Kaspa contains no premine or founders’ rewards.
At the same time, Kaspa is neither attempting nor pretending to be a “fair launch” coin, as the term “fair” is subjective, too broad, and absurd; early- and late-comers are at odds and cannot be co-satisfied. Bitcoin is extremely unfair to people born in 2030.
The last major attempt at a fair launch-the Grin MimbleWimble project-was not successful, disappointed too many early members, and effectively buried the project; the community and coin are influencing nothing in crypto today, which is sad and wasteful, as it is a beautiful protocol and was even built in Rustlang.¹ Arguably, two properties of Grin contributed to its failure: it is GPU-based, hence has no barrier to entry and required no long term commitment from its early investors; and it has a constant block reward, leading to high inflation and hindering the store-of-value property for its early participants. Grin’s attempt at mimicking Bitcoin’s organic growth of value and community therefore failed, since the crypto market at that time (and certainly today) was already mature and developed, investment vehicles were well-employed, and participants’ patience had significantly shortened due to other competing innovations.
In contrast, Kaspa is a “community launch” coin.
The goal is that early members would (1) be able to secure themselves allocation of Kaspa, with some degree of certainty, and (2) enjoy a low inflation rate on their holdings. A mechanism to achieve this would need to (a) let the market price the opportunity (rather than, e.g., the core devs price it), (b) tune the inflation parameters in accordance with the “size” of the community as represented by some verifiable quantity. That is, the larger the community gathering around the coin, the lower inflation rate you want this community to suffer from, which translates to a steeper inflation curve.²
Since the protocol itself is faceless and organization-less, the mechanism will be deployed outside the protocol, by DAGlabs, as the largest miner on day one, on a best effort basis, and entailing still a large degree of uncertainty.
Initial Hashrate Offering
DAGlabs will oversee a pre-launch customization of ASICs that will support a hash function specific to Kaspa, providing a head start on mining. These machines will dominate the market for an unknown period until other players decide to enter. The value of these machines must be distributed across early contributors, investors, the community, and a future development fund in some form of ASIC presale. The benefits of an “ASIC presale” model are described thoroughly in Nic Carter’s post, In support of the proof of work [un]fair launch. TL;DR: Kaspa will have good and well-understood PoW security from the start, the regulatory risk normally surrounding token presales is reduced, and early adopters are rewarded and development is monetized at a limited capacity, among other benefits.
Unfortunately, and diverging from Carter’s ideal, it is impractical for DAGlabs to support a logistical pipeline of physical distribution and shipment of machines, due to several factors: (i) it would be too expensive and cause logistic havoc, (ii) there is not enough demand for pre-sold ASICs-average miners wouldn’t acquire machines that can only mine a coin that does not yet exist,³ and (iii) the ASICs are not particularly friendly to home users, so even folks with a few GPUs-who would normally be a good audience for an ASIC presale-would find it slightly more challenging to operate an ASIC.
Thus, DAGlabs’ main efforts would be (*) distributing the mining machines both geographically and politically, and (**) facilitating economic participation of the community in mining, namely, creating a financial vehicle for early community members to be invested in the coins mined by the machines. Later efforts would include (***) further distributing the full nodes that control the mining process, enabling community members to run the software that dictates the block templates to be mined, and (****) creating a thin logistical pipeline to sell machines to interested parties and enthusiasts.
No free launch
Before mainnet launch, a DeFi contract will auction out the right to future Kaspa coins. Interested community members will lock some coins (say, ETH) on said DeFi contract and receive Kaspa at a future date. These Kaspa would originate from the machines operated by DAGlabs. The coins will flow to the contract, and in exchange the contract will release the locked ETH and send them to DAGlabs. The money will (1) repay DAGlabs for the capital expenses of the ASICs, (2) fund the operational expenses of these ASICs, and (3) be saved for future development.
Importantly, in case DAGlabs does not flow Kaspa in a relevant timeframe (for whatever reason), the contract would automatically unlock the ETH and return them to the participants; thus, even in the worst case, a participant will not pay without receiving the promised Kaspa. To discourage DAGlabs from maliciously keeping Kaspa instead of flowing it to the DeFi contract, there will be an off-chain tool that continuously demonstrates the hashrate of the ASICs, providing transparency around mining.
Parties that participated in this contract-based ASIC pre-sale and are interested in owning and holding the ASICs physically should contact DAGlabs to arrange this; DAGlabs won’t be able to cover the shipping cost.
Finally, as argued above, participation in the pre-sale importantly determines the size of the early community and the timeline of community growth, which in turn should determine the aggressiveness of the minting curve, or the disinflation rate. The larger the size of the early community (i.e., higher participation in the DeFi contract), the more aggressive we can and need to be with disinflation in order to protect the investment and participation of the community. Thus, the end state of the DeFi presale will determine the disinflation parameters of Kaspa monetary policy embedded in the Genesis block of Kaspa, according to a precommitted formula.
A concrete description of the contract and mechanics appears here.
 The excitement around Grin was comprised as follows: 15% — writing in Rust, 25% — author’s pseudonym “Mimblewimble” from Harry Potter, 25% — the protocol itself, allowing cut-through of STxOs when syncing new nodes, 35% — a known Blockstream dev contributing to the project.
 To some extent, the to-be-described mechanism replaces one of the roles of PoW, namely, a slow and organic price-discovery and distribution mechanism. Indeed I argue that in today’s crypto climate PoW can no longer fully serve this role properly, and is instead “just” the best infrastructure for a secure, sovereign cryptocurrency.
 Most miners, as it turns out, follow the market and do not lead it. They are not particularly interested in the software and the protocol, which explains why they won’t be a proper target audience for an Initial ASIC Offering.
Originally published at https://blocklivenessmatters.com on December 14, 2020.