DeFi 101: What Is Kusama (KSM) And How Does It Work?

2021/09/30 09:31:12

Kusama is the 'Canary Network' for the Polkadot project, an experimental playground with real economic conditions. Kusama is often referred to as the testnet of Polkadot, but it's more than just a testnet as it allows projects to deploy their code, test out all the features in real economic conditions, and give a sneak peek of their project to the community.

Testnet is an instance of a blockchain for testing and experimentation without the risk of losing any real funds as it just provides an economic simulation through free tokens. However, Kusama is the 'real' testbed for early-stage projects with KSM tokens that allows projects to test their technology and the economic risks associated with them.

How does Kusama Work?

Kusama is the canary network of Polkadot and shares the same underlying architecture, except for a few differences in the governance parameters. It is a meta-layer or a Layer-0 protocol that provides shared security and allows developers to build custom blockchains on top of it.

The meta-layer is called the Relay Chain, and the custom blockchains built on top of the Relay Chain are called Parachains or Parathreads. The relay chain provides shared security to all the parachains and parathreads, and is responsible for finality and block production through consensus.

Parachains are independent blockchains that are interoperable with other parachains on the Kusama network. They can also cross-communicate with Parachains on the Polkadot network and external networks like Bitcoin and ethereum via interoperable bridges.

Interoperability between Polkadot and Kusama Networks | Source: Kusama

The relay chain uses Nominated Proof-of-Stake (NPoS), a variant of the Proof-of-Stake consensus mechanism. Under NPoS, there are two main consensus roles:

Validators: They are responsible for block production and verification. They also participate in the governance activities such as voting for the proposed changes to the network.

Nominators: They select the trustworthy validators by a voting process, where they delegate their staked KSM tokens. Each KSM token represents a vote.

Unlike Polkadot, Kusama Network provides a lower barrier to entry for smaller projects that are looking to kickstart their product development and get community traction. Here are some of the other differences between Polkadot and Kusama.

Polkadot and Kusama comparison | Source: Polkadot Wiki

Due to the modified governance parameters, Kusama is up to four times faster than Polkadot. Another key difference is lean setups, where the token bonding period for parachains are much lower compared to Polkadot. Validators are also required to stake less KSM tokens compared to the staking requirements on Polkadot.

KuCoin and Kusama Parachain Slot Auction

The parachain slots on Kusama are secured through an auction mechanism, where the community supports their favorite projects by staking KSM tokens with them. Unlike the ICO, this new form of fundraising is called crowdloaning, where the users lend (stake) their assets for a certain amount of time (lock-up period), and get on-chain rewards after the lock period is over.

The crowdloaning process happens through Candle Auction, where the slot auction is completed on the chain and is terminated randomly. KuCoin supported the first Kusama parachain auction on June 9, 2021, where users participated in Candle Auction through the KuCoin platform.

How To Buy KSM And Participate In The Auction?

In this section, we will outline simple steps to buy KSM and participate in the Kusama parachain auction.

Step 1: Buy crypto assets from KuCoin exchange

If you don’t have any KSM tokens to participate in the auction process, you can buy from the KuCoin exchange platform. With KuCoin, you can buy crypto assets with a credit/debit card, Apple Pay, or a SEPA bank transfer. KuCoin also has a KuCoin Express service where you can buy crypto assets with just one click. After you’ve made a successful purchase, you can withdraw your assets to your favorite wallet or keep it on the exchange.

Step 2: Pool-X portal

Go to the Pool-X portal, and under the Polkadot section, pick any ongoing parachain auction and click ‘Participate Now’. You will be presented with a dashboard where you can deposit your KSM tokens. Please note that each parachain has a lease period, and your KSM tokens will be locked till the lease expires.

Pool-X portal for the Kusama Parachain Auctions

Closing Thoughts

Kusama is a powerful experimental playground for Polkadot and projects that are looking to explore the features of Polkadot and stress-test their deployment in a production environment with real economic activity. On the Kusama platform, early stage projects can also build traction through community engagement by showcasing their product and participating in the parachain auctions.