Countdown to Karura: A Deep Dive on the DeFi Hub of Kusama
Discover the new Karura website, explore the DApps, and learn how to support Karura in the upcoming Kusama Parachain Auction.
After months of building and growing, the Acala team is almost ready to debut its EVM-compatible, layer-one blockchain: Karura, the DeFi Hub of Kusama.
Read on to learn how you can support the upcoming launch and get ready for Karura’s all-in-one, cross-chain, DeFi platform to help you swap, borrow, lend, earn, and stake — all with micro gas fees.
Building the next evolution of DeFi
It’s no secret that decentralized finance (DeFi) is changing everything. With blockchain technology innovating at a tremendous pace, and the total value locked in DeFi protocols growing from 1 Billion in February 2020 to over 41 Billion in March 2021, it’s clear: users demand a better financial system — one that grants autonomy and unfettered access to the newest and most sophisticated of investment strategies.
It’s time for DeFi to deliver on the promise of democratizing financial services — like payments, staking, lending, borrowing, and trading — without the pain points of juggling multiple protocols and staggering network fees. Savvy investors are ready for a power-house platform to serve its community with cutting-edge and composable financial apps that are fast, affordable, and rewarding. And they not only want to utilize this platform; they want to be a part of it — guiding its development and ensuring that its ecosystem continues to grow and lead the way in a multi-chain future. Thankfully, the wait is over.
Meet Karura, the all-in-one DeFi hub of Kusama.
Founded by the Acala Foundation, Karura is a scalable, EVM-compatible network optimized for DeFi, and built on Kusama. It’s an all-in-one DeFi platform that offers a suite of financial applications including: a trustless staking derivative (liquid KSM), a multi-collateralized stablecoin backed by cross-chain assets (kUSD), and an AMM DEX (the Karura DEX) — all with micro gas fees that can be paid in any token.
Not only that, but Karura provides an ethical and sustainable token distribution model as well as the on-chain Karura Treasury, both of which support its community and longevity. And because Karura leverages its novel Acala EVM, which enables Ethereum compatibility with unlimited Substrate* functionality, the network is primed to support the deployment of leading DeFi projects who aim to expand their services beyond Ethereum.
*Substrate is the blockchain-building framework for building on Polkadot and Kusama.
Why is Karura built on Kusama?
Karura is built by Acala, a leading development team in the Polkadot ecosystem, which has received four Web3 Foundation grants, and founded the Substrate Developer Academy (led by Karura/Acala CTO Bryan Chen). Both Karura, and its sister-network Acala are backed by Coinbase Ventures, Pantera Capital, Polychain Capital, Hypersphere, among many other top firms.
But with all the Polkadot-ecosystem experience and support, why launch Karura on Kusama?
Kusama is the network for rapid progress and experimentation
Kusama is Polkadot’s faster-moving, wilder cousin — a multi-chain network for radical innovation. Though related by codebase, Kusama and Polkadot are independent, standalone networks with their own development communities and DeFi demands. But because Kusama has faster governance parameters and higher risk tolerance, projects like Karura can build big and move fast.
By launching on Kusama, Karura can push the limits of what’s possible, giving the Acala team a place to launch bold new financial innovations without risking funds on the more robust Acala network. Karura will access Kusama’s plug-and-play security while enjoying high-capacity processing speeds, micro-gas fees, and interoperability between multiple networks, all ultimately bridged to Polkadot. By launching as a Kusama parachain, Karura will deliver decentralized financial products and stable assets to Kusama’s entire ecosystem of networks.
Introducing Karura’s DeFi DApps
With Karura, you can execute hundreds of DeFi strategies without ever leaving the platform. Utilize your cross-chain tokens like BTC or ETH to issue a self-serviced loan in kUSD. Provide liquidity to the Karura DEX to earn fees from trading volume. Stay liquid while staking KSM to earn rewards and amplify your potential gains with the unlocked, liquid KSM staking derivative. The possibilities are infinite thanks to Karura’s thoughtfully-designed financial apps.
Karura Dollar Stablecoin (kUSD)
As more users turn to crypto assets for their financial needs, it has become imperative to provide price-stable currencies to better enable the mainstream adoption of DeFi use cases such as payments, loans, tokenized securities, and more. Users often need to rely on an asset’s stability to: execute low-cost borderless value transfer, assess the risk of lending strategies, and to ensure that their transition to and from a digital financial environment is as approachable as it is predictable.
Enter the Karura Dollar (kUSD), a decentralized, multi-collateralized stablecoin backed by cross-chain assets. Stable by design, and pegged to the U.S dollar, kUSD is the de facto stablecoin of Karura, Kusama, and beyond.
With the Karura Dollar Stablecoin protocol, anyone can issue a self-serviced loan in kUSD by locking valuable cross-chain crypto assets, including KSM, BTC, LKSM (Liquid KSM) or ETH, as collateral. While the user maintains the loan by paying interest, the protocol works to maintain kUSD’s stability while automatically managing the risk from any price fluctuations of the underlying collateral asset. In fact, the stablecoin’s liquidation process is jointly supported by Karura’s decentralized exchange and auction to achieve the best price optimization and efficiency..
Karura Swap
At launch, the Karura DEX will provide users with a trustless, cross-chain AMM exchange powered by an automated liquidity provisioning protocol. Thanks to Kusama’s weight-based fee model, users can perform instant cross-chain swaps for a fraction of the gas required on other networks — and because Karura’s DEX is an underlying liquidity pool and settlement layer, it can accept fees in virtually any token.
This means you can utilize the Karura DEX on day one and expect to pay micro-gas fees with the tokens you already have, including KSM, LKSM, BTC, ETH, and more.
With the Karura DEX, users can become a liquidity provider and earn in two ways: through exchange fees generated from Karura’s trading volume, and through stability-fee profit sharing from the kUSD stablecoin protocol. Because the Karura DEX serves as a unified provisioning mechanism, when liquidation occurs, the DEX automatically provides liquidity to the Karura Dollar stablecoin.
Liquid KSM Staking
Users in the Kusama ecosystem have been staking their KSM in a variety of ways from Polkadot.js to centralized services. Staking KSM generates favorable yield for holders; however, there have been several challenges up to this point:
- Staked KSM is locked/bonded and has no utility beyond earning rewards.
- Staking through Polkadot.js requires high staking minimums, and a seven-day unbonding period.
- And the UX can be frustrating, with many users turning to centralized exchanges that offer a simplified experience while forcing the user to forgo the custody of their keys.
Fortunately, a new staking experience is available with Karura’s Liquid KSM (LKSM) staking derivative.
Stay liquid while staking with LKSM
Liquid KSM (LKSM) allows users to stake their KSM while maintaining access to its liquidity. A game changer in the world of staking, when KSM is staked, users receive LKSM (a tokenized receipt for their stake) with the additional benefit of it being a yield-earning token.
With LKSM’s accessible liquidity, users can make additional use of their stake with Karura’s other financial products. For example, LKSM can be used as collateral for a stablecoin loan or for trading within the DEX. One can quickly see how this creates some interesting DeFi use cases.
What’s more, Liquid KSM offers no staking minimums, and no unbonding period for the underlying KSM, since users can unbond anytime for a small fee.
It’s all powered by KAR
KAR is the utility and governance token that powers Karura’s DeFi hub of Kusama. Generated at launch, Karura’s native token will have six distinct use cases. KAR tokens:
- Power the micro gas fees and smart contract execution for transactions.
- Incentivize network nodes to monitor and relay messages to Kusama.
- Support Karura’s on-chain governance by empowering the community to vote, elect council members, and drive the development of Karura.
- Enable algorithmic risk adjustment to automatically adjust risk parameters such as interest rates or collateral ratio.
- Are staked by teams deploying new Substrate pallets on the Karura blockchain.
- Are staked by teams deploying new DApps and smart contracts on Karura.
With all of these incentives aligned, KAR ensures that Karura will be a fast-moving and powerful network that enables efficient and inexpensive transactions while offering the best and latest in DeFi innovations.
But how does one get KAR?
Karura’s Path to Launch
With a vibrant community of 100,000+ members, it’s clear that users are excited to support the launch and try Karura’s DApps beyond the Mandala testnet. But in order to launch, Karura must first secure a parachain slot on the Kusama network, a process that requires adequate funding to strategically bid in the network’s candle auction alongside several other parachain teams.
Karura’s path to launch now includes three major milestones: Crowdsource KSM with the Crowdloan Module, Participate in the Parachain Auction, and Win! The process will kick off any day now — with adequate time for KSM stakers to unbond their KSM and prepare for the event.
Here’s what to expect:
1.) Crowdsource KSM with the Crowdloan Module
Soon Karura will hold a KSM crowdsourcing event to bootstrap the network’s bid for the Kusama parachain slot auction. The KSM will be used to participate in the auction in order to gain a slot on Kusama’s network for security and interoperability.
For their contribution, participants will receive Karura’s native token KAR. For each 1 KSM locked, users will be distributed a yet-to-be-determined amount of KAR upon Karura’s launch. The final KAR amount will depend on the amount of support Karura receives.
2.) Participate in Parachain Auction on Kusama
Next, Karura will participate in an unpermissioned candle auction to earn a slot on Kusama’s network. The opening bid will use the “crowdloan module” holding the KSM contributed during the crowdsourcing event. Community members can continue to contribute until the end of the parachain auction.
3.) Win Auction and Launch Mainnet
After Karura wins a parachain auction, Karura mainnet will launch and KAR will be generated and distributed to supporters. Any supporter who had locked their KSM in the crowdloan module will receive a reward in KAR. Upon receipt, 30% of this KAR will be unlocked, liquid, and available to utilize within Karura’s DeFi ecosystem, while the remaining 70% will be vested and released gradually until the end of the parachain’s slot lease. As Karura DeFi applications go live, liquidity provider programs will begin, and DeFi will officially be available on Kusama!
🚀 Interested in supporting Karura? Visit the Karura website for more info.
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