However, a DAG also poses a challenge for achieving consensus, as there is no clear way of determining the order of blocks and transactions in the network. This is where GHOSTDAG comes in. GHOSTDAG is a protocol that assigns a unique order to the blocks in the DAG, using a combination of two rules: the blue rule and the red rule. The blue rule selects the blocks that have the most accumulated proof-of-work behind them, forming a virtual chain of blocks called the blue set. The red rule selects the blocks that are not in the blue set, but are directly or indirectly referenced by the blue set, forming a complementary set of blocks called the red set. Together, the blue set and the red set form the GHOSTDAG order, which is the canonical order of the blocks and transactions in the network.
GHOSTDAG is based on the GHOST protocol, which was proposed by Yonatan Sompolinsky and Aviv Zohar in 2013. The GHOST protocol is a modification of the Nakamoto consensus, which is the consensus mechanism used by Bitcoin and other proof-of-work cryptocurrencies. The Nakamoto consensus selects the longest chain of blocks as the valid chain, and discards the blocks that are not in the longest chain as orphans. The GHOST protocol, on the other hand, takes into account the blocks that are not in the longest chain, but are still part of the tree of blocks, and uses them to measure the proof-of-work of the different branches. The GHOST protocol selects the heaviest subtree of blocks as the valid chain, and gives more weight to the blocks that have more descendants. The GHOST protocol improves the security and stability of the network, as it reduces the probability of forks and attacks.
GHOSTDAG is an extension of the GHOST protocol, which generalizes it from a tree of blocks to a DAG of blocks. GHOSTDAG allows the blocks in the DAG to reference multiple previous blocks, instead of just one, creating a more complex and rich structure. GHOSTDAG also introduces the concept of the red set, which is a set of blocks that are not in the heaviest subtree, but are still confirmed by it. The red set adds more security and finality to the network, as it ensures that the blocks in the DAG are ordered and validated by the GHOSTDAG protocol.
How does Kaspa work?
Kaspa works by using the GHOSTDAG protocol to order and confirm the blocks in the DAG. The blocks in the DAG are created by the miners, who use the SHA-256 algorithm to find a valid hash for each block. The hash of each block must satisfy a certain difficulty level, which is adjusted periodically by the network. The difficulty level determines how much proof-of-work is required to create a block, and how much reward is given to the miner. The block reward is the main source of emission for Kaspa, and it is reduced every month by a factor of (1/2)^(1/12), following the chromatic phase policy.
