What is Acala (ACA) and How does it work? |KuCoin Crypto Gem Observer
Throughout 2021 the transition from web2 to web3 was discussed throughout the world. New applications came in the form of NFTs, cryptocurrency and deregulated finance. However, the majority of people remained skeptical about how these features will change the internet. Acala is looking to change this. It’s an innovative project in the process of building a "tough" Web 3.0 DeFi infrastructure. This infrastructure will help to bring native DeFi products to Polkadot and help bridge the gap between the traditional FinTech and banking world with the world of DeFi. This new technology could make web 3.0 friendlier for new users and improve accessibility as a whole. With these innovations, Acala is building a new category called HyFi, or Hybrid Finance, to bridge the worlds of web2 and web3 finance.
What is Acala (ACA)?
Acala is the DeFi and liquidity hub of Polkadot. It’s a decentralized finance network that runs on a scalable layer-1 smart contract platform. The platform is compatible with Ethereum and has been optimized for the DeFi market. For ease of use, it has built-in liquidity and ready-made financial applications. This range of financial applications allows users to become liquidity providers, trade assets, issue self-services loans, and even earn a high APY on their digital assets. The native currency of the protocol is ACA, though it has its own decentralized stablecoin (aUSD), decentralized exchange (Acala Swap), DOT Liquid Staking (LDOT) for users, and the EVM+. EVM+ combines the Ethereum Virtual Machine with Substrate, allowing developers to scale their Ethereum Dapps to Acala while also enjoying the new innovation brought by Acala’s products built with Substrate. These ensure that developers can access the best of Ethereum and the full power of Substrate.
The project was founded in October 2019 and has since received five Web3 Foundation grants. It has also received support from some of the largest funds in the DeFi market. These include Coinbase Ventures, Pantera Capital, Polychain Capital, Arrington XRP, ParaFi and CoinFund. The team has also grown from the founding members to a worldwide team of experts. These operate around the globe including New Zealand, China, Europe, South America, and the United States.
Acala was the first project to win a parachain slot auction on Polkadot. This allows the team to onboard its very own customized layer-1 network to Polkadot’s Relay Chain. The project has already gained recognition from a large community of over 800,000 members as well as over 100 ambassadors. These members continue to support Acalas mission to build a new, open financial system that helps to bring accessibility and opportunity to all users.
What is ACA and what is it used for?
The utility token of Acala is ACA. ACA is used to power the DeFi hub and has a total supply of 1,000,000,000. It will be released on KuCoin at the 25th of January at a price of $0.875 with an initial circulating supply of 69,304,481 tokens. The token will serve several purposes for the project. Firstly it will help to power the transaction fees on the platform. Secondly, it will be used for gas fees and the completion of smart contracts. It will also incentivize network nodes, who will monitor and relay messages to Polkadot. You can read more about the ACA token’s use cases here.
The token will also play an important part in the governance of the cryptocurrency. Tokens will allow community members to vote on a wide range of decisions. These include electing certain council members, voting on policies and driving the overall development of Acala. Furthermore, it will also limit risk through an algorithmic risk adjustment. This will help limit problems such as interest rates and collateral ratios. Lastly, ACA will also allow teams to create new Substrate pallets on the Acala blockchain. They can do this by staking the ACA they hold.
How does Acala Work?
Acala works as Polkadot’s economic hub. It provides users with DOT-based assets, Polkadot ecosystem assets, and cross-chain assets. These assets include cryptocurrencies such as Bitcoin, Ethereum and many more. The platform itself can be optimized to meet the needs of any DeFi project. It works in a way that allows continuous upgrading without forks. This means new developers can integrate and request new features based on their needs. For example, on-chain ‘keepers’ could automate protocol execution to enhance the user experience. Alternatively, they could make sure transactions are payable with any token, creating ease of transaction for users.
On the platform, the Acala Dollar (aUSD) is the built-in programmable primitive of the Acala network. aUSD works as the Polkadot-native decentralized stablecoin. It’s backed by DOT and other cross-chain assets such as BTC.
Who created Acala?
The project was founded by Ruitao Su, Bette Chen, Bryan Chen, and 0xThreeBody with the support of Laminar and Polka Wallet. Today, the team consists of some of the industry's best blockchain innovators, economists and full stack dApp developers. Together, they’re determined to innovate the DeFi industry and bridge the gap between web 2 and web3.
Acala has a huge partnership base, consisting of over 70 different partners. These include large brands such as Coinbase Ventures, Spartan and P2P capital. Acala’s partners also include web2 companies such as Current.com, a U.S.-based fintech company with 3 million customers. Acala is also working on an NFT and loyalty points platform with theChive, an online community with over 10 million monthly active users. Last, Acala has strong partners in the DeFi space. Acala received one of the first grants from DeFi pioneer, Compound, to build a bridge between Compound and Acala for a multi-chain money market.
What Makes Acala Unique?
One of the biggest advantages for users of Acala is its small gas fees. The current crypto market is held back by gas fees, sometimes costing $100’s to make a single transaction. Acala allows users to make transactions for a fraction of the fees required on other networks. It utilizes Polkadot’s weight-based fee model, in which users can make transactions at a lower cost without huge fluctuations in price.
Another advantage of Acala is that it accepts nearly all tokens when it comes to gas fees. Acala offers flexible fee tokens allowing users to settle transactions with USDT, USDC, aUSD, DOT, BTC, ETH, and several other options. Together, these advantages solve one of the biggest problems facing the industry.
For developers, the biggest advantages of Acala are to build on a layer-1 blockchain customized for DeFi. This means developers building in the Acala EVM+ will be able to natively leverage the liquidity of the Acala DEX, use features such as automatic scheduling or on-chain keepers, all while maintaining compatiblity with MetaMask for users. Since Acala’s chain can also be upgraded without forks, the chain has the ability to continuously be updated with new features requrested by teams building on Acala. In this sense, Acala’s platform is future-proof.
The technology behind Acala makes it one of the most innovative projects in the crypto space. Unlike many other projects, the projects team has taken a forward thinking approach, looking to bridge the gap between web 2 and web3. This customizability of the platform makes it easier for new DeFi companies to adapt to market changes and meet the demands of their users. With its token set to release later this month, it’s a project that has the potential to revolutionize how we currently use crypto and DeFi.
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