State of $KAS

Kaspa, as a Layer 1 blockchain, was initially designed as a high-throughput, payment-focused network using the UTXO (Unspent Transaction Output) model, similar to Bitcoin. This architecture, while excellent for fast and efficient transactions, inherently lacks the native programmability required for complex smart contracts that maintain persistent state, unlike account-based blockchains like Ethereum.

However, the Kaspa ecosystem is actively working on enabling smart contract functionality through Layer 2 (L2) solutions and other innovative approaches:

1. Layer 2 Solutions (Rollups):
* Kasplex L2: This is a key Layer 2 solution being developed to bring Ethereum Virtual Machine (EVM) compatibility to Kaspa. Kasplex uses a "based rollup" architecture, allowing EVM-compatible smart contracts to operate on top of Kaspa's high-performance BlockDAG. This approach allows for complex computations to occur off-chain while leveraging Kaspa's security and high throughput for settlement.
* Sparkle: Another innovative Layer 2 solution for Kaspa smart contracts, Sparkle is envisioned as a "Layer 1.5" architecture, tightly integrated with Kaspa's base layer. It utilizes zero-knowledge proofs (zk-proofs) to perform complex computations off-chain, submitting only proofs of correctness to the Kaspa network. This enhances both security and scalability while preserving data privacy.

2. KRC20 Tokens:
* The introduction of KRC20 tokens, similar to Ethereum's ERC20 standard, marks a foundational step towards building a broader smart contract infrastructure on Kaspa. While KRC20 tokens themselves don't enable full smart contract functionality, they provide a standard for asset creation and network experimentation, paving the way for more complex decentralized applications (dApps).

3. Future Native Smart Contract Execution:
* Kaspa's long-term roadmap includes the potential for native smart contract execution directly on its base layer. This is a more ambitious goal that would require significant architectural changes to accommodate the statefulness and computational complexity of smart contracts within its UTXO model.

How these solutions aim to work:
* Leveraging Kaspa's Strengths: These Layer 2 solutions are designed to take advantage of Kaspa's core features:
* BlockDAG and GHOSTDAG: Kaspa's BlockDAG structure and GHOSTDAG protocol enable parallel block creation and instant transaction visibility, leading to incredibly high transaction speeds and scalability. This underlying speed and efficiency are crucial for supporting a thriving smart contract ecosystem.
* Proof-of-Work Security: Kaspa's robust Proof-of-Work (PoW) ensures a high level of decentralization and security.
* Off-chain Computation, On-chain Settlement: For rollup-based solutions, the execution of smart contracts often happens off-chain on the Layer 2, which processes transactions and state changes rapidly. Periodically, batches of these transactions and proofs of their validity are then committed to the Kaspa Layer 1 for final settlement and security. This minimizes the burden on the Layer 1 while inheriting its security.
* Interoperability: Some approaches explore connecting Kaspa's Layer 2 solutions with existing smart contract platforms like Ethereum, potentially allowing Kaspa to serve as a fast sequencing layer for transactions settled on Ethereum.

In essence, while Kaspa's Layer 1 currently focuses on high-speed payments, its community and developers are actively building out robust Layer 2 solutions to bring comprehensive smart contract functionality and dApp support to the ecosystem. This strategy allows Kaspa to maintain its core strengths while expanding its capabilities to compete in the broader decentralized application space.