Food for Thought

In a world where centralized control over money and the economy is increasingly questioned, a new technology is taking center stage: cryptocurrencies. Bitcoin, the first and most well-known among them, has reignited discussions about the value of money and the future of our financial system. But as with any revolutionary development, there are hurdles and challenges to overcome.

The Dilemma of Our Current Monetary System

For decades, our monetary system has been based on government control. Central banks centrally determine interest rates and indirectly dictate the money supply. This ‘monetary socialism’ carries significant risks. Increasingly, businesses incur debt due to artificially cheap credit enabled by low interest rates. These companies, often called ‘zombie companies,’ survive only because of cheap money, as their productivity is insufficient to compete in a free market.

Economist Michael von Prollius pointed out as early as 2019 that around 12% of all companies in Europe could be classified as ‘zombie companies’—a figure that has likely increased significantly since the COVID-19 crisis. These firms tie up valuable resources that could be better utilized elsewhere, ultimately diminishing the overall prosperity.

Governments themselves are also deeply in debt. To reduce the costs of servicing debt and avoid a looming state bankruptcy, central banks keep pushing interest rates lower. This, however, causes citizens’ savings to lose value and forces investors into riskier ventures with returns higher than inflation. This situation creates a debt-financed illusion of prosperity—a fragile house of cards that could collapse with the next economic shock, leading to a massive financial and economic crisis.

Bitcoin: A Beacon of Hope in the Digital Age

Against this backdrop, the significance of Bitcoin and the underlying blockchain technology becomes clear. Introduced in 2008 by an anonymous person or group under the pseudonym Satoshi Nakamoto, Bitcoin enables the digital transfer of value without requiring a central authority like a bank between sender and recipient.

Bitcoin offers a remarkable advantage: it is resistant to state intervention. There is no central authority, headquarters, or CEO who could be coerced or intimidated to bring the project down. The integrity of transactions is ensured by a network of decentralized computers managing the blockchain—a chain of data blocks linked together using cryptographic methods.

Challenges and Solutions

However, Bitcoin has its drawbacks. The limitation of block size to about 1 MB has resulted in high transaction fees and long waiting times, hindering Bitcoin’s use as an everyday payment method. This issue is known as the ‘Blockchain Trilemma,’ which refers to the challenge of creating a blockchain that is simultaneously secure, decentralized, and scalable.

Some projects, such as the Lightning Network, have attempted to address this issue by adding a secondary layer over the Bitcoin blockchain. Yet, compromises remain, particularly in terms of security and user-friendliness. Furthermore, it could take over 50 years for the entire global population to adopt Bitcoin fully, requiring tremendous patience. For these reasons, companies like Tesla, Reddit, and Expedia have distanced themselves from Bitcoin, as it failed to deliver on its promise of being a fast and affordable payment solution.

Kaspa: A Technological Breakthrough with a Future

But there is hope. A project launched in 2021 called Kaspa has finally solved the Blockchain Trilemma. Developed by a team led by programmer Yonatan Sompolinsky, Kaspa utilizes a technology built on Bitcoin’s principles and enhances them. The so-called Block-DAG (Directed Acyclic Graph) allows multiple blocks to be mined simultaneously without compromising security or decentralization.

Kaspa combines the advantages of Bitcoin (including the secure ‘Proof-of-Work’ mechanism) with high scalability, making it a truly digital payment solution capable of processing thousands of transactions per second—securely and decentrally.

While Bitcoin can be imagined as a congested village road where all cars (transactions) struggle to move forward, Kaspa is a seven-lane highway where transactions can be processed simultaneously at lightning speed. Instead of one block every 10 minutes as in Bitcoin, Kaspa aims for an astounding 100 blocks per second.

Implications for Our Future

Kaspa fulfills Satoshi Nakamoto’s original vision of a ‘peer-to-peer electronic cash system’ that is decentralized, secure, and fast. In a world where trust in governmental institutions and banks is waning and financial crises loom, Kaspa offers a genuine alternative to existing fiat currencies.

For merchants and consumers, Kaspa offers the opportunity to escape the high fees imposed by credit card and payment service providers. For individuals, Kaspa opens up new ways to securely and cost-effectively store money and transfer it worldwide without relying on banks or other intermediaries and without the risk of unscrupulous authorities freezing accounts or confiscating assets for holding ‘unapproved’ political views.

What Can We Do?

It is up to all of us to support and advance these developments. The more people learn about Kaspa, the faster this technology can spread and its benefits can unfold. It starts with understanding and engaging with the topic. The official website kaspa.org offers a wealth of valuable information.

Once we grasp the significance and potential of Kaspa, it is important to share this knowledge—whether through conversations with friends and colleagues, posts on social media, or direct outreach to merchants and business owners. Thanks to low transaction fees, Kaspa could also serve as a medium for DeFi, AI, energy, and Internet of Things applications. The possibilities are limitless.

Let us build a better world with better money. Join us.

Olivier Kessler

Director of the Liberal Institute

By the way: You can support the Liberal Institute with Kaspa. Here is our wallet: kaspa:qpzx47ynwnlx30t4r9m5lnnd­wf4wje8u2rf94azls0a079ue00857y­9qleucf