Kusama Coin (KSM): Everything You Need to Know

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The blockchain industry is ever-growing, with new and better developments being launched on a daily basis. This naturally results in a need for innovations that improve the performance of existing blockchain projects. It’s necessary to evaluate these innovations regularly in order to tackle potential weaknesses and vulnerabilities that may undermine the efficiency of a project. This is the main goal that Kusama sets out to achieve: to ensure that all project improvements made are fit for the mainnet.

How Does Kusama Work?

Kusama is built with substrates and codes similar to those of Polkadot. Often referred to as “the canary network of Polkadot,” Kusama is an evolutionary and multi-channel network designed to facilitate an audit system for Polkadot. How does the audit system work? Well, Kusama welcomes new features, and experiments with them before said features are rolled out to Polkadot.

Most blockchain ecosystems only use a test network to develop their decentralized applications (DApps) and projects. Kusama, however, provides a functional market and test network conditions that other chains don’t provide. Kusama also benefits from modified governance parameters that allow it to operate up to four times faster than the Polkadot ecosystem.

Kusama uses two types of blockchains to process transactions and manage network activity. The main network, on which the validators are located, is called the relay chain. The relay chain has minimal functionality and is responsible for coordinating the system as a whole. Parachains, on the other hand, are unique and allow users to run separate Layer 1 blockchains with the Kusama network. Being able to run these single layers linked to the relay chain ensures the security of the parachains and significantly increases the scalability and interoperability of the Kusama network. There are also user-generated networks called parachains that may each have different architectures, features and use cases, depending on the project using each one. We’ll explain these in detail later on in this guide.

What Is the KSM Token?

The KSM token is the native cryptocurrency of the Kusama network (just as DOT is the native token of the Polkadot network). The initial distribution of this token respects the same DOT token distribution. Essentially, this means that if you’ve participated in the DOT ICO, you’ll have access to the same number of KSM tokens that you purchased in the DOT ICO. This serves to encourage token holders to use the Kusama network and help the team in its development. However, perhaps the biggest change in Kusama is related to the generation of tokens via network rewards.

The KSM coin is a governance token to manage protocol updates and patches and pay fees through parachains. Validators stake their KSM to ensure network security and earn inflation rewards, while nominators can use their KSM to show support to certain validators and receive a share of the rewards. In addition, the KSM cryptocurrency can be used for linking to support new parachains.

How Can I Get a Kusama Coin?

You can buy KSM tokens on various leading crypto exchanges, including Bybit. However, this isn’t the only way to get KSM coins. Kusama has aligned itself with the Polkadot community by offering KSM tokens to anyone who’s purchased DOT during its ICO. Those who own a DOT indicator token can follow these instructions to claim an equal amount of KSM. There’s no deadline by which to claim the KSM tokens.

Treasury Proposals: If you have a project that will increase the value of the network, you can submit a cash flow proposal.

Bug Bounty Program: The bug bounty program rewards anyone who discovers vulnerabilities in Kusama’s code.

Validators: Validators can claim rewards for running the validation node. The number of KSM needed to become a validation node is dynamic, changing over time. 

Nominators: Kusama nominators play a passive investor role by delegating their KSM to a maximum of 16 validators. For this, they receive rewards which are dynamic and evolve. 

Kusama Governance

The governance of the Kusama network lies primarily in the hands of three groups: the referendum chamber, the council, and the technical committee.

Referendum Chamber: This is the group that submits proposals for change, and votes on these proposals to see which ones will move forward. They also vote for board members, and can apply to become board members themselves.

Council: The council has 13 members elected to represent Kusama holders, who remain passive. A vote is held every 24 hours to determine the members of the board. The council is responsible for electing the technical committee.

Technical Committee: These members are elected by the board. The committee can include blockchain developers or development teams, and its role is to determine the degree of importance of each proposal. They ensure that urgent proposals are voted on and implemented first.

The referendum chamber may make a public proposal, or the council may submit its proposals, while the technical committee may submit emergency proposals. These three actors can potentially lead to implementing changes in Kusama’s protocol.

The main aspect of governance is the referendum, which determines whether or not to make changes to the protocol. It’s possible to make several changes by referenda, such as altering the parameters of the network, registering or deregistering a parachain, voting on the financing of a project by the public Treasury, and many others.

On Kusama’s network, the referenda are voted on every seven days. The proposal supported by the greatest number of interests is deemed the most important, and becomes a referendum. This process alternates between public and council proposals, so that neither has priority.

Once a proposal becomes a referendum, anyone interested can vote for or against it. If the referendum is adopted, it’s promulgated after a waiting period of seven days. Kusama uses a new voting concept called “Adaptive Quorum Biasing” that makes passing a proposal easier or more difficult, depending on the governance group that submitted it and the number of voters who vote.

In short, when the turnout is low, the protocol requires a supermajority decision to reject proposals, as well as less total passing votes to pass proposals. Still, when the turnout increases to around 100%, it becomes a simple majority.

Kusama includes a logic that allows its governance system to deal with unforeseen events that require rapid legislative changes. This type of legislative “short circuit” makes it possible to submit a proposal to a referendum immediately, in parallel with the normal monthly proposals. 

In case of approval by a supermajority (more than three-quarters) of the council, and a two-thirds approval of the technical committee, a bill can then be accelerated. It’s immediately voted on in the referendum chamber, with a much shorter than normal voting time (three days) and a promulgation period close to zero. The approval mechanisms, in this case, are unchanged from what they normally would be (a simple majority or, in the case of unanimous counsel, a default deferral). This mechanism should be sufficient for non-contentious bug fixes and technical upgrades.

What Are the User Roles in Kusama?

The common goal of all users in Kusama is to maintain and develop the network. As with Polkadot, anyone can participate in the Kusama network, in several different ways. However, there are two major classes of participants who play specific roles in its overall operations: builders and network managers. Since the Kusama network works like Polkadot, it’s operated and maintained by the same set of users.

Builders

These users are allowed to build and customize their applications on Kusama before deploying them to Polkadot. Thus, they can apply the same logic to the Polkadot network that got the best and most effective result of their experiments on Kusama.

Builders create parachains, bridges, parathreads and other elements on the network. They are essentially the development teams and individual developers. Here’s why development teams might consider using Kusama for their development efforts:

  • Since Kusama uses Polkadot’s base code, developers will have almost the same experience building on Polkadot.
  • Kusama’s development is much faster than that of Polkadot.
  • Once built, these Kusama projects can easily be moved to Polkadot if desired.
  • Deploying to Kusama will likely be much less expensive than deploying to Polkadot.

Since Kusama is a canary network, developers should build the parachains on Kusama first for a testing process before deploying them to Polkadot.

Network Maintainers

Kusama (KSM) is a permissionless network; every KSM holder has the opportunity to use it. KSM holders can interact with all the features of the Kusama network. These include, for example, staking (i.e., validating or nominating), governance, parachain auctions, transfers and everything else. Anyone participating in the Polkadot sale can claim a pro rata amount of KSM through the Kusama claims process. KSM used to be publicly accessible via a so-called faucet (quasi a small coin donor), which has since been taken out of operation.

The network maintainers are responsible for maintaining and controlling the operations of the platform. This category of users includes collators who receive information from parachains and transfers to validators via new blocks for verification. These validators receive the new blocks and add them once they’ve been verified. They also engage in future activities, such as consensus with other validators. This set of users are considered the maintainers of the network because they impact the activities that take place on the network.

Kusama Treasury

Kusama’s Treasury consists of funds from transaction fees, lost deposits, the inefficiency of bets and the reduction of penalties. KSM token holders can make an expense proposal by depositing 5% of the amount he proposes to spend with the Treasury. These funds are for the Kusama network. It’s up to the community to decide precisely how the cash flow funds should be spent.

For a proposal to be adopted, it must receive a favorable vote of at least 60% of the board. The deposit will be slashed if the proposal is rejected, or returned if the proposal is accepted. This process takes place every six days.

Kusama Parachains and Parathreads

From a technological point of view, there’s little difference between a parachain and a parathread. The parachain can become a parathread, and vice versa. The real difference between the two is economic: parachains are standalone blockchains with custom tokens and functionality adapted to specific use cases. The parachain connection to the relay chain is present throughout, and the system provides full throughput. A parathread, on the other hand, is a special form of parachain that isn’t constantly associated with the relay chain, and is therefore priced based on pay-as-you-go. Kusama has adopted an operating system that organizes several specified blockchains for various purposes into a network of parachains. 

Parachains got their name from the concept of multiple chains running parallel to the relay chain. This allows them to parallelize, and scale transaction processing. The parachain places at Kusama are limited to 100. If a project wants to get hold of a parachain, it must participate in a parachain auction. Various blockchain projects compete for the available places, ensuring the highest level of quality since not every team receives a parachain place. The parachains are maintained by a network maintainer, the so-called collator. The roles of the collator node are to maintain a full node of the parachain, receive all the necessary information of the parachain and produce new block candidates.

What’s so special about the parachains is that they can be adapted for any number of applications. In addition, the parachains are connected to the main Kusama blockchain (relay chain). In this way, they benefit from their network security. To create this community, Kusama uses so-called parachain slot auctions. This is a market-efficient selection of parachains that are added to the Kusama relay chain. Teams that inspire the trust of the KSM community are given preferential treatment. The final decision on everything that happens in the Kusama network (including the timing of the parachain slot auctions) is finally made by the Kusama council and the KSM stakeholders.

How Does the Kusama Parachain Auction Work?

The parachain auction is how projects bid to obtain a parachain on the respective networks. This auction is done through the candle auction process, which dates back to the sixteenth century when auctions were allowed until a real wax candle went out. Uncertainty about the actual end time of the auction was used to reduce bid sniping (this is bidding at the last moment), which was a problem even then. In auction sniping, bids are tightened at the last possible moment so that other participants don’t have the opportunity to react with a higher bid.

When combined with blockchain technology, this method has proven, beneficial properties, especially for achieving efficiency. It’s therefore considered an appropriate mechanism for allocating parachain slots on both Polkadot and Kusama. Unlike the old-style candle auction, the end is determined retrospectively. This means that the auction always has a set, fixed duration to continue bidding, and the actual end block (“terminal block”) is determined randomly only after that time.

Typically, these auctions take place over seven days. The first Kusama parachain was auctioned off in June, and Karura was the highest bidder in this auction. Karura network is an autonomous and all-in-one decentralized finance (DeFi) platform for the Kusama ecosystem. It offers services such as loans, interest, liquid staking, the introduction of stablecoin, and an autonomous exchanger (AMM DEX).

KSM’s Price

As of early September 2021, KSM was trading at $395.92, according to CoinMarketCap. [Editor’s note: With the recent downturn in the crypto market, KSM is trading at around $344 as of September 22, 2021.]

Source: CoinMarketCap – Kusama

What Is the Market Cap for Kusama Coin?

The current market capitalization of Kusama is approximately$2.9 billion from a circulating supply of about 8,470,098.06 KSM.

How Do I Take Part in Kusama Crowd Loans?

A crowd loan can be similar to a participatory loan. It’s a “fundraising-type” crowdfunding, but in the form of a loan for the duration of a parachain. This allows a project to collect the sum, or part of the sum, necessary (in DOT or KSM loaned) for bidding and obtaining a parachain during auctions on Polkadot or Kusama. 

Therefore, to participate in a Kusama crowd loan, you must identify a specific project that wants to buy a parachain. While the process may differ with each project, they’re all fairly straightforward. Specifically, tokens (KSM in this case) are collected on behalf of the teams, and remain under the custody and security of the “relay chain.” Participating in a crowd loan campaign is safe and secure for users, who can be sure to receive their contributions on one of the two predefined dates.

Kusama vs. Polkadot: The Differences

Kusama and Polkadot are blockchains that operate independently and have different functions. Kusama is more flexible, faster in its governance and more economical to deploy code than its counterpart, Polkadot. On the other hand, Polkadot is more stable, secure and conservative than Kusama. Eventually, the two blockchains will be connected through a bridge, enabling interoperability.

Many parts of the two networks’ codes are identical. – They share the same architecture, nominated Proof-of-Stake (NPoS). Polkadot and Kusama are independent and autonomous networks with different strategies. Kusama is the ideal network for bold experimentation and deployment at an early usage stage, while Polkadot is more conservative, prioritizing stability, security and reliability. 

Governance on Polkadot and Kusama is designed to be fully decentralized and without permission, giving a say in how the network is managed to anyone with the native token (DOT for Polkadot, KSM for Kusama). Thus, over time, the networks will evolve independently, converging or diverging according to their respective communities’ decisions.

The key technical difference between Polkadot and Kusama is that Kusama has changed the governance settings, which allows for very fast upgrades. The Kusama network can be adjusted on short notice should the community decide to implement any changes. Additionally, Kusama is up to four times faster than Polkadot, with a seven-day voting period for KSM holders, followed by seven days to enact the blockchain referendum. On Polkadot, this period is four times longer: the voting period lasts 28 days, followed by a period of promulgation of 28 days. Note, however, that Polkadot will always be the main network for the deployment of applications. 

Is Kusama Coin a Good Investment?

The Kusama initiative has several advantages and benefits for network users. First, it offers a quick iteration process and allows developers to explore new technologies and ideas that could significantly impact the market. Second, it allows developers who intend to deploy certain applications and parachains on the Polkadot network to predict the performance of planned innovations, based on their experiences on Kusama that have allowed them a testing period.

Over the past year, KSM’s price saw an increase of over 1,124%, from $30 in August 2020 to about $386 in September 2021. KSM hit an all-time high of $623 on May 18, 2021, smarking a 1,242% gain in less than a year of trading. 

Source: TradingView – Kusama 

The Future of Kusama and Kusama Coin

As DeFi continues to gain mainstream popularity, the need for viable testing platforms like Kusama is now greater than ever. Built to support the growing Web 3.0 ecosystem, Kusama has characteristics almost identical to those of Polkadot. It’s instructive to see how the protocol works independently from the Polkadot network, while complementing Polkadot’s growing system at the same time.

The platform presents a system of democratic functioning which allows for radical innovations. It also allows developers to initiate their specific blockchains from multiple sources and connect them to the main network. Kusama includes the latest and most effective technological tools introduced by the Web3 Foundation and Parity Technologies. It allows developers to use the blockchain facilities provided by the testnet. This helps them launch their blockchain with fast iteration and a well-audited process before deploying to Polkadot, which makes Kusama an integral part of the success DeFi projects enjoy. 

The Bottom Line 

Kusama is a network that functions as a test environment. Developers can experiment and analyze the effectiveness of their code before proceeding with the official launch on the Polkadot network. The Kusama infrastructure allows developers to take advantage of both a more flexible governance system and lower staking requirements than the Polkadot network. Overall, Kusama is a great platform for testing using parachains.

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