What is Karura?

Karura is a project built on the Kusama network and Substrate technology, which gave rise to Polkadot. Thanks to this, Karura intends to create a scalable network compatible with the Ethereum Virtual Machine (EVM), optimized for the deployment of DeFi applications. 

Karura seeks to facilitate interoperability with other projects Substrate through products that may be of interest to network users Kusama, Polkadot y Calm down, without ever having to abandon the Substrate base and all its advantages compared to other blockchains.

Origin of Karura

The development of Karura started in October 2020, when the Acala project (now known in Kusama) announced the launch of this new product, powered by a parachain in Kusama. 

Acala's idea with this project is to do the same thing that Polkadot and Kusama have done: serve as an evidence box to help develop ideas quickly, test them, and then translate them into the final version of the protocol. In this case, Karura would be the development version, leaving Acala as the final version of a product focused from start to finish to the DeFi ecosystem.

In this way, Acala began a crowd loan whose objective was to allow the team to get a parachain slot in Kusama. The campaign to achieve this first milestone was a complete success, with Karura becoming the first project to get a parachain slot in Kusama, which sparked even more interest in this project.

The project marked a milestone in its history on June 23, 2021 when it wrote the first block on the parachain, just one day after obtaining the slot. From that moment, Karura began to provide its DeFi services, using as a base the native token KAR and its DEX, Karura Swap. Thus began the story of Karura and its immense potential within Kusama, Polkadot and, of course, the DeFi cross-chain ecosystem targeted by this protocol.

How does Karura work?

Acala has designed Karura with the same idea with which Polkadot launched Kusama: that of being a Canarian or testing network, for the technologies and products that will later be integrated into Acala. In this way, Acala focuses its operation on the Polkadot network (which is the business and stable network), while Karura is deployed in Kusama, taking advantage of the rapid development of this network, in a kind of bleeding edge, that drives development and innovation for this protocol. This means that both protocols (Acala and Karura) work in parallel and are able to intercommunicate with each other using the Polkadot / Kusama Substrate technology.

Now, since Karura is a reflection of Acala, What new things can this protocol bring? Well, the development team has focused on NFTs and creating a DeFi ecosystem for them that makes life on Substrate-compatible networks. This has great advantages among which we can mention:

1. Ease of cross-chain operation, thanks to Substrate and its bridges with other EVM-compatible networks.
2. Take advantage of the rapid development and innovation of the Kusama network and paving the way for Acala's product development in the Polkadot network. 
3. Continue innovating products like NFT, collectibles and collaterals, etc.
4. Having a high level of security, stability and scalability.
5. Generate a decentralized governance system to participate in the evolution of the protocols.
6. A joint evolution of Acala and Karura as sister projects and tokens.

To achieve all this, Karura has built a series of well-defined products that are:

1. An on-chain liquidity protocol known as Liquid Staking Karura. This protocol allows you to block KSM tokens in exchange for receiving L-KSM tokens and earning interest for it. L-KSM is a fungible token and can be traded on DEX or used as liquidity in other DeFi applications that accept it.
2. An stablecoin cross-chain, multi-collateral type, which name is kUSD. This system is similar to what we can see in currencies like DAI. In this system, users create a vault with a collateralized position (CDP) and thanks to it they can obtain kUSD. Among the tokens that can be used are DOT, ACA, PolkaBTC and KSM.
3. Un DEX AMM protocol named Naker that allows you to take advantage of all the above to form a DeFi ecosystem on it.
4. He has also created a chain treasury system and a Decentralized Sovereign Wealth Fund (dSWF). Thanks to this, the development and evolution of the project can be financed at an economic level.
5. Finally, all this works on what Acala has made known as Acala EVM, a virtual machine that works on Substrate and that is capable of providing compatibility with Ethereum natively. This means that Karura can accept DeFi protocols built on Ethereum natively, run them smoothly, lower its commission expenses, and scale significantly, without having to wait for ETH 2.0 to do so.

What is the KAR token?

The KAR token is a utility token that is intended to serve as a bargaining chip to access Karura services. Said token has a fixed supply amount and its value is backed by a certain amount of Acala token (ACA). Thus, the KAR token is used to pay transaction fees, rewards and incentives for the creation of nodes, the governance system and community treasury, as well as the rest of Karura's network operations in its parachain.

An interesting point about the token is that its development team initially assigned the tokens as follows:

1. Initial drivers: 18,33%
2. Drivers: 10,08%
3. Founding team: 10%
4. Community: 60,87%
5. Reward program and auction liquidity: 34%
6. Ecosystem development: 5%
7. Treasury / Reserve: 11,62%
8. Rewards reserve: 10,25%

Conclusion

Karura's parachain seeks to offer a set of products that can be especially useful in Kusama's DeFi ecosystem. This, together with its interoperability with Acala, offers enormous possibilities of use for its users. If we add this to the fact that Karura is built on Substrate technology, its possibilities increase exponentially. This thanks to its expansion potential and operational capacity. 

However, it must be made clear that Karura is a recently created project and, therefore, there is still a lot of room for improvement, which will undoubtedly make it an even more interesting project for everyone.

Links of interest