies on CPU/GPU cores rather than memory, making it more accessible
• Hardware Flexible: Works effectively with GPUs, FPGAs, and ASICs
• Future-Proof: Designed to remain efficient as hardware evolves

How BlockDAG Enables Decentralization

Kaspa’s blockDAG architecture, combined with rapid block rates (currently 10 blocks per second following the Crescendo upgrade in May 2025, with plans for 32+ BPS), creates unique advantages for mining decentralization:

High Block Rate: With blocks being created every second (and plans for much faster rates), there are many opportunities for miners to find blocks. This means miners with lower hashrates still have realistic chances of finding blocks and earning rewards.

Solo Mining Viability: The high block rate and blockDAG structure make solo mining viable even for miners with relatively low hashrates. This is different from Bitcoin, where solo mining is essentially impossible for small miners due to the low block rate (one block every 10 minutes on average).

Reduced Pool Dominance: When solo mining is viable, miners don’t need to join large pools to have a reasonable chance of earning rewards. This reduces the risk of pool centralization, where a few large mining pools control the network.

Geographic Distribution: The blockDAG architecture and high block rate help maintain good geographic distribution of mining power. Miners in different locations can find blocks independently, rather than being forced into large centralized pools.

Tokenomics and Decentralization

Kaspa’s tokenomics directly support decentralization:

Fair Distribution: The fair launch ensures that no party starts with an advantage. All tokens must be earned through mining, spreading ownership across many participants rather than concentrating it in the hands of founders or early investors.

Accessible Mining: The kHeavyHash algorithm and blockDAG architecture make mining accessible to a broader range of participants, not just those with specialized ASIC farms. This helps maintain decentralization.

Sustainable Incentives: The emission schedule provides consistent, predictable rewards that incentivize participation. Even as rewards decrease, the high block rate ensures miners still have opportunities to earn rewards.

9.

Why This Emission Schedule?

Kaspa’s emission schedule is carefully designed to balance multiple competing objectives: providing miner incentives, creating deflationary pressure, achieving broad distribution, and maintaining long-term sustainability. Understanding the reasoning behind this design helps explain why Kaspa chose this particular approach.

Balancing Speed and Sustainability

One common question about Kaspa’s emission schedule is whether it’s “too fast” or “too slow.” The answer depends on what you’re optimizing for:

Arguments for “Fast” Emission:

• Achieves broad distribution quickly, spreading ownership across many participants
• Reaches supply maturity faster, allowing the network to focus on transaction fees sooner
• Creates scarcity more quickly as most tokens are mined in early years
• Allows the network to establish itself before most tokens exist

Arguments for “Slow” Emission:

• Provides longer-term miner incentives through block rewards
• Maintains inflation for a longer period, which some economists argue is beneficial
• Creates more gradual supply transitions, reducing market volatility
• Gives the network more time to develop before relying primarily on fees

Kaspa’s schedule strikes a balance: it’s fast enough to achieve broad distribution and reach supply maturity relatively quickly (by 2026), but slow enough to maintain miner incentives for decades and create smooth, predictable transitions.

The Chromatic Advantage

The chromatic phase design (smooth monthly reductions) provides several advantages over traditional halving events:

Avoiding Supply Shocks: Traditional halvings create sudden 50% reductions in block rewards every few years. These events can cause market volatility as miners adjust to lower rewards. Kaspa’s smooth reductions avoid these shocks by making changes gradually.

Predictable Economics: Miners and investors can always calculate exact future rewards, eliminating uncertainty about when changes will occur. This predictability helps with planning and reduces market manipulation around halving events.

Same Deflationary Effect: Despite the smoother transitions, the chromatic phase achieves the same overall deflationary effect as traditional halving (50% reduction per year). The economic outcome is the same, just with smoother execution.

Addressing ASIC Concerns

The emission schedule was designed in part to address concerns about ASIC dominance. By having a relatively fast emission schedule that distributes most tokens early, Kaspa reduces the risk that ASICs (which typically emerge later) will capture a disproportionate share of the total supply.

Additionally, the high block rate and blockDAG architecture help maintain decentralization even with ASICs, as solo mining remains viable and pool dominance is less of a concern.

Time-Based vs Block-Based Emission

Kaspa’s time-based emission (rewards per second) rather than block-based emission (rewards per block) provides important benefits:

Consistency: The emission rate remains constant regardless of block rate changes. If Kaspa increases its block rate (for example, to 10 or 32 BPS), the reward per block adjusts automatically to maintain the same emission rate per second.

Predictability: Supply milestones are based on time, not blocks, making them more predictable and easier to calculate.

Flexibility: The network can upgrade block rates without disrupting the emission schedule, providing flexibility for future improvements.

10.

Future Considerations: Block Rewards and Network Security

A common concern with deflationary emission schedules is how the network will maintain security when block rewards approach zero. This is a legitimate question that applies to Bitcoin, Kaspa, and other proof-of-work cryptocurrencies. Understanding how Kaspa addresses this concern helps evaluate the long-term viability of the network.

The Transition to Fee-Based Rewards

As block rewards decrease and eventually reach zero, miners must rely increasingly on transaction fees for their income. This transition is gradual-it happens over decades, giving the network time to develop and grow. By the time block rewards become negligible, Kaspa should have:

• Established Value: As one of the lowest-inflation cryptocurrencies, Kaspa should be highly valued, making fees sufficient even at low volumes
• High Transaction Volume: With faster block rates (potentially 10-32+ BPS) and smart contracts, transaction volume should be substantial
• Diverse Fee Sources: Layer 2 solutions, smart contracts, and other applications create multiple fee streams beyond simple transfers
• Network Effects: By this point, Kaspa should have significant network effects and adoption, creating organic demand for transactions

The key insight is that as Kaspa becomes more valuable and more widely used, transaction fees become more valuable even if they’re small in nominal terms. A fee of 0.0001 KAS might seem small, but if KAS is worth $10, that’s $0.001-and with millions of transactions per day, fees can add up significantly.

Kaspa’s Advantages for Fee-Based Security

Kaspa has several characteristics that make it well-suited for a fee-based security model:

High Throughput: With current block rates of 10 BPS (achieved with the Crescendo upgrade in May 2025) and planned increases to 32+ BPS (and potentially 100+ BPS), Kaspa can process many more transactions per second than Bitcoin. More transactions mean more fee revenue for miners.

Low Fees: Kaspa’s current fees are very low (typically around 0.000023 KAS for a standard transaction), which encourages usage. As adoption grows, even small fees can generate substantial revenue when multiplied across high transaction volumes.

Smart Contracts and L2s: Future smart contract capabilities and Layer 2 solutions will create additional fee sources. Complex transactions, DeFi operations, and L2 settlements can generate higher fees than simple transfers.

Fast Confirmations: Kaspa’s fast confirmation times (approximately 10 seconds) make it suitable for more use cases than slower networks, potentially increasing transaction volume.

If Fees Aren’t Sufficient: Alternative Solutions

In the unlikely event that transaction fees aren’t sufficient to maintain mining profitability, several options are available:

Fee Adjustments: The protocol could increase standard fee amounts. This is a simple change that doesn’t require modifying the emission schedule.

Tail Emission: Some cryptocurrencies implement a small, perpetual block reward (tail emission) that never reaches zero. This ensures miners always have some block reward incentive. However, this requires changing the emission schedule and moving away from the fixed supply model.

Demurrage: A fee on stationary UTXOs (unspent transaction outputs) could be implemented to incentivize movement and generate fees. This is a more complex solution that’s not currently planned.

However, it’s important to note that these solutions are not currently under active consideration. The expectation is that by 2029 (when Kaspa’s inflation rate drops below Bitcoin’s) and especially by 2057 (when block rewards reach zero), the network will be mature enough and valuable enough that transaction fees will be sufficient to maintain security.

By 2029: The Hard Money Transition

By 2029, Kaspa will have a lower inflation rate than Bitcoin, making it arguably the world’s hardest money. Combined with its revolutionary proof-of-work implementation, high transaction throughput, and expected smart contract capabilities, Kaspa should be positioned as both the “most secure money” and one of the most valuable cryptocurrencies.

At this point, the value proposition becomes clear: high value combined with high transaction volume creates substantial fee revenue, even if individual fees are small. The network’s security is maintained not just by fees, but by the overall value of the network itself-the more valuable Kaspa becomes, the more expensive it becomes to attack, and the more valuable fees become for miners.

Conclusion

Kaspa’s tokenomics represent a carefully designed economic model that balances fairness, sustainability, and long-term viability. The fair launch ensures equitable distribution, the fixed maximum supply creates scarcity, and the deflationary emission schedule provides predictable monetary policy.

Key takeaways from Kaspa’s tokenomics:

• 100% of tokens are distributed through proof-of-work mining-no premine, pre-sales, or allocations
• Maximum supply is fixed at approximately 28.7 billion KAS
• Most tokens (95%) will be mined by 2026, achieving broad distribution quickly
• The chromatic phase provides smooth, predictable emission reductions
• By 2029, Kaspa will have lower inflation than Bitcoin, making it extremely hard money
• The network is designed to transition to a fee-based security model as block rewards decrease

Understanding Kaspa’s tokenomics is essential for anyone interested in the project. The economic model directly impacts value proposition, network security, and long-term sustainability. As Kaspa continues to develop and mature, these tokenomic principles will guide its evolution into what many believe could become one of the most valuable and secure cryptocurrencies in existence.

The combination of fair distribution, predictable deflation, and innovative technical architecture positions Kaspa uniquely in the cryptocurrency landscape. Whether you’re a miner, investor, developer, or simply someone interested in sound money, understanding Kaspa’s tokenomics provides essential context for evaluating the project’s long-term potential.