Yonatan Sompolinsky at Australian Crypto Convention
I watched the presentation of Kaspa Founder Yonatan Sompolinsky at Australian Crypto Convention and generated this article with ChatGPT:
The Evolution of Permissionless Consensus: Insights from Yonatan Sompolinsky at the Australian Crypto Convention
At the Australian Crypto Convention, Yonatan Sompolinsky delivered an enlightening talk on the importance of permissionless consensus in blockchain technology. As a pioneering figure in blockchain research and development, Sompolinsky explored the nuanced interplay between infrastructure, user experience, and technological advancements in decentralized systems, with a focus on Kaspa and its unique attributes.
The Essence of Permissionless Consensus
Sompolinsky began by likening permissionless consensus to the server infrastructure of online gaming platforms. Just as professional chess players value server responsiveness and reliability, blockchain users—particularly in decentralized finance (DeFi)—require robust, efficient sequencing layers. These layers are responsible for ordering and validating transactions, much like a gaming server ensures seamless gameplay.
Metrics in Blockchain vs. Traditional Systems
Drawing parallels between blockchain and traditional servers, Sompolinsky highlighted shared metrics such as latency, resiliency, and throughput. However, he emphasized that blockchain introduces a critical metric: resiliency to manipulation. Unlike gaming servers, which may face issues like crash fault tolerance1, blockchains must guard against malicious activities like front-running2, back-running3, and transaction censorship4.
Kaspa: The DAG-Based Vision
Kaspa, a directed acyclic graph (DAG)-based blockchain, exemplifies a novel approach to scaling permissionless systems. In traditional blockchains like Bitcoin or Ethereum, a single leader (e.g., miner or validator) determines the transaction order for each block. Kaspa disrupts this model by enabling parallel sequencing through multiple blocks per second. This not only reduces confirmation times but also increases competition among sequencers5.
Current and Future State of Kaspa
Today: Kaspa operates at approximately one block per second.
Future Vision: The network aims to achieve 10 to 100 blocks per second, providing "internet speed" for proof-of-work systems while maintaining Bitcoin-like security principles6.
Sompolinsky argued that such high block rates are crucial, not just for speed, but to foster sequencer competition. This competition minimizes manipulation and enhances user outcomes, particularly in financial transactions.
Sequencer Competition and Market Dynamics
Sompolinsky introduced the metric sequences per round (SPR), which measures the number of active sequencers competing to process transactions. He noted that traditional blockchains suffer from monopolistic sequencing due to their leader-based design. In contrast, Kaspa's DAG model promotes decentralization by allowing multiple sequencers to operate simultaneously7.
First-Price and Second-Price Auctions: Sompolinsky outlined mechanisms where sequencers bid to process transactions, creating incentives to return profits (kickbacks) to users. Higher block rates amplify this competition, leading to fairer transaction ordering and reduced manipulative behaviors8.
The Role of External Data and Oracles
Sompolinsky underscored a critical challenge in blockchain systems: their reliance on external data. For applications like lending protocols or asset trading, accurate price feeds from oracles are indispensable9. However, this data is inherently unverifiable within the blockchain. By increasing the number of blocks and sequencers, Kaspa aims to aggregate and validate external data more effectively, mitigating risks from erroneous or manipulated inputs10.
Addressing Industry Challenges
Sompolinsky criticized the crypto industry's obsession with isolated metrics like transactions per second (TPS), urging a focus on holistic system design. He also stressed the importance of transparency and user education to combat spoofing11 and manipulation in decentralized systems.
A New Paradigm for Layer 1 Blockchains
Concluding his talk, Sompolinsky reaffirmed the relevance of Layer 1 (L1) blockchains. Sequencing layers, he argued, are not merely technical abstractions but foundational components for DeFi and other high-stakes applications. He encouraged developers and researchers to prioritize competition, transparency, and user-centric design in blockchain protocols.
Conclusion
Yonatan Sompolinsky’s insights at the Australian Crypto Convention illuminated the evolving landscape of blockchain technology. By reimagining consensus through Caspa’s innovative design, he presented a compelling case for scalable, user-focused, and resilient decentralized systems. As the blockchain industry matures, his emphasis on fostering competition, leveraging DAG structures, and addressing real-world challenges like oracle reliability sets a clear direction for the future of permissionless systems.
I am actively advocating market education on Bitcoin, cryptocurrencies, and web3, with the hope of empowering more people to seize this chance and benefit from these technologies, ultimately achieving genuine financial freedom. Feel free to share this article with your friends and kindly recommend this column to them.
Crash Fault Tolerance: The ability of a system to handle unexpected server failures without major disruptions.
Front-Running: The practice of inserting transactions into a blockchain ahead of pending ones for financial gain.
Back-Running: Placing a transaction immediately after another to exploit market movements.
Transaction Censorship: Preventing certain transactions from being included in a blockchain.
Sequencer: A participant in a blockchain network responsible for ordering transactions within a block.
Proof-of-Work: A consensus mechanism where participants solve computational puzzles to validate transactions.
Monopolistic Sequencing: A situation where one entity has control over transaction ordering within a block.
Kickback: A portion of the profit returned to users as an incentive.
Oracles: Mechanisms for importing external data into a blockchain.
Price Feeds: Real-time data on asset prices, essential for financial applications.
Spoofing: Creating false signals to manipulate market behavior.