The 3 Main Components of Katal Chain

On Substrate, The Relay Chain, and The ACTUS Standard

Katal Chain
Nov 5 · 4 min read

Financial contracts have played a pivotal role in history since the time of the ancient Near East and Chinese feudal kingdoms. Early iterations of debt instruments, insurance contracts, and commercial enterprise endeavors have relied on the intertemporal elements of financial contracting, which have evolved into the modern financial landscape today over thousands of years.

However, legacy finance is due for disruption, and the blossoming trend towards open finance — built on blockchains — has become a cardinal focus of crafting the foundation for the Web 3.0.

At Katal Chain, we believe in the compelling potential of creating a homogenous taxonomy of financial contracts that serve as a basis for the Web 3.0’s digital economy. Achieving this desired vision requires a robust infrastructure explicitly tailored for the type of value transfer, settlement, and interoperability that such a next-generation digital environment necessitates.

As a result, we have chosen to build our standardized framework for financial contracts on Polkadot, the “United Network of State Machines.” Our model consists of three primary aspects, which are tethered to Polkadot’s broader pooled security and interoperable capacity.

Breaking Down The 3 Components of Katal Chain

There are three primary components to Katal Chain that we rely on to actualize our vision of a financial ecosystem, unencumbered by conventional points of friction:

  1. Substrate — Blockchain Framework
  2. Polkadot Relay Chain — Interoperability
  3. ACTUS — Standardized Contract Language

A brief overview of each follows.

Substrate

Substrate is a standardized blockchain framework created by Parity Technologies. At a high level, the concept is to provide the development resources that empower developers and businesses to spin up blockchains quickly and with customizable features like privacy.

The technology is built from WebAssembly, Libp2p, and GRANDPA consensus, which power three characteristic features of Substrate chains:

  1. Dynamic Self-Defining State Transitions
  2. Light Client Functionality
  3. Progressive Consensus Algorithm

The goal is to render the standard resources for rapid deployment of highly useful blockchains with fast finality, dynamic usage, and of course, interoperability.

The interoperability aspect is also the most compelling reason for Katal Chain’s selection of Substrate. For example, creating a taxonomy of standardized financial contracts requires interoperability between different types of networks. If Polkadot’s parachains are all different strongholds of value with application-specific cases like gaming assets or crypto lending products, Katal Chain needs to be able to interact with them without going through expensive gateways.

Substrate is inherently compatible with Polkadot as a parachain, and as a result, absorbs all of the pooled security, interoperability, and forkless advantages of being a part of the Polkadot ecosystem. And the icing on the cake is that Substrate is language-agnostic for writing code for core blockchain logic, as long as it compiles to WebAssembly.

Substrate enables the rapid creation of a parachain in Polkadot, which connects various blockchains using its relay chain.

Relay Chain

Polkadot’s relay chain is also built with Substrate. The relay chain plays the pivotal role of managing the connections, interoperability, and transfer of value and arbitrary messages between the parachains (i.e. blockchains) in the Polkadot network.

The relay chain confers the pooled security to the parachains, where blockchains receive the aggregate proof-of-stake (PoS) (GRANDPA) consensus security from various chains contributing to the collective security. The Relay Chain also plays a fundamental role in governance, and according to Polkadot:

“The relay chain uses a sophisticated governance mechanism that is designed to establish a transparent, accountable and binding process for resolving disputes and upgrading the network.”

Notably, parachains can retain their own, independent governance processes while still participating in the broader network.

With the framework for crafting an interoperable, dynamic, and scalable blockchain within the Polkadot network complete, the next major step for Katal Chain to materialize is implementing the Algorithmic Contract Types Unified Standards (ACTUS) for embedding standardized financial contracts into vast networks of value transfer.

ACTUS

ACTUS contract types define classes of financial products and how to express them. The ACTUS framework also provides real-world examples of conventional financial contracts ranging from annuities to perpetual bonds and vanilla swaps.

The comprehensive classification and enumeration of each financial asset type set the stage for incorporating those assets into a public blockchain framework like Polkadot — which can subsequently extend its network effects to other networks. Importantly, ACTUS will operate as an unparalleled repository for crypto-assets and other digital assets running on blockchains that are entirely out of the scope of many DeFi applications and ecosystems today.

We have only begun to scrape the surface of crypto products with basic lending and a few cases of tokenized equities emerging.

By combining ACTUS with Katal Chain, we broach the topic of expressing virtually every type of financial contract available today in a digital ecosystem of seamless value transfer.

The long-term potential is compelling, and Katal Chain can serve as the underlying foundation from which the Web 3.0 extracts practical frameworks for constructing, adjudicating, and expressing financial contracts without intermediaries and across abstract silos of value.

Eventually, we expect businesses, developers, and networks to codify and leverage Katal Chain’s ability to standardize the settlement of contracts ranging from complex derivatives to credit default swaps in blockchain-based economies.

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Katal Chain

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Standard Framework for Finance https://katalchain.com

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