Acala, the decentralized finance network and liquidity hub of Polkadot, today announced its partnership with Blockdaemon, a top-performing blockchain infrastructure provider, to support its newly-launched staking derivatives for Polkadot (DOT) and Kusama (KSM).
The first liquid staking products in the Polkadot and Kusama ecosystem, Acala’s DOT and KSM Liquid Staking represent a new class of financial products primed to compound staking liquidity and create new use cases for DeFi users and developers. The products launched today on Karura, Acala’s Kusama-based blockchain, then will launch on Acala, the soon-to-launch Polkadot-based blockchain platform.
Unlocking Liquidity
Nominated proof-of-stake networks like Polkadot and Kusama incentivize users and validators to stake DOT and KSM for alignment in security and consensus, but one problem has emerged – these staked assets offer no utility beyond earning rewards.
Currently, over $21 billion in liquidity is staked on Polkadot and roughly $2 billion on Kusama. But these assets are locked and dormant, unable to take advantage of other DeFi applications to multiply returns. Users also experience relatively long unbonding periods making them wait 28 days for Polkadot (DOT) and 7 days for Kusama (KSM) before they can redeem their assets. To address these challenges and unlock billions in liquidity for the Polkadot and Kusama ecosystems, the Acala team has built and launched Liquid Staking.
The first Liquid Staking product on Polkadot
Acala’s first Liquid Staking product is KSM Liquid Staking (LKSM), a product launched today on the Karura parachain that lets users stake their KSM while maintaining access to its liquidity.
When KSM is staked on Karura, users receive LKSM, a liquid, yield-earning token that not only represents their staked KSM value, redeemable at any time, but also includes their ever-increasing staking rewards. Currently, anyone who stakes KSM for LKSM earns an indicative 16% APR in staking rewards while also enjoying the benefit of LKSM being an unlocked token that grants access to its underlying KSM liquidity for other uses in DeFi.
For example, LKSM can be used as collateral for a kUSD stablecoin loan, for trading within Karura Swap in an LKSM/kUSD pair, or for becoming a liquidity provider (LP) in the LKSM/KSM pool. With these additional utilities, KSM Liquid Staking empowers users to access liquidity and significantly boost staking yield.
What’s more, LKSM offers low staking minimums (0.1 KSM), and no unbonding period for the underlying KSM, since users can unbond at any time for a small fee. Early unbonding allows users to instantly exit staking positions instead of waiting for the standard 7 days unbonding period, eliminating the opportunity cost of staked KSM and waiting time.
Powered by Blockdaemon
As PoS networks scale, so too does the importance of the underlying infrastructure that coordinates and maintains access to developer tools and nodes. These nodes play a key role in validating transactions and storing on-chain records, and it’s imperative that validator programs for layer-1 platforms like Acala include strong partners equipped to provide institutional-grade security, scalability, and reliability.
With this in mind, Acala is pleased to partner with Blockdaemon as the first Validator in its Liquid Staking Validator Program.
Beginning today, Blockdaemon will run validators for the KSM Liquid Staking pool, and by extension, secure the Kusama network. Blockdaemon will provide the KSM Liquid Staking pool participants low commissions (2%) and a no-slash guarantee meaning users are insured if a node malfunction occurs.
Blockdaemon takes a security first approach with risk mitigation being their top priority for customer protection. To avoid downtime and protect users from loss, Blockdaemon’s engineers manually oversee failover procedures using rigorous processes and monitors every protocol 24/7. Blockdaemon also provides regional and data center diversity spanning across 10+ cloud and bare metal service providers with node redundancy.
With multiple layers of risk mitigation, Blockdaemon will be supporting the secure growth of Acala and Karura and allow users’ funds to stay liquid while earning their Kusama staking rewards.
“As the leading blockchain infrastructure provider, pushing for innovation in the staking and security space is a top priority for Blockdaemon. Acala’s Liquid Staking product is poised to unlock billions in liquidity across Polkadot and Kusama, and we are excited to be the first node operator to join this program to help users compound their DOT and KSM staking yield.” – Konstantin Richter, founder and CEO of Blockdaemon
Join the Liquid Staking Validator Program
Interested in helping validate on Polkadot and Kusama while serving the liquid staking pool participants of Acala and Karura? Apply for Acala’s Liquid Staking Validator Program here.
Start staking KSM for LKSM to earn liquidity mining rewards
Today, the Acala team is kicking off a new liquidity mining program to reward the community with a pool of 350,000 KAR in wards. The liquidity mining program has two ways to earn:
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