Kusama: the wild cousin of Polkadot
Anyone following the DeFi space closely will have noticed that interoperability remains a bit of a challenge for developers. Consequently, DeFi can be a bit more difficult to use for the average user, especially when it comes to moving tokens from one chain to another.
One project with a focus on interoperability that has captured the limelight this year is Kusama — not lastly, thanks to the impressive price performance of its native token KSM which went from trading under $70 at the beginning this year to nearly hit $600 at the height of the bull market.
Kusama self-describes itself as the “wild cousin” of Polkadot. Polkadot is another blockchain network that brings interoperability in combination with high security to the ecosystem. While it might be easy to see Kusama as just a testnet for Polkadot, it’s more than that. Both Kusama and Polkadot are brainchildren of Dr Gavin Wood, who was also involved in creating Ethereum.
He describes Kusama as:
Kusama is Polkadot’s experimental “canary” network. It is an early, unaudited and wholly experimental pre-production trial network, designed to help understand how the various cutting edge technologies introduced in areas including governance, staking, and sharding work under “real” economic conditions.”
How does Kusama work?
Kusama focuses on interoperability and scalability. The network can form bridges to other chains, enabling data transfer and value across chains through the Kusama relay chain.
The relay chain is the most important chain of Kusama and allows customization. The network is built using Parity’s technological tools and substrates (a product that makes building blockchain fast, easy and safe) — both developed by the Web3 Foundation.
Like many other blockchains trying to scale, Kusama uses a technique called sharding. Traditional sharding splits a blockchain into several parts — so-called shards — where all shards work on transactions simultaneously. This increases the efficiency and transaction speed of the blockchain as a whole. Zilliqa is already deploying sharding, and Ethereum plans to implement sharding as soon as it has completed the switch to Proof-of-Stake in 2022.
However, Kusama doesn’t rely on the traditional approach to sharding. It hosts one main chain, the relay chain, which communicates with its sidechains, called parallel chains or short parachains. In fact, parachains is the term you’re most likely to come across concerning Kusama.
Parachains are simplified blockchains that benefit from a share of the security of the mainnet and can be modified to their users. Blockchain projects looking for a chain to build on can use parachains and adjust them to suit their needs.
The network architecture combining one relay chain with various parachains enables blockchains to communicate through Kusama. Currently, 100 individual blockchains can connect and interoperate on Kusama. All parachains can communicate with each other, creating network effects while keeping transaction load off the mainchain.
KSM — the Kusama token
Just like other native blockchains, Kusama is powered by its own token: KSM. Kusama has various use cases, including validating the network, staking, nominating validators in a process called nominated PoS, voting on and creating improvement proposals and most interestingly, bidding for parachain slots.
As the network can only host 100 blockchains, parachains are in demand and so valuable that companies have to win an auction to gain a slot. When projects decide to build on Kusama, they will join a parachain auction and raise KSM from their community. The auction ends at a random moment, so projects have to make high bids to win. Instead of giving the funds directly to the project — as has happened during ICOs — the KSM raised is locked up for a certain period so that projects don’t have access to them. This disincentivizes scammers and allows investors to speculate on new projects without actually spending their KSM.
These parachain auctions might have played a role in driving up the price of KSM. The more KSM investors pull from exchanges to invest in parachain auctions, the less supply is circulating, leading prices to pick up.
Parachain auctions have proven that they work with Karura, successfully winning a slot and now delivering a multi-collateralized stablecoin backed by cross-chain assets. Kusama might have lower security than Polkadot, but it allows faster and more flexible deployment — making it the perfect entry for many dApps aiming to build on Polkadot at some point.
In an innovative space, Kusama offers a low-barrier entry for promising projects and enables investors to get in early at lower risk (they will get their crypto back).
KSM is trading on Bitcoin.com Exchange with BTC and USDT pairs.