Acala Network is a decentralized financial network and liquidity hub for the Polkadot ecosystem. This platform is compatible with external blockchains (e.g. Ethereum) optimized for the DeFi segment and drives smart contracts.
The idea behind the Acala project
With the advent of Ethereum and the development of other blockchains that have smart contracts, developers have started to actively create decentralized applications. These include various services and platforms based on blockchain technology.
One of the most popular segments of the cryptocurrency market is decentralized finance. Like many other blockchain projects, these services need to scale. This means speeding up transactions and compatibility with different blockchains. That's exactly what the Acala network can do thanks to its integration capabilities in decentralized finance.
The Acala Network allows DeFi projects to scale quickly and with maximum efficiency. Consider all this against the backdrop of maximum security! According to Paul Veradittakit, one of the main investors in the project, the Acala Network aims to become the DeFi hub for the entire Polkadot ecosystem. This goal has now been practically achieved.
According to the developers of the Acala Network, their project will eliminate the need to choose between the profitability of locking funds in the DeFi protocol and the profit from staking. What makes this platform so special is that it is the first network to offer cross-blockchain interoperability for different DeFi services.
Collaboration with Kusama and Polkadot
The Acala network, designed for decentralized finance, is the first project to get a parachain slot on the Polkadot network, giving Akala access to a flexible earning mechanism based on this decentralized ecosystem.
The parachain team aims to develop DeFi products that meet the diverse needs of users. The developers have also made it possible for decentralized financial applications to work on all blockchains connected to Polkadot.
Upon winning the parachain auction, Acala will become Polkadot's financial center. It is the Acala Network Token (ACA) that will be used to carry out settlements within the parachain ecosystem. Everything related to decentralized money in Polkadot will be supported and backed by the Acala network.
This project’s RnD continues and focuses on 2 main areas:
- Parachain economic modeling and management
- Development of the protocol and various systems of decentralized financing (DeFi)
The aUSD token is one of the main tools of the Acala network. This is a stable decentralized coin that allows you to receive and send dollars using any blockchain. The most important thing is that they are connected to the Polkadot platform.
The Acala Dollar (aUSD) was designed specifically for the decentralized ecosystem. This stablecoin is ideal for any transactions inside Polkadot. For this reason, it is backed by its own ecosystem token (DOT) and its derivatives. Also, aUSD can interact with cross-chain assets.
The network is managed only by holders of the Acala Token (ACA) token.
Through this platform, you can access the following tools and assets:
- Decentralized stablecoins based on Polkadot
- DOT-based assets
- Various derivatives based on decentralized finance technology
- Polkadot system assets
- Cross-chain assets from different sources: Bitcoin, Ethereum, etc.
The advantage of working through this platform is also that it allows you to pay commission inside Polkadot with any coin. ACA is the utility token of the decentralized ecosystem. It is used to ensure the operability of smart contracts.
The Acala parachain itself can be updated without forks to introduce new features.
Acala Protocols
The platform uses several tools to ensure safe, fast, and convenient work with decentralized finance.
One of them is the Homa protocol. Homa protocol is needed to reduce the costs that arise when using staking assets outside of the classic stacking scheme. Another feature of the Homa protocol is security. It allows you to create a pool of staking assets (for example, L-DOT for DOT, etc.).
As a result, the following opportunities become available to users:
- Use of staked assets in different markets.
- Trading in Polkadot between all available chains.
- Providing liquidity for staked assets. Without the Acala network protocol, such resources would be blocked.
The next protocol on the platform is called Honzon. Honzon is required for the full-fledged operation of a decentralized cross-chain stablecoin.
Connecting the protocol enables the following features:
- lending with predictable risk;
- creating a reliable and stable currency for all blockchains in Polkadot;
- using the Honzon protocol as a base for the creation of other financial services.
Thanks to this protocol, the aUSD stablecoin appeared on the Acala network. It is pegged to the value of the US dollar. The presence of this coin in the Polkadot ecosystem allows you to take loans in USD, pledging your crypto assets such as ETH, DOT, BTC, etc as collateral.
Operations within the Kusama Network
This network is a fully-fledged platform with its own token. It allows you to test applications and blockchains before placing them on Polkadot's parachain slots.
To make available to Kusama the same features that are supported by the Acala platform, another network was created - Karura. Karura is the center that allows DeFi projects to work as part of Kusama.
Akala and Karura networks are called sister networks because they perform the same functions but in different protocols.
Karura Platform
While Acala is building a DeFi hub for Polkadot, Karura is building a decentralized finance hub for the Kusama platform community.
Karura is a versatile DeFi platform. It can be used to:
- exchange crypto assets;
- borrow;
- lend to other users;
- pay for microgas;
- earn, etc.
The Karura network can be scaled by connecting different blockchains and services to it.
The platform has its own financial applications. For example:
- Liquid KSM, a non-trust financial derivative.
- A multi-collateralized stablecoin that is analogous to the dollar - kUSD. It is also supported by cross-blockchain assets.
The Karura network allows you to pay commission in the Kusama system with any token.
This parachain has several key advantages:
- users and projects have access to the latest technology stack;
- the speed of operations for running DeFi applications is significantly higher;
- The constant development of popular technologies related to decentralized financial instruments: collateral, collecting, NFT, etc.
The goal of the Karura network is to become a popular and fully-fledged innovative platform in the DeFi segment. Projects of different levels can test their services on this network.
Fundamental Analysis
Investors have already expressed their appreciation for the Acala Network (ACA) token. The stablecoin of the aUSD platform has also drown an attention. It is backed by a large amount of collateral in the form of digital assets. The Acala Dollar is a decentralized currency, which adds a stability.
As you can see, aUSD has minimal volatility. But in rare cases, there are sharp drawdowns, after which the rate is restored. The risk of such sudden price spikes must be taken into account. If fundamental news indicates a fall in the dollar, then the aUSD rate may also go down.
The current daily trading volume of this stablecoin is $14.6 thousand. The total supply of the Akala dollar reached 2.7 million units. The average cost of aUSD per day is $1.03.
The Acala platform itself is attractive in that it was able to become a working network adapted for the use of decentralized financial applications based on different blockchains. This cross-blockchain functionality simplifies DeFi projects.
The demand for the use of such tools within the crypto technology market will grow steadily. The reason for the increase in demand is a scaling challenges faced by the large DeFi projects. They are limited to resources of only one blockchain where the project is created. Acala Network removes this barrier and gives access to significantly more resources and users.
Since Akala is the economic center of the Polkadot ecosystem, it quickly gained the necessary level of trust from the participants in the crypto market since the highest trust rating in this project, which unites different blockchains, at the same time helps the Acala Network.
Working with the Acala Network, projects will be able to interact with different networks. It offers to expand capabilities for DeFi platforms without sacrificing security, and this will inevitably attract many users.
Investors working with decentralized finance will need an ACA token to pay fees on the network. Also, this coin is needed for those who intend to take part in the development of the network. Ownership of the ACA allows you to vote on changes, improvements, and updates to the platform.
Karura Token (KAR)
This coin is required to operate in the Karura system. With its help, you can perform the following actions:
- take part in the management of the network community;
- pay transaction fees;
- correct algorithmic risks;
- deploy smart contracts and pallets.
The feature of testing apps and blockchains before publishing them on Polkadot is popular. For this reason, the network for working with decentralized applications in Kusama has also not been overlooked.
The DeFi segment is developing rapidly; such projects need fast, reliable, and convenient functionality to create, test, and refine various services. Karura makes all of it possible.
Now the cost of the KAR token is $7.57. The market capitalization of the project is at the level of $138.1 million. The
daily trading volume has reached $ 3.9 million. The total supply of the coin and its maximum volume is 100 million.
According to some experts, by the end of 2022, the value of the KAR token will reach the level of 19.55 USD per coin. In 2023, there may be a jump in the rate, and the token may cost 33.21 USD. At the same time, the predicted average price is USD 24.6.
Development Prospects
Karura and Acala are already working with a large number of projects in the decentralized finance segment. Access to the Kusama network allows Karura to carry out comprehensive updates with minimal risk.
Large investors and companies believe in the idea of creating and developing a network that unites DeFi services of different blockchains. For this reason, they support the Acala and Karura networks. Plus, the Web3 Foundation, the creators of Polkadot, is actively investing in the development of these platforms. Thanks to this support and with the already existing successes, Karura and Akala will actively expand their functionality, causing an influx of funds from investors and successful projects.
Acala Network has every chance of becoming a leader or one of the key players in its segment. With the current support and ambition of the project team, Acala is highly likely to reach the level of global financial infrastructure in the DeFi segment. This status will allow the network to become a business partner of the largest companies working with decentralized finance.
Regular users and projects will get the following benefits:
- stable updates and risk control;
- competent and decentralized project management;
- guarantees and quality assets;
- innovative blockchain products;
- corporate-grade stability and security.
As a result, the projects Acala Network, Karura, Polkadot, and Kusama managed to competently complement each other and form one reliable, multifaceted and scalable system.
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