Kusama, a figurative “wild cousin” to Polkadot, is auctioning parachains for emergent DeFi projects to get their start. Let’s take a look at what the platform offers, as well as which incoming projects are the most promising.
Kusama is a noteworthy development for the DeFi world because it introduces truly unprecedented interoperability and scalability. It’s built using Substrate with nearly the same codebase as Polkadot, the industry-leading multi-chain infrastructure. It offers a number of advantages over other networks, like open governance that lets a community vote and control the network, as well as advanced technology that employs the newest features before they land on Polkadot.
It furthermore offers a level of composability that goes far beyond other networks. Developers will appreciate this high level of flexibility offered by Substrate technology, enabling the creation of sophisticated decentralized platforms.
Kusama developers warn the public to expect chaos, but recent news like Tether’s launch of a Kusama-Based USDT token is highly encouraging. It seems likely that this industry-leading ecosystem will quickly emerge from any such chaos — this would of course be impossible without a number of innovative projects competing to win Kusama’s first parachain auction.
Kusama’s network has sufficiently matured to become a meaningful DeFi haven. It initially launched as a test network for Polkadot, but in the end, Kusama actually obtained real value. As of this writing, its market cap exceeded $1.64 billion dollars, approximately one-tenth of Polkadot’s. This places Kusama 54th in terms of market cap — network value is critically important for establishing a successful DeFi ecosystem, as it impacts liquidity and overall user interest.
Only a small number of projects will actually win a slot on Kusama, but those that do will likely establish themselves as key DeFi market players for a long time to come. It’s highly likely that participants building on this network first will gain the highest value.
In a healthy bull market when cryptocurrencies are trading strongly, the DeFi sector easily exceeds $100 billion. As this technology holds the potential to reshape the $1 quadrillion derivatives market, there’s reasonable speculation that it may end up climbing to such a high valuation. DeFi principles have the opportunity to reshape the future of banking around the world, and be valued accordingly.
Here are three high-caliber DeFi projects that are coming to Kusama.
Karura by Acala (https://acala.network/karura)
Altair by Centrifuge (https://centrifuge.io/altair/)
Genshiro by Equilibrium (https://genshiro.equilibrium.io/en)
Taking its name from a creature with a human torso and birdlike head in Japanese mythology, 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.
This platform introduces new financial applications for staking, borrowing, and trading in the crypto world. Its thoughtfully designed apps offer users a bunch of trading instruments, like a trustless staking derivative (liquid KSM) and a multi-collateralized stablecoin backed by cross-chain assets (kUSD). The trading functionality is available on a specialized AMM DEX with micro gas fees that can be paid in any token.
You can issue a self-serviced loan in kUSD using cross-chain tokens like BTC or ETH, or earn fees by providing liquidity to the Karura DEX. The platform also allows for earning amplified rewards using liquid KSM as a staking derivative. The developers are enabling hundreds of DeFi strategies within just one platform.
Taking its name from one of the fastest spinning stars in the galaxy, Altair is a DeFi platform that bridges Centrifuge and Kusama. Altair users can tokenize real-world assets and finance them on Kusama.
Altair allows for borrowing from many other protocols, and it connects these users to Kusama’s DeFi ecosystem. Users can originate individual non-fungible assets here and use them as collateral for loans. Tokenized assets may also be used as collateral to access financing through Tinlake, an asset-backed lending dApp.
Altair will bridge the Kusama, Polkadot, and Ethereum ecosystems to let assets gain access to financing wherever it is available. In the future, Altair is planning to connect more and more projects across these ecosystems, using Kusama to let anyone access DeFi liquidity.
“Genshiro” comes from the Japanese word for a nuclear reactor — the team is inspired by stories of early scientists working to harness technology to unleash a new kind of energy in the world. That is why Genshiro follows Kusama’s wild approach and is going to battle test its technology by introducing a wide range of assets and lowering critical collateralization requirements to 100%.
Furthermore, Genshiro will roll out its DEX and introduce a wide range of derivative assets based on traditional financial assets (users will be able to trade derivative products like perpetual swaps and/or future contracts on commodities, stocks, ETFs, and so on). Users will have access to a broad range of crypto assets, less strict margin rules, the Curve AMM, a DEX with derivative contracts on ETFs, stocks, gold, and commodities, and much more.
Last but not least, Genshiro will aim to fully decentralize its Kusama-based network right from the get-go by cleverly allocating its utility tokens to the Kusama community: participants will be able to stake KSM to parachain and earn rewards in native GENS tokens during the parachain lease period. 20% of the 1.2 billion GENS token supply will go towards PLO auctions — that’s 240,000,000 tokens! Users can earn up to 30% APR while participating in the PLO.
Genshiro also proposes a novel approach to the collateralized stablecoins and lending facility backed by a portfolio of crypto assets. The stablecoin will be a multiple-collateral stable unit of account, pegged to USD. The stability will come from the over-collateralization of borrower positions. By using novel approaches to on-chain pricing and risk calculations, the team distinguishes from stablecoins like DAI and introduces its own concept of stability.
How these projects compare
Check out the following table to see how functionality of these projects compare:
|Project Name||DeFi Services|
As we can see from this comparison by core product features, Genshiro offers way broader options than its contenders. Simultaneously, Altair by Centrifuge is introducing a novel approach to bringing real world assets to the crypto world. It distinguishes Altair from others in this list that are providing more traditional crypto services.
The most promising projects
The growth of DeFi took the crypto world by storm and led to the launch of numerous platforms with expertise in lending, exchanges, and payments. While lending protocols are still the most common in DeFi, the Kusama ecosystem promises to become a long-term home for truly experimental projects like Altair and Genshiro, which have the potential to become a way more serious DeFi market contender than other established financial platforms.