As of September 26, 2024, Kasplex, a project supported by the Kaspa Ecosystem Foundation (KEF),released the first zkEVM (zero-knowledge Ethereum Virtual Machine) layer-2 (L2) mainnet. For the first time, Ethereum-compatible smart contracts are now live on the Kaspa network, enabling developers to build a wide range of applications on Kaspa’s high-speed Layer-1 proof-of-work BlockDAG. Kasplex also enables real-world projects to connect off-chain data to Kaspa L1, spanning traditional finance, enterprise computing, and Web3 applications.
This milestone builds upon the May 2025 Crescendo hardfork, which increased the block rate to 10 blocks per second (BPS) and improved transaction ordering, preparing Kaspa to support L2 applications that bridge aoff-chain data with on-chain functionality.
Kasplex introduces the first zkEVM rollups to the Kaspa network, enabling developers to use familiar Ethereum tools, such as Solidity, Hardhat, and MetaMask. Gas fees remain denominated in $KAS, and a two-way L1<>L2 bridge, with an open node infrastructure to enhance decentralization. Kasplex reported early testnet results of 6.5 million blocks processed, over 24 million transactions completed, and throughput exceeding 1,000 transactions per second across more than 300,000 unique wallets.
Kasplex is a pivotal step for Kaspa, lowering barriers for developers, enabling new DeFi and tokenization opportunities, and expanding real-world applications, while preserving the network's speed, scalability, and proof-of-work security.
Looking ahead, the roadmap includes upgrades to the KRC-20 standard, development of an EVM-Lua interface for expanded programming options, and deeper integration of zero-knowledge improvements and vProgs.
From day one, dApps and DeFi platforms have gone live on the Kasplex mainnet. Zealous Swap offers Infinity Pools, NFT staking farms, and other advanced trading features. KaspaCom enables trading, swapping, and staking, while Kaspa Finance introduces DeFi services, AI-driven trading bots, and multi-reward farming. Additionally, SeaSwap, a DEX aggregator, scans across multiple pools and exchanges, including Zealous Swap, KaspaCom, Kaspa Finance, and KSPR Bot to deliver users the best rates and lowest fees. Users can monitor L2 transactions through Kas.fyi, as well as through the beta version of the Kaspa Developer Platform.
As the Kasplex team expressed: “Kasplex zkEVM is not just our achievement, it is the result of collective dedication, collaboration, and belief in what Kaspa can become.” To understand why this launch matters, it’s helpful to trace the history and logic of smart contracts, from theory to today.
The Cypherpunk History of Smart Contracts
In the world of blockchain and decentralized networks, Smart Contracts are computer programs that automatically execute when conditions are met, reducing reliance on intermediaries. These codes are traceable and irreversible, as they are directed by code. The conditions are defined by a set of "If / Then" statements established by the buyer and/or seller. They can be related to buying/selling. They can also incorporate off-chain data, such as weather conditions, sports game outcomes, and any other information that can be captured on a network and connected to a blockchain via an oracle.
Esteemed Cypher Punk Nick Szabo first conceptualized the smart contract in the 1990s, envisioning it as a digital protocol incorporating algorithms to perform transactions securely over computer networks. He envisioned them to be a bridge between computers and finance, and cryptography and economics. He developed this idea while designing legal contracts to create e-commerce protocols. When he first conceived this idea, it was considered impossible, as the blockchain had not yet been invented, and there was a risk of a security breach at the bridge level.
In 1994, Szabo published the paper, “Smart Contracts,” where he defined a smart contract as:
“A smart contract is a computerized transaction protocol that executes the terms of a contract. The general objectives of smart contract design are to satisfy common contractual conditions (such as payment terms, liens, confidentiality, and even enforcement), minimize exceptions both malicious and accidental, and minimize the need for trusted intermediaries. Related economic goals include lowering fraud loss, arbitration and enforcement costs, and other transaction costs.”
Szabo envisioned smart contracts being used with point-of-sale (POS) terminals and cards, electronic data interchange (EDI), and "agoric" (marketplace) bandwidth. He stated that digital cash protocols were the best example of smart contracts in that they have the following characteristics: "unforgeability, confidentiality, and divisibility.”
As a sort of premonition, Szabo predicted the upcoming creation of blockchain technology as the descendant of the digital cash systems used at that time :
“Digital cash protocols use several of the rich new building blocks coming out of the fields of cryptography and computer science. Most of these components have not yet been widely exploited to facilitate contractual arrangements, but the potential is vast. These subprotocols include Byzantine agreement, symmetric and asymmetric encryption, digital signatures, blind signatures, cut & choose, bit commitment, multiparty secure computations, secret sharing, and oblivious transfer.”
While noting that at the time there was little research in the domain of smart contracts, Szabo predicted, "I suspect the possibilities for greatly reducing the transaction costs of executing some kinds of contracts, and the opportunities for creating new kinds of businesses and social institutions based on smart contracts, are vast."
An interesting point he made was that smart contracts could include “smart fine print” that gives direction to both parties regarding the fine print. For example, he noted that customers often cannot know if their information is being sold to third parties when making a purchase. This awareness could be achieved through smart contracts by incorporating the smart fine print.
Szabo also introduced several other concepts that are related to the smart contract domain. One such idea was that of “synthetic assets,” which could create low-cost, yet highly actionable financial derivatives, like futures and options.
He also coined the term "smart property," which allows users to include smart contracts within physical objects. For example, could be programmed to require an ownership smart contract to operate, reducing or eliminating the risk of theft. Building on this idea, he introduced the concept of a "smart lien," which ensures that users must keep their payments current to use the car. If a user were to fall behind, the smart lien would automatically disable access, making the solution far more efficient and cost-effective than relying on a repo agent.
Later in 1996, Nick Szabo expanded upon this idea through the paper titled "Smart Contracts: Building Blocks for Digital Markets." In this paper, he presented his famous example of the ancestor to smart contracts—the vending machine. The device performs a basic function: input coins; output drinks. He later includes other, less primitive examples, including POS terminals, EDI, and the SWIFT, ACH, and FedWire networks. He also predicts that local businesses will evolve into multinational small businesses as smart contracts can simplify and reduce today's convoluted processes.
In this paper, Szabo provides two conditions required by smart contracts to secure against attacks, including the following: "robust against native vandalism,” and “robust against sophisticated, incentive compatible (rational) breach."
He shared basic objectives of contract design:
Observability: the capacity for each party to monitor all parties’ contract fulfillment.
Verifiability: the capability to verify the status of a contract
Privity: parties should only know and control the contract, as is necessary
Enforceability: Self-enforcing protocols reduce the need for enforceability through built-in incentives, reputation, and network security.
While the previous objectives define what a smart contract should achieve, Szabo also specifies the cryptographic tools necessary to implement them, which he terms the “building blocks” of smart contracts:
Cryptographic Protocols: serve as the essential foundation for smart contracts, enabling a better balance between transparency, verifiability, privacy, and enforceability.
Key: a large, highly random, and secret number that forms the essential hidden element, or focus of obscurity, within cryptographic protocols.
Secret Key: a single, shared key between two parties, used for encryption, that is kept secret.
Public Key: a published key that is used, while its partner secret key is kept hidden.
Digital Signatures: a cryptographic proof used to sign, or stamp, verifying that a piece of data has been actively signed with a unique private key.
Blind Signature: a cryptographic protocol combining digital signatures and secret-key encryption that allows a signer to endorse an object without seeing its specific content.
Secret Sharing: a cryptographic model of dividing up a key into multiple parts, to establish distributed control and secure collaboration.
Zero-knowledge Interactive Proof (ZKIP): a cryptographic protocol that enables one party to prove possession of a secret key without revealing any information about the secret Key.
Digital Mix: a privacy-preserving technique that allows parties to send messages across a network without revealing their identities or communication partners, achieved through layering encryption.
Szabo’s vision laid the groundwork for programmable contracts that would later be implemented on blockchain networks like Ethereum—one of the most significant milestones in the evolution of smart contracts. Ethereum transformed Nick Szabo's early theoretical framework into a working, programmable ecosystem, where smart contracts can execute automatically and immutably. These features enable a wide range of use cases, including stablecoins, unique digital assets, decentralized exchanges, gaming platforms, insurance policies, and interoperable currencies.
Ethereum's emphasis on smart contracts was clear from its inception, as reflected in the title of its whitepaper : "Ethereum: A Next-Generation Smart Contract and Decentralized Application Platform." The whitepaper positioned Ethereum as a blockchain designed for more than just money, describing potential use cases such as custom currencies, ownership registries for physical devices, non-fungible assets, decentralized exchanges, financial derivatives, peer-to-peer gambling, and reputation systems. It also introduced the concept of a Decentralized Autonomous Organization (DAO), which consists of a set of long-term smart contracts designed to encode an organization’s bylaws and autonomously manage its assets and governance.
The whitepaper emphasized that the contracts could be layered and work together, allowing multiple contracts to coordinate and fulfill different roles simultaneously. For instance, one contract could manage membership in a DAO, another could act as an escrow for transactions, and a third could enforce additional permissions or security requirements. Together, these interconnected contracts enable complex, automated workflows without relying on centralized intermediaries.
Building on this concept, the whitepaper further divided applications into three categories:
Financial applications: including sub-currencies, derivatives, hedging contracts, savings wallets, wills, and some employment contracts.
Semi-financial applications: involve money, but also non-monetary aspects, such as escrow for digital services, where the end goal is non-monetary.
Not financial at all: for example, "online voting and decentralized governance".
Among these categories, the whitepaper identified financial derivatives as the "most common" smart contract application, illustrating Ethereum’s early focus on automating and optimizing financial workflows. Ethereum not only provided a programmable framework but also demonstrated real-world use cases that inspired subsequent projects.
How to Use Smart Contracts
Smart contracts operate on the logical framework of "if / when… then…" statements that are coded into a blockchain, and they are automatically deployed when the specified conditions are met. There can be multiple requirements and input variables. Since the contracts are automated, they are irreversible.
In an April 2021 paper titled "Smart Contracts," published in the Internet Policy Review, Primavera De Filippi outlines several practical applications of smart contracts. These include:
Creating tokens for fundraising initiatives, such as token sales or Initial Coin Offerings (ICOs).
Issuing and managing digital collectibles, such as NFTs and gaming
Facilitating decentralized marketplaces to trade digital tokens and assets
Automating payments can occur conditionally or on a regular basis, depending on preset rules.
Enabling shared savings accounts
Operating escrow arrangements, releasing funds only when agreed-upon requirements are satisfied.
Running simple lottery systems, pooling funds, and redistributing them to winners.
Supporting gambling and prediction markets, where the transparency of operations ensures trust.
Real-World Uses
Corporations have been exploring smart contracts for practical use. IBM applied them in their Pharma.portal program, which monitors the supply chain of temperature-controlled pharmaceuticals and shares real-time information across multiple parties. IBM also collaborated with Home Depot on vendor management and dispute resolution, utilizing smart contracts for implementation. Another IBM example is a global trade finance network called we.trade.
Reuters wrote an entire article about how smart contracts could revolutionize the insurance industry in particular and how smart contracts could finally provide expedited and transparent services—something that industry is not known for today.
Since smart contracts are programmable, users can easily incorporate compliance features, such as Know Your Customer (KYC), data privacy, and others, through coding. Digital automations could remove the need for users to file and wait for claims. This also eliminates the possibility of human error and bias. There is also no ability to change information outside of the terms of the contract. Having a decentralized security system through nodes makes it more difficult to hack. The lack of intermediaries reduces the costs of infrastructure, operations, and human capital.
Additionally, smart contracts can scale to a level that is impossible for a human-run business.
Reuters declared two categories of smart contracts applicable to the insurance industry:
Replacement of existing traditional insurance policies.
Mitigation of financial risks through the use of a blockchain.
Traditional insurance policies can be replaced by "parametric insurance," where policyholders are paid when specific events occur, rather than based on the amount of damage, through self-executing smart contracts and oracles. Oracles connect off-chain data (such as temperature and sports scores) to on-chain networks. Currently Kaspa Kii is working on an initiative called the Kaspa Mobility Insurance Framework, K-MIF, to address these issues utilizing the Kaspa network. In the commercial space, Lemonade is utilizing artificial intelligence to automate nearly instant payouts within three minutes of the claim, while Nexus Mutual offers decentralized insurance for crypto risks. Reuters stated:
“Although smart contracts, such as the ones created by Lemonade, Etherisc, and Nexus Mutual are still in their infancy, their ability to reduce operational costs and facilitate efficient, secure, and accurate payouts may offer considerable advantages over traditional insurance products.”
Smart contracts are executed immediately when the conditions are met, thereby expediting the transactions and reducing the time required for human operations, such as filing paperwork and checking requirements. Since smart contracts do not rely on an intermediary, they eliminate the risk associated with a centralized entity. The cryptography associated with blockchain technology makes dealing with smart contracts more secure and transparent than traditional finance. These features and benefits result in cost savings by eliminating intermediaries, reducing time delays, and preventing cryptography hacks.
Beyond their practical benefits, smart contracts are also being studied through formal logic to better define their structure, rules, and behavior.
The academic paper, titled "DR-CONTRACT: An Architecture for e-Contracts in Defeasible Logic" written by Guido Governatori and Duy Pham Hoang, claims that smart contracts need to utilize formal and conceptual language. Specifically they state,
"A language for specifying contracts needs to be formal, in the sense that its syntax and its semantics should be precisely defined. This ensures that the protocols and strategies can be interpreted unambiguously (both by machines and human beings) and that they are both predictable and explainable."
This approach allows smart contracts to be analyzed for expected behaviors and the relationships between contract clauses.
Governatori and Pham Hoang emphasize that contract language should be “conceptual.” They cite J.J. van Griethuysen’s famous Conceptualization Principle from his “Information Processing Systems…”, which states that the conceptual schema should only include relevant dynamic and static aspects, and it should avoid the specifics of data representation and organization. This aligns with the Kaspa vision, where the data availability (DA) remains on the L1, separate from the smart contracts, executed on L2.
Finally, they describe the contract as a legal document made up of multiple articles, each containing several clauses. These clauses generally fall into two categories: “definitional clauses,” which clarify key concepts, and “normative clauses”, which specify the actions and obligations of the parties involved.
The February 2025 paper, "Logical Foundations of Smart Contracts", by Kalonji Kalala of the University of Ottawa School of Electrical Engineering and Computer Science, explores how Blockchain smart contracts can be modeled using Situation Calculus, providing a structured framework for their behavior.
Kalala clearly defines a smart contract as the "automation of the execution of an agreement". He explains that legal contracts are often long and complex, with multiple subcontracts detailing the processes, actions, and effects involved. Smart contracts can automatically carry out these operations required to fulfill the agreements, eliminating the need for unnecessary intermediaries.
Situation Calculus models smart contracts using four key elements:
Actions: the operations performed.
Situations: sequence of actions, represented by do: do(α,s).
Time Points: when the actions occur.
Objects: other entities defined in the contract.
These variables allow smart contracts to represent and express themselves as a part of the "dynamically changing world."
Kalala further incorporates obligations using deontic logic to capture duties and constraints. He formalizes smart contracts as logical theories, executable in GOLOG (a Situation Calculus-based language built on Prolog). This setup supports automatic verification and proofs, giving smart contracts a strong logical foundation and practical execution framework.
Smart contracts have evolved from Szabo’s early vision to Ethereum’s programmable ecosystem and now Kasplex on Kaspa, enabling secure, automated, and scalable agreements. By reducing intermediaries, ensuring predictable outcomes, and linking off-chain data, they unlock new possibilities for finance, enterprise, and real-world applications. Kasplex, with Ethereum-compatible tools and a robust Layer-2 architecture, positions Kaspa as a platform ready for the next wave of decentralized innovation.
Part Two will dive into the technical mechanisms that make these advanced smart contract systems possible.
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