Dec 16, 2022

7 min read

Acala’s Journey in Review & The Road Ahead in 2023

A Look Back on Acala’s Journey

Acala started our journey in October 2019 (just over 3 years ago) as one of the very first teams who took a risk and began building Polkadot and Substrate’s future. Polkadot’s focus on decentralization, long-term thinking, and the most advanced technological innovation in the industry are a few of the qualities that attracted us to come to Polkadot from Ethereum where we started.

In our whitepaper, we outlined our plans to build a decentralized finance network powering a decentralized stablecoin and staking liquidity protocol for the Polkadot ecosystem. This work began in 2019 and continued as we waited for Polkadot to launch. In the meantime, we decided to go the route of launching an experimental “canary” network on Kusama to deploy Acala and Acala’s protocols first. In June 2021, that network, Karura, became the first parachain to ever win a parachain slot auction on Kusama or Polkadot. Today Karura has $25M in TVL, 94,000 account holders, and 192k KSM staked in LKSM liquid staking.

Then, in November 2021, it was Acala’s time to gain its parachain slot. With DOT contributed by over 200,000 individuals, Acala became the first parachain to ever win a parachain slot on Polkadot. The chain then officially went live in January 2022, and we quickly began launching our products, as they had already been launched and observed in production on Karura. Today, Acala has the #1 cross-chain demand by volume of any parachain on Polkadot, has #1 total value locked (TVL) of any parachain, and #1 total liquid staking value of any parachain. To date, Acala’s team is also the recipient of 5 Web3 Foundation Grants, including the grant originally funding the aUSD stablecoin protocol.

In May 2022 after the launch of LDOT staking on Acala, we were proud to have delivered everything in our whitepaper and more. Expanding beyond our whitepaper, we added new products and features such as the Acala EVM+, our fully customized Ethereum-compatible environment for launching Solidity-based DApps on Acala. We also built and deployed Interprotocol aUSD Distribution Scheme (IADS), allowing protocol-to-protocol aUSD minting to increase stablecoin liquidity and efficiency.

As our engineers built everything mentioned above, we also welcomed another team to our ecosystem who we consider part of our Acala family — the Tapio team — who we incubated and watched launch their stableswap and synthetic products on Karura and Acala. Tapio continues to innovate and push the envelope, and they still have upcoming growth and launches ahead with tDOT, the Pike money market, and more.

All in all, we are very proud of our team’s results up until this point, and are even more excited about what the future holds as we continue to develop and grow our appchain to provide solutions for crypto-native protocols, developers, and users, as well as traditional finance institutions and mass-market consumers.

Crypto Industry Challenges in 2022

2022 brought a tumultuous run of black swan events ranging from Terra to Three Arrows to macro market recession to FTX’s historic fraud. In a post-FTX crypto industry, compliance is becoming inevitable. Centralized entities without compliance and true transparency will be difficult to gain customer confidence and further adoption. Openness, transparency, decentralization, and on-chain verifiability (web3 values) will again become the main value judgment by the people and by the market. This is the true, decentralized internet and financial system’s time to shine.

At the same time, protocol growth models will likely begin to evolve as well. Using only token airdrops (inflated token incentives for yield farming) and related hype mechanisms to achieve the “illusion” of prosperity will likely no longer be effective nor the main method for driving adoption. More focus will likely shift to creating and distributing real value to a broader audience of users.

While the industry has been hit in a significant way, not everyone is retracting. Institutions have ever more clarity on the future direction of digital currency and blockchain. It’s only a matter of time before these institutions and mass market audience begin to choose the right channel to deploy resources and begin adoption of blockchain in a major way.

We see both of these trends (renewed importance of decentralization + real value distribution + institutional adoption) as major opportunities for Acala’s appchain and ecosystem. Let’s move on to some details around where Acala is headed to position the network to capture the anticipated demand from these trends.

Acala’s Road Ahead

Over the next 6–12 months, Acala will focus engineering, growth, and product efforts primarily in the following five areas:

Security & Monitoring
Product Development
Institutional Integrations
Governance

First, Acala will further advance network security and capabilities for incident response. While most crypto bug/hack incidents can only recover a small minority of the losses through legal recourse or white hat fund returns, Acala’s aUSD incident was the opposite; through technical recourse offered by Acala’s architecture and Substrate’s on-chain governance, a vast majority of the loss was recovered. Of course, there is even more we can do to innovate collaboratively with the cross-chain ecosystem to further incident prevention, incident response, security, and monitoring capabilities, and this will be a top priority for Acala’s engineers.

We will also spend efforts doubling down on native DeFi innovations and building up Polkadot’s native cross-chain DeFi stack, and the focus will be on quality over quantity. An example is Polkadot-native protocols like Tapio (tDOT) that integrated Acala’s DeFi stack to create synthetic DOT, uniting cross-chain DOT liquidity. Acala-incubated Tapio recently raised a $4M funding round led by Polychain, Hypersphere, and Arrington.

Furthermore, Acala will continue focusing on institutional product development and integrations. Especially post-FTX, entities operating like a black box will lose their competitive edge. Acala will become the transparent, open, decentralized backend that can be integrated and customized for compliant enterprise or institutional products. This is a trickle-up movement for Acala and Polkadot, where the DeFi stack will be the product and innovation center, and institution DeFi will be the solution center and mass-market distribution channel, resulting in sustainable liquidity that feeds back into DeFi and the entire ecosystem.

Acala will also continue to advance our network governance system. Polkadot recently deployed its new Governance v2 on Kusama, and deployment on Polkadot will soon follow. Acala and Karura also plan to deploy this new governance system on both networks. Acala’s parachain slot is also planned to be renewed in Q4 2023 in a way similar to Karura’s renewal earlier this year.

Acala’s Road Ahead: Some Detail on 2023

Security & Monitoring

Substrate multi-chain testing suite: Chopsticks (building open source for Polkadot ecosystem)
XCM policy pallet: rate limit movements of value to enhance security

Product Development

Acala Apps 2.0 — unified cross-chain DApp, updated UI/UX, updated liquid staking stats and reporting
tDOT Real Yield product enhancements in collaboration with Tapio
Democratized liquidation pools (opportunity for aUSD holders) in collaboration with Kujira
Interchain Proof Oracle Network for asynchronous and trustless state reading, to provide a foundation for many applications such as cross-chain proof of reserves, cross-chain smart contract execution/automation, and more.

Institutional Integrations

Institutional DOT Liquid Staking implementation and integration into Liquid Collective with Alluvial, Coinbase, Kraken, Figment, and more
Continue integration work with Current.com
Continue integration work with Venkman for enterprise loyalty programs

Governance

Governance v2 integration and revamp

For the video overview of the Roadmap with Acala co-founder Bette Chen, you can find that here:

Thank You

Today there are nearly 170,000 on-chain Acala account holders, and that number continues to grow. To all of you who have supported us in the past, today, and in the future, thank you for being a part of the journey. Our community and our ambassadors have been invaluable in helping provide product feedback, grow Acala’s brand and local presence, drive new partnerships and integrations, and even helped grow our talented team. 2023 will be another year of hardcore development work and relentless effort on the product and growth teams. As always, join us in our Discord or reach out to our team to chat about integrations.

About Acala

Acala is a decentralized finance appchain powering the Polkadot DeFi ecosystem. The core product, Acala USD, is a decentralized, multi-collateral, crypto-backed stablecoin serving as the native stablecoin of the Polkadot ecosystem. Acala’s Ethereum-compatible blockchain has built-in DeFi protocols for application developers to leverage, including a trustless staking derivative (liquid DOT — LDOT), a decentralized exchange, and the EVM+, a hybrid EVM offering fully Ethereum-compatible development environment plus full compatibility with Substrate. Acala was the first-ever parachain to earn a slot on Polkadot, is a 5-time Web3 Foundation Grant recipient, and is the top engineering team on Polkadot by Github commits.

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