When Kaspa block rewards end, the fees become the rewards.
All good things come to an end… or do they?
The end of blockchain emissions is when the blockchain system stops generating new tokens or coins. This stop in coin production can happen for a few reasons, such as reaching a maximum supply limit specified in the blockchain’s code or when the blockchain transitions to a different consensus mechanism that doesn’t require block rewards.
When blockchain emissions end, miners may want to switch to other blockchains that are still generating coins, or with chains like Kaspa, miners can continue to mine for transaction fee rewards instead.
Since Kaspa’s consensus mechanism is designed with longevity in mind, there are no plans to migrate to another consensus method, nor will there be any less demand for miners. Kaspa will still need miners to secure the network after emissions, and their services will be rewarded with transaction fees.
There is neverending speculation when a proof or work chain reaches the end of emissions. With Kaspa, however, the plan is set in stone… or code.
When the Kaspa blockchain reaches the end of its emission, the maximum block reward specified in the code will be equivalent to the value calculated by log2(440/0.0425)+0.5=13.83 by the end of the 14th year of Kaspa emission, based on a BPS of 1.
“Well, what am I looking at? Where did those numbers come from, and what if the BPS increases to 32 when the Rust rewrite is completed?”
Since this formula calculates the maximum single-block reward in Kaspa, this determines the year of Kaspa emission based on the transaction fee, number of UTXOs (Unspent Transaction Outputs), number of transactions, and block production rate.
Here’s the breakdown:
- 0.0001 KAS per UTXO fee: This is the transaction fee for each UTXO in a transaction.
- A maximum of 85 UTXOs can occur in a single transaction.
- A maximum of 5 such transactions can occur in a block.
- 425 * 0.0001 = 0.0425 KAS: This is the max total transaction fee for all the transactions in a block, given that there is a maximum of 5 transactions with 85 UTXOs each.
- log2(440/0.0425)+0.5: This is a logarithmic calculation, where the logarithm base is 2 since block reward is reduced 2 times each year. The argument of the logarithm, 440/0.0425, is the chromatic phase initial block rewards of 440 KAS divided by the max total transaction fee of 0.0425 KAS. The result is then added to 0.5, the first half a year before halving.
- The 14th year of Kaspa emission is when the block reward equals the coinbase block reward, given a constant block production rate of 1 block per second.
- For the case of 32 BPS, this becomes the equivalent of 14-log2(32/1) = 14–5 = 9th year of Kaspa emission: This part of the formula calculates the equivalent year of Kaspa emission when the block production rate is 32 blocks per second, instead of 1. This formula adjusted for 32 BPS shows the equivalent year will be the 9th instead of the 14th.
The bottom line: when Kaspa reaches the end of emissions, the miners will be rewarded with transaction fees based on the above formula since block rewards will cease to exist. For further examination visit the GitHub link below to check out the coding.
Tip: Bubblegum Lightning hasn’t played with formulas since college. Take my explanation with a grain of salt, and please feel free to correct me.
Comment below or find me on the Kaspa discord — Bubblegum Lightning