Substrate is the modular blockchain framework on which Kusama is built and the foundation for the whole Polkadot ecosystem. It allows developers to quickly build and launch a blockchain with a variety of feature options available for a wide range of project needs. These options include WebAssembly smart contracts, multi-level permissioning, encrypted transactions and state, account-level locking, and governance tools. Substrate-based protocols can easily interact with Polkadot allowing them to become parachains in the system and share security.

Kusama uses Nominated Proof of Stake (NPoS) as its consensus method. There is a known and limited number of validators in the active set and this active set number is decided by governance. Inclusion in the active set is determined by your total self-bonded and nominated stake. The minimum stake to get in the active set varies daily and depends upon the number of validators attempting to be included and the amount of stake on each. In a NPoS system, each elected validator has equal say in consensus.

Once included in the active set, every validator has equal voting powers and gets equal rewards. For example, if there are two validators, one with 15k KSM and another with 100k KSM, assuming both are in the active set, they will receive equal rewards on an annual basis.

Because of this equitable distribution of rewards, it is preferable for a KSM holder to distribute their stake and run multiple validators. Optimizing your participation on Kusama, or any NPoS network, requires more active management than other PoS networks.

There is no minimum self-bond to run a validator. It is possible to meet the minimum stake necessary to be elected to the active set with almost 100% nominated KSM. The goal is to get in the active set without being significantly higher than the minimum. As such, many validators maintain a low self-bond and nominate themselves with the majority of their KSM from a separate account. This set up allows them to remain flexible and distribute their stake as the minimum for election to the active set changes.

Kusama has two participatory reward mechanisms. Its native rate of participatory rewards is determined by the staking rate of the protocol, capping out at 10% when 50% of the protocol’s tokens are staked.

Additionally, 1% of DOTs (native to Polkadot) will be distributed as rewards to Kusama participants. The reward distribution mechanism has not yet been determined, as the Polkadot protocol is still under development.

If a validator doesn't follow protocol rules, Kusama slashes their bonded tokens as well as the KSM delegated to them.

Slashing primarily happens for one of the two reasons:

• Double signing: If someone reports on chain A that a validator signed two blocks at the same height on chain A and chain B, the validator will get slashed on chain A.
• Downtime: If a validator’s signature has not been included in the last X blocks, the validator will get slashed by a marginal amount proportional to X. If X is above a certain limit Y, then the validator will get unbonded.

Kusama’s governance parameters allow for fast upgrades; the period between governance events is relatively short. Allowing for new referenda, voting, and enacting approved upgrades to happen quickly allows the protocol to adapt and evolve rapidly. Given the speed of governance, validators must remain active and aware to keep up with changes on the protocol.