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<div data-page-id="WRnLdyBIpoELBZxwBIDl5hCLggh" data-lark-html-role="root" data-docx-has-block-data="true">
<h2 class="heading-2 ace-line old-record-id-BZWcdqBAFooRfKx8AvtlQrsdgpd">Key Takeaways</h2>
<ul class="list-bullet1">
<li class="ace-line ace-line old-record-id-HyV3dqj1hoOJvLx1Qbwlb69OgFg" data-list="bullet">
<div><strong>Infinite Sharding Paradigm:</strong> TON uses a dynamic multi-blockchain architecture that automatically splits and merges "shardchains" based on network load to maintain speed.</div>
</li>
<li class="ace-line ace-line old-record-id-CZfOdMIo1ohZQqxH40WlHNnSgPc" data-list="bullet">
<div><strong>Asynchronous Communication:</strong> Unlike Ethereum&rsquo;s synchronous model, TON smart contracts communicate via asynchronous messages, allowing for massive parallel processing.</div>
</li>
<li class="ace-line ace-line old-record-id-A6P1dsLUqoJF6OxAUDUltBg4gSh" data-list="bullet">
<div><strong>Hypercube Routing:</strong> This specialized mathematical structure ensures that messages travel between any two shards in the network via the shortest possible path, minimizing latency.</div>
</li>
<li class="ace-line ace-line old-record-id-DgQadt3Xdop4Zwxc8wVliiGKgDd" data-list="bullet">
<div><strong>Telegram Integration:</strong> TON is natively embedded into the Telegram interface, providing over 900 million users with seamless access to decentralized wallets and Mini Apps.</div>
</li>
</ul>
<h1 class="heading-1 ace-line old-record-id-Rg0OdITzvotOCDxE5LjlQ12gggb">How Does Toncoin (TON) Work?</h1>
<div class="ace-line ace-line old-record-id-GZVidw4qEoQ5jWxXedll4dBfgBd">In the pursuit of global blockchain adoption, The Open Network (TON) has emerged as a frontrunner by solving the critical issue of scalability. To understand <strong>how Toncoin (TON) works</strong>, one must look beyond the traditional single-chain design of Bitcoin or early Ethereum. TON is engineered as a "blockchain of blockchains," a complex but highly efficient ecosystem designed to handle millions of transactions per second.</div>
<div class="ace-line ace-line old-record-id-Z6Fnd05YmoqJ1CxG2Iblx5MZg0g">For traders analyzing assets on <a href="https://www.kucoin.com/en-eu/markets" data-lark-is-custom="true">KuCoin Markets</a>, Toncoin represents a unique hybrid of social media reach and high-performance engineering. The network has evolved into a fully decentralized infrastructure that supports everything from decentralized storage to trustless Bitcoin bridges, positioning itself as the backbone of the decentralized web.</div>
<h2 class="heading-2 ace-line old-record-id-Z7GadgKruoGR0sxz7qxlsPwfgmh">The 6W Framework of the TON Ecosystem</h2>
<div class="ace-line ace-line old-record-id-K3Tidb5IlojKctxAziMlkeagg5b">To grasp the scale of the network, we apply the <strong>6W principles</strong> to its technical state:</div>
<ul class="list-bullet1">
<li class="ace-line ace-line old-record-id-RDzadjQaPoorLoxTqNWlVLpageP" data-list="bullet">
<div><strong>Who:</strong> Originally conceived by the Durov brothers and now maintained by the global <strong>TON Foundation</strong> and a community of open-source developers.</div>
</li>
<li class="ace-line ace-line old-record-id-SzxedtfeaojICXxiMZNlT85rgag" data-list="bullet">
<div><strong>What:</strong> A <strong>Proof-of-Stake (PoS) Layer-1</strong> blockchain utilizing an adaptive infinite sharding architecture.</div>
</li>
<li class="ace-line ace-line old-record-id-HMWZdZHpJoPHfxxxkIQl4VKSgia" data-list="bullet">
<div><strong>Where:</strong> Integrated directly into the Telegram messaging app, allowing for "invisible" blockchain interactions.</div>
</li>
<li class="ace-line ace-line old-record-id-LKCpdCyRSoQGmDxHE8klf2Gdgtf" data-list="bullet">
<div><strong>When:</strong> Block finality is achieved in seconds, with a verified capacity that consistently sets records for transactions per second (TPS).</div>
</li>
<li class="ace-line ace-line old-record-id-XVK9dDlbtoHk0rxdMhIlQugDgxc" data-list="bullet">
<div><strong>Why:</strong> To create a decentralized internet where financial services are as accessible and fast as instant messaging.</div>
</li>
<li class="ace-line ace-line old-record-id-ZYiQdnEajovLVMx1cmulrrmGgju" data-list="bullet">
<div><strong>How:</strong> Through a three-layer hierarchy consisting of a <strong>Masterchain</strong>, <strong>Workchains</strong>, and <strong>Shardchains</strong>.</div>
</li>
</ul>
<h2 class="heading-2 ace-line old-record-id-AEMMdGABxomPQcxIPCxl6k6bgsb">1. The Architecture: Dynamic Infinite Sharding</h2>
<div class="ace-line ace-line old-record-id-BlL1dvxPVosaEbx459Ll9t41gfg">The most powerful answer to "how does Toncoin work" lies in its sharding mechanism. While most blockchains struggle with congestion as more users join, TON is designed to grow horizontally.</div>
<h3 class="heading-3 ace-line old-record-id-KaSMdBPvqoucyDxJIBklL25QgdS">Masterchain and Workchains</h3>
<div class="ace-line ace-line old-record-id-Q9BOd4GI4oiRqUx5Zjtl4RtCg5b">The network is anchored by a single <strong>Masterchain</strong>, which stores the network&rsquo;s vital configuration and the final state of all other chains. Underneath, they are <strong>Workchains</strong>&mdash;independent blockchains that can have their own sets of rules, virtual machines, and fee structures for specific use cases.</div>
<h3 class="heading-3 ace-line old-record-id-IAlZdqFB5oDbzlxKFixlUKUngTb">The Infinite Sharding Paradigm</h3>
<div class="ace-line ace-line old-record-id-Y7BVdds4Cot4Q7xJI4YlM9fGgvb">The true innovation is that each Workchain can split into $2^{60}$ <strong>Shardchains</strong>. If a particular shard becomes too busy, the network automatically splits it in two to process transactions in parallel. When the traffic subsides, the shards merge back together. This "infinite sharding" ensures that the network never hits a hard limit on throughput.</div>
<h2 class="heading-2 ace-line old-record-id-KGaYdzzoBoZAbnxYeRsl94aBgNd">2. Asynchronous Messaging and Hypercube Routing</h2>
<div class="ace-line ace-line old-record-id-FY27dc4gioZkzexZfT1l1fdig5z">One of the distinct features of <strong>how Toncoin (TON) works</strong> is its asynchronous nature. In many traditional blockchains, a transaction must wait for all smart contract calls to finish at once (synchronous). On TON, smart contracts send messages to each other that are processed independently.</div>
<h3 class="heading-3 ace-line old-record-id-NWOSdtoKFoONLrxPmQglF0FvgAc">Hypercube Routing Mechanism</h3>
<div class="ace-line ace-line old-record-id-L4tHdgSbHov6FuxWXHclbpE7ggg">To ensure these messages don't get lost or slowed down as the network scales, TON uses <strong>Hypercube Routing</strong>. This mathematical structure allows a message from one shard to reach any other shard in the network with a minimal number of "hops." Even if there are millions of shards, a message can typically find its destination in just a few steps.</div>
<div class="ace-line ace-line old-record-id-PupRd2OGYoz0pNxV633l0JW2gTd">This architecture prevents the "bottleneck" effect common in other sharded networks. Technical updates regarding these routing efficiencies are frequently detailed in the <a href="https://www.kucoin.com/en-eu/blog" data-lark-is-custom="true">KuCoin Blog</a>.</div>
<h2 class="heading-2 ace-line old-record-id-E9iAdAgDco1uZkxeCxulvTO2gmh">3. Technical Innovations: BTC Teleport and Decentralized AI</h2>
<div class="ace-line ace-line old-record-id-NIUBdZnxbodLbOxk2fqlmfUlgMg">The TON ecosystem continuously integrates advanced features that redefine its utility:</div>
<ol class="list-number1" start="1">
<li class="ace-line ace-line old-record-id-JMZ3d8wwBoQp3bxDy0cl0eQBghg" data-list="number">
<div><strong>TON BTC Teleport:</strong> This feature allows for the trustless, non-custodial movement of Bitcoin onto the TON network. Users can bring their BTC into the TON DeFi ecosystem without relying on centralized bridges or intermediaries.</div>
</li>
<li class="ace-line ace-line old-record-id-ZF9sdQFjBokFvqxWSTWlhikEg3c" data-list="number">
<div><strong>Decentralized AI Compute:</strong> TON supports decentralized AI agents through specialized initiatives. Users can pay for AI processing power directly in TON tokens, facilitating a self-sustaining economy of autonomous programs within the ecosystem.</div>
</li>
</ol>
<div class="ace-line ace-line old-record-id-IKytdIOs1omt8RxbIPql1IB0ggf">These advancements are often highlighted in <a href="https://www.kucoin.com/zh-hant/announcement" data-lark-is-custom="true">official announcements</a> as the network moves closer to becoming a universal infrastructure.</div>
<h2 class="heading-2 ace-line old-record-id-SYTudAMAuoaZ9Kxk6VelNehqgZe">4. Native Utility: More Than Just a Gas Token</h2>
<div class="ace-line ace-line old-record-id-L0R9dogwJoezOGxyNgVlPkcRgVd">The TON token is the essential "fuel" for the entire Open Network. Its utility is deeply embedded in both the technical and social layers:</div>
<ul class="list-bullet1">
<li class="ace-line ace-line old-record-id-QWOkdcMxTo7imtxw1tIl5SwmgFQ" data-list="bullet">
<div><strong>Staking and Security:</strong> As a PoS network, TON is secured by validators who stake large amounts of the token. Smaller holders can participate through delegation using the <a href="https://www.kucoin.com/en-eu" data-lark-is-custom="true">KuCoin Lite Version</a>.</div>
</li>
<li class="ace-line ace-line old-record-id-KrQpdaNcDoYzokxGfzllasKTgRf" data-list="bullet">
<div><strong>Network Services:</strong> TON is required for decentralized storage (TON Storage), human-readable blockchain addresses (TON DNS), and decentralized proxy services.</div>
</li>
<li class="ace-line ace-line old-record-id-TNSjdpIGooWSKpx0dBUlJ8ONgC3" data-list="bullet">
<div><strong>In-App Economy:</strong> Within the social interface, TON is used to purchase advertisements, access premium features, and trade digital goods via Mini Apps.</div>
</li>
</ul>
<h2 class="heading-2 ace-line old-record-id-KbkxdrN91oPQyJxySfwl05NYgJf">Comparison: TON vs. Other High-Throughput Networks</h2>
<div class=" old-record-id-D39NdhwUco4fpNxDrDilauvggPf" data-type="sheet">
<style> td {white-space:nowrap;border:0.5pt solid #dee0e3;font-size:10pt;font-style:normal;font-weight:normal;vertical-align:middle;word-break:normal;word-wrap:normal;}</style>
<table border=""><colgroup><col width="188"><col width="188"><col width="188"><col width="188"></colgroup>
<tbody>
<tr>
<td>Feature</td>
<td>Toncoin (TON)</td>
<td>Solana (SOL)</td>
<td>Ethereum (L2)</td>
</tr>
<tr>
<td>Consensus</td>
<td>PoS (BFT variant)</td>
<td>Proof of History / PoS</td>
<td>PoS</td>
</tr>
<tr>
<td>Scaling</td>
<td>Dynamic Sharding</td>
<td>Parallel Execution</td>
<td>Modular / Rollups</td>
</tr>
<tr>
<td>Messaging</td>
<td>Asynchronous</td>
<td>Synchronous</td>
<td>Synchronous</td>
</tr>
<tr>
<td>User Access</td>
<td>Native Social Integration</td>
<td>Browser Wallets</td>
<td>Browser Wallets</td>
</tr>
<tr>
<td>Primary Focus</td>
<td>AI &amp; BTC Teleport</td>
<td>Real-time Finality</td>
<td>ZK-Interop</td>
</tr>
</tbody>
</table>
</div>
<h2 class="heading-2 ace-line old-record-id-EKMAdWa6loaWw2xIKvjld8h1gBg">Conclusion: The Architecture of Mass Adoption</h2>
<div class="ace-line ace-line old-record-id-OVRDd1l2Doj3OXxnzMjlYTPggkc">Understanding <strong>how Toncoin (TON) works</strong> reveals a network built for the "SuperApp" era. By combining a mathematically advanced sharding mechanism with an intuitive user interface inside one of the world's most crypto-friendly messaging platforms, TON has successfully bridged the gap between complex blockchain engineering and everyday utility.</div>
<div class="ace-line ace-line old-record-id-AxDtd1x4po4bycx2iu5lylu0g1c">As the network continues to evolve, the integration of trustless Bitcoin liquidity and decentralized AI services ensures that Toncoin remains a pillar of the modern Web3 stack. You can track the latest liquidity and market depth for TON across all major pairs on <a href="https://www.kucoin.com/en-eu/markets" data-lark-is-custom="true">KuCoin Markets</a>.</div>
<h2 class="heading-2 ace-line old-record-id-A7shd38L7oiMSdx7ZsglEMD1gAh">FAQs</h2>
<h3 class="heading-3 ace-line old-record-id-FaMXdJNFaoOOWaxGqcolebRvg41">What is the "Infinite Sharding Paradigm"?</h3>
<div class="ace-line ace-line old-record-id-Qv0ldSpK0oHongx9nPMlaXlFgZc">It is TON&rsquo;s ability to split the network into smaller shardchains when load is high and merge them when load is low, allowing it to scale indefinitely to meet demand.</div>
<h3 class="heading-3 ace-line old-record-id-OXC2dwpC8oKDotxgHhGlHNtTg3Z">Is TON still connected to Telegram?</h3>
<div class="ace-line ace-line old-record-id-RP1RdyV4koxVYtxAM6ul63X2gjc">While the TON Foundation is an independent non-profit, the network remains the primary blockchain for Telegram, powering its internal wallet, ads, and usernames.</div>
<h3 class="heading-3 ace-line old-record-id-MOOKdiTrnoEndRxnPiYlbUyPgtg">How does "BTC Teleport" differ from a standard bridge?</h3>
<div class="ace-line ace-line old-record-id-C3GAdSwTGouUoixT5YXlcx7wgTc">Standard bridges often rely on a centralized custodian. BTC Teleport uses smart contracts and cryptographic proofs to move Bitcoin trustlessly, meaning you never give up control of your private keys.</div>
<h3 class="heading-3 ace-line old-record-id-Jg9AdkeQkoWnp3xqYejlgk01g3g">Can I earn rewards with TON?</h3>
<div class="ace-line ace-line old-record-id-N2MPdllkDoJPMvxg3NdlXrjpgyI">Yes. You can stake your TON tokens to help secure the network and earn rewards. This can be done through a validator or via staking services available on the <a href="https://www.kucoin.com/en-eu" data-lark-is-custom="true">KuCoin Lite Version</a>.</div>
<h3 class="heading-3 ace-line old-record-id-XnB2dvDO8oubLYxBmFklthJ1gTo">Where can I find information on the latest network upgrades?</h3>
<div class="ace-line ace-line old-record-id-VBHId1Ua9oq5grxrerdl1etsgOd">The most reliable sources for network milestones and roadmap progress are the <a href="https://www.kucoin.com/zh-hant/announcement" data-lark-is-custom="true">official announcements</a> and the <a href="https://www.kucoin.com/en-eu/blog" data-lark-is-custom="true">KuCoin Blog</a>.</div>
<div class="ace-line ace-line old-record-id-W6zrdv2gVogND7xs8Tnl21J6gdg">Join 30 million global users on the world&rsquo;s leading crypto exchange by signing up for your free account now. <a href="https://www.kucoin.com/ucenter/signup" data-lark-is-custom="true">Register Now!</a></div>
<h2 class="heading-2 ace-line old-record-id-YwWKdY5CroRdamx4NzvlR1Hpgqd">Further reading</h2>
<div class="ace-line ace-line old-record-id-QRgqdijmAorniXxcCrJlRJ78gBc"><a href="https://www.kucoin.com/learn/web3/top-10-ton-wallets-for-the-open-network-ecosystem" data-lark-is-custom="true">Top 10 TON Wallets for The Open Network (TON) Ecosystem</a></div>
<div class="ace-line ace-line old-record-id-CJ7Md8oxcoLAHbxsd1olI5DIgOb"><a href="https://www.kucoin.com/news/flash/cocoon-launches-on-ton-enables-gpu-owners-to-earn-toncoin-for-ai-tasks" data-lark-is-custom="true">Cocoon Launches on TON, Enables GPU Owners to Earn Toncoin for AI Tasks</a></div>
</div>

How Does Toncoin (TON) Work? 

<div data-page-id="WR19dQaBfoQDqhxK833lMCKPgGe" data-lark-html-role="root" data-docx-has-block-data="true">
<h2 class="heading-2 ace-line old-record-id-X3e3d3KxUoxHmExOXAulfVeCgbb">Key Takeaways</h2>
<ul class="list-bullet1">
<li class="ace-line ace-line old-record-id-TjYRd42Y5o0QXHxvvDslZEfMgNb" data-list="bullet">
<div><strong>Layer-0 Infrastructure:</strong> Polkadot acts as a foundational "meta-protocol" that connects multiple specialized blockchains into a single unified network.</div>
</li>
<li class="ace-line ace-line old-record-id-T84tdj2f9oHNDqxmcwXlUbEdgLb" data-list="bullet">
<div><strong>Shared Security Model:</strong> All connected blockchains (Parachains) inherit the robust security of the central Relay Chain, eliminating the need for independent validator sets.</div>
</li>
<li class="ace-line ace-line old-record-id-GOfZdi2uHosbo0xBA1jleskRg6d" data-list="bullet">
<div><strong>Agile Coretime:</strong> The network has evolved into a dynamic resource model, allowing projects to purchase the computer power they need on-demand rather than through rigid auctions.</div>
</li>
<li class="ace-line ace-line old-record-id-CJ3Zdu9CAo95gKxr8dQlzA7XgLd" data-list="bullet">
<div><strong>Native Interoperability:</strong> Through the XCM (Cross-Consensus Messaging) format, data and assets can move seamlessly between different blockchains without centralized bridges.</div>
</li>
</ul>
<div class="ace-line ace-line old-record-id-KPpgdwQZvoaOHtxUAiolLMQ8gGh">In the traditional blockchain landscape, networks often operate as "silos," unable to communicate or share security with one another. To understand <strong>how Polkadot (DOT) works</strong>, one must visualize it as a "network of networks." Often referred to as a Layer-0 protocol, Polkadot provides the underlying architecture that allows diverse, specialized blockchains to coexist, communicate, and scale under a single security umbrella.</div>
<div class="ace-line ace-line old-record-id-XTsBdhyu3os5z0x6iSTlfWEsghf">For traders and builders monitoring the <a href="https://www.kucoin.com/en-eu/markets" data-lark-is-custom="true">KuCoin Markets</a>, Polkadot represents a departure from the monolithic design of earlier blockchains. By separating the consensus mechanism from specific application logic, Polkadot enables a level of customization and interoperability that is essential for the next generation of decentralized finance and Web3 services.</div>
<h2 class="heading-2 ace-line old-record-id-LHDrdgeDmod5YIxkU7zlhd6Tg6b">The 6W Framework of the Polkadot Ecosystem</h2>
<div class="ace-line ace-line old-record-id-YB4LdCDYBoyc7txBwERln22Qgjh">To define the mechanics of Polkadot in a practical context, we apply the <strong>6W principles</strong>:</div>
<ul class="list-bullet1">
<li class="ace-line ace-line old-record-id-Ekz6dG5nloJPQbxgRL8lGyr8g8g" data-list="bullet">
<div><strong>Who:</strong> Conceived by Ethereum co-founder Dr. Gavin Wood and developed by the Web3 Foundation and Parity Technologies.</div>
</li>
<li class="ace-line ace-line old-record-id-HKKzdS3l3oxrkjxtHmFlwUkVg2c" data-list="bullet">
<div><strong>What:</strong> A <strong>shared multi-chain meta-protocol</strong> that enables the cross-chain transfer of any data or asset type.</div>
</li>
<li class="ace-line ace-line old-record-id-X19kd8SNJoR0DxxAhaVl81iGgfb" data-list="bullet">
<div><strong>Where:</strong> A decentralized web of independent Parachains linked to a high-security Relay Chain.</div>
</li>
<li class="ace-line ace-line old-record-id-TmBCd10YDojYyRxIrK0l4zFFgWd" data-list="bullet">
<div><strong>When:</strong> Achieving sub-6-second block finality through advanced consensus upgrades.</div>
</li>
<li class="ace-line ace-line old-record-id-Q1LDd5kUpo4HFgxVTjhlx2ZRgSf" data-list="bullet">
<div><strong>Why:</strong> To solve the critical issues of scalability, interoperability, and security fragmentation in the blockchain industry.</div>
</li>
<li class="ace-line ace-line old-record-id-PoaodQKg9owae1x67jLlhyvxg5e" data-list="bullet">
<div><strong>How:</strong> Utilizing <strong>Nominated Proof-of-Stake (NPoS)</strong> and a specialized "Coretime" resource allocation model.</div>
</li>
</ul>
<ol class="ace-line ace-line old-record-id-ZCpUd57Igo7ahQxXhjplX7WMgWf" start="1">
<li data-list="number">
<h2 class="heading-2">The Core Architecture: Relay Chain and Parachains</h2>
</li>
</ol>
<div class="ace-line ace-line old-record-id-XLqedQYkao1u3fxfejmlR3TGgEe">The most fundamental answer to "how does Polkadot work" lies in its two-tier structure. Unlike a standard blockchain that handles everything on one chain, Polkadot splits its responsibilities.</div>
<h3 class="heading-3 ace-line old-record-id-SYOpd4C8nodM0QxjFWEljlnLgqf">The Relay Chain</h3>
<div class="ace-line ace-line old-record-id-VD66d7hMuo1HjGxkDr6lJZevgIg">The Relay Chain is the "heart" of Polkadot. Its primary responsibility is not to host smart contracts, but to provide <strong>Shared Security</strong> and coordinate consensus for the entire ecosystem. By focusing purely on security and governance, the Relay Chain ensures that the entire network remains synchronized and resistant to attacks.</div>
<h3 class="heading-3 ace-line old-record-id-YUgpdpedEoJR8gx67DplUv05g1s">Parachains (Parallel Blockchains)</h3>
<div class="ace-line ace-line old-record-id-QTMfdjMznopNobxiJ04lZiRtgFc">Parachains are specialized, independent blockchains that connect to the Relay Chain. These chains can be optimized for specific tasks&mdash;such as privacy, gaming, or high-frequency trading. Because they run in parallel, they do not compete for block space with one another, which is how Polkadot achieves its massive scalability.</div>
<div class="ace-line ace-line old-record-id-FTdTdB35Qoj3aZx6PGdlffDEgHb">Technical deep-dives into these architectural components are frequently shared in the <a href="https://www.kucoin.com/en-eu/blog" data-lark-is-custom="true">KuCoin Blog</a>, helping users understand the nuances of multi-chain scaling.</div>
<ol class="ace-line ace-line old-record-id-G2U9d7DczoDs6Px4Svbl1sZagRe" start="2">
<li data-list="number">
<h2 class="heading-2">From Auctions to Agile Coretime</h2>
</li>
</ol>
<div class="ace-line ace-line old-record-id-GmGNduGRTorbYzxdgAilUwM7gp8">Historically, projects had to win expensive "slot auctions" to connect to Polkadot. However, the network has evolved into a more flexible model known as <strong>Agile Coretime</strong>.</div>
<div class="ace-line ace-line old-record-id-JEnxdRdfHobhcVxQYkgl0TZTgPe">In this updated system, Polkadot treats its computational resources (Cores) as a commodity. Projects can now acquire the power they need in a way that suits their business model:</div>
<ul class="list-bullet1">
<li class="ace-line ace-line old-record-id-RsukdCjL6o6wxfxuR8zlxhqMgNg" data-list="bullet">
<div><strong>Bulk Coretime:</strong> For established projects requiring consistent, predictable access to the network.</div>
</li>
<li class="ace-line ace-line old-record-id-HI6hdrA0poVeRoxMpO2lTO0fgGc" data-list="bullet">
<div><strong>On-Demand Coretime:</strong> For smaller applications or startups that only need to process blocks occasionally, paying only for what they use.</div>
</li>
</ul>
<div class="ace-line ace-line old-record-id-LbQGdu7Bho76Wnx4oRKlB1Ppgrf">This shift lowers the barrier to entry and allows for a more efficient distribution of network resources. Users can manage their DOT holdings and participate in these ecosystem shifts via the <a href="https://www.kucoin.com/en-eu" data-lark-is-custom="true">KuCoin Lite Version</a>.</div>
<ol class="ace-line ace-line old-record-id-GqQbdYpU3oOOvZxgw7QluyOqgAf" start="3">
<li data-list="number">
<h2 class="heading-2">Interoperability via XCM (Cross-Consensus Messaging)</h2>
</li>
</ol>
<div class="ace-line ace-line old-record-id-N980dDHCIozVf8xbdENl9czngYf">A critical part of <strong>how Polkadot (DOT) works</strong> is the ability for these different chains to talk to each other. Polkadot uses a language called <strong>XCM</strong>.</div>
<div class="ace-line ace-line old-record-id-ReS3dhJWroTCR0xkvhElDmbngib">XCM allows a smart contract on an "Identity Chain" to interact with a "DeFi Chain" trustlessly. Because this messaging happens natively within the Polkadot ecosystem, it avoids the risks associated with third-party bridges, which are often the targets of security breaches. This native interoperability is a frequent topic in <a href="https://www.kucoin.com/zh-hant/announcement" data-lark-is-custom="true">official announcements</a> as new parachains join the ecosystem.</div>
<ol class="ace-line ace-line old-record-id-Qrw0dH5DXoMW06xJUnNlWXx6goe" start="4">
<li data-list="number">
<h2 class="heading-2">The DOT Token: Staking, Governance, and Utility</h2>
</li>
</ol>
<div class="ace-line ace-line old-record-id-DbBJd13Y6omB8BxK04TlwyiQg1g">The DOT token is the native utility token that keeps the network running. Its role is divided into three main functions:</div>
<ol class="list-number1" start="1">
<li class="ace-line ace-line old-record-id-MHeqdtUDrokpctxaLwrl5mhVg0g" data-list="number">
<div><strong>Staking for Security:</strong> Polkadot uses Nominated Proof-of-Stake (NPoS). DOT holders can "nominate" trustworthy validators to secure the network. In return for staking their tokens, they earn rewards.</div>
</li>
<li class="ace-line ace-line old-record-id-JtqMdnTKSonqhexIhZplOHThgnc" data-list="number">
<div><strong>On-Chain Governance:</strong> Unlike many networks where decisions are made by a small group of developers, Polkadot is a true DAO. DOT holders vote on everything from technical upgrades to how the network's treasury is spent.</div>
</li>
<li class="ace-line ace-line old-record-id-AUCPdu3pUopegoxOYdEle6Eagcc" data-list="number">
<div><strong>Coretime Purchasing:</strong> In the new resource model, DOT is the currency used to buy the compute power (Coretime) required to run a parachain.</div>
</li>
</ol>
<div class="ace-line ace-line old-record-id-Vg8rdIrVKoEOb0xQnbolsDwWgCb">The transition toward a more scarcity-driven tokenomics model and the burning of a portion of fees are key metrics that traders monitor on <a href="https://www.kucoin.com/en-eu/markets" data-lark-is-custom="true">KuCoin Markets</a>.</div>
<h2 class="heading-2 ace-line old-record-id-RcqVdVA5SocMklxQMRvlNLgRgwe">Comparison: Polkadot vs. Traditional Blockchains</h2>
<div class=" old-record-id-IM5kdggG8oYTchxjlyHlk4fngLh" data-type="sheet">
<style> td {white-space:nowrap;border:0.5pt solid #dee0e3;font-size:10pt;font-style:normal;font-weight:normal;vertical-align:middle;word-break:normal;word-wrap:normal;}</style>
<table border=""><colgroup><col width="121"><col width="310"><col width="310"></colgroup>
<tbody>
<tr>
<td>Feature</td>
<td>Polkadot (DOT)</td>
<td>Monolithic Blockchains (L1)</td>
</tr>
<tr>
<td>Structure</td>
<td>Multi-chain (Relay + Parachains)</td>
<td>Single-chain</td>
</tr>
<tr>
<td>Security</td>
<td>Shared across all chains</td>
<td>Each chain must provide its own</td>
</tr>
<tr>
<td>Scalability</td>
<td>Parallel processing (High)</td>
<td>Sequential processing (Lower)</td>
</tr>
<tr>
<td>Upgrades</td>
<td>Forkless (On-chain governance)</td>
<td>Hard forks required</td>
</tr>
<tr>
<td>Resource Use</td>
<td>Agile Coretime (On-demand)</td>
<td>Variable Gas Markets</td>
</tr>
</tbody>
</table>
</div>
<h2 class="heading-2 ace-line old-record-id-RWxRdHFaSonvBDxQL2slq02Wggg">Conclusion: The Foundation for a Decentralized Web</h2>
<div class="ace-line ace-line old-record-id-TGi8dujqioPvwIxgoedlchc7gic">Understanding <strong>how Polkadot (DOT) work</strong> reveals a protocol designed for longevity and adaptability. By providing a secure foundation that other blockchains can plug into, Polkadot eliminates the need for every new project to build its own security from scratch.</div>
<div class="ace-line ace-line old-record-id-MBr7dnyf5oEyL5x9gq8lcWkCg0c">As the ecosystem continues to refine its "Agile Coretime" model and expand its cross-chain messaging capabilities, the utility of the DOT token as a resource-governing asset grows. For those tracking these developments on <a href="https://www.kucoin.com/en-eu" data-lark-is-custom="true">KuCoin</a>, Polkadot remains one of the most technically ambitious and resilient projects in decentralized space.</div>
<h2 class="heading-2 ace-line old-record-id-NOoYdTUxAo09OhxTNiglL3Jtgab">FAQs</h2>
<h3 class="heading-3 ace-line old-record-id-LtpTdyTsVoXAE7xlGyelS8UBgVs">Is Polkadot a blockchain for smart contracts?</h3>
<div class="ace-line ace-line old-record-id-CyNAdUvVNogtf1xww28lx7DNgLp">The Relay Chain itself does not support smart contracts. Instead, it provides security to "Parachains," which are the chains where smart contracts and applications actually run.</div>
<h3 class="heading-3 ace-line old-record-id-W01ndLQu9oFsaFxG79WlDRBvgrd">What is the purpose of DOT staking?</h3>
<div class="ace-line ace-line old-record-id-CdjpdjfJ7o9XsDxIo3flHKGVgNd">Staking DOT is used to select validators who verify transactions. This secures the network and prevents malicious actors from taking control.</div>
<h3 class="heading-3 ace-line old-record-id-R2vbdqtxQoWFxCxVfGblYTMDguc">How does Polkadot upgrade without hard forks?</h3>
<div class="ace-line ace-line old-record-id-TDCQdchcgowcCzxsZTXlWH3BgeC">Polkadot has its logic stored on-chain. When a governance vote passes, the network automatically updates its own code, allowing it to evolve without splitting the community.</div>
<h3 class="heading-3 ace-line old-record-id-L7KId7mbOozn1txPsfOl4QtHgdc">What is "Shared Security"?</h3>
<div class="ace-line ace-line old-record-id-ZwvLdEXRGo2P7MxQIBwlnOqogMc">Shared Security means that all Parachains connected to Polkadot are protected by the same set of validators on the Relay Chain, providing even small chains with top-tier security.</div>
<h3 class="heading-3 ace-line old-record-id-Jb4SdSxyUoW4tvx5EF3lVJLSgDd">Where can I find the latest Polkadot referendum results?</h3>
<div class="ace-line ace-line old-record-id-XzWBd40bkonOQtxtDtQljn5Jgkd">Detailed results of on-chain votes and network milestones are often summarized in <a href="https://www.kucoin.com/zh-hant/announcement" data-lark-is-custom="true">official announcements</a> and on the <a href="https://www.kucoin.com/en-eu/blog" data-lark-is-custom="true">KuCoin Blog</a>.</div>
<div class="ace-line ace-line old-record-id-Qj8TdOhecoUwsWxmgTvlPd83glf">Join 30 million global users on the world&rsquo;s leading crypto exchange by signing up for your free account now. <a href="https://www.kucoin.com/ucenter/signup" data-lark-is-custom="true">Register Now!</a></div>
<h2 class="heading-2 ace-line old-record-id-PAA0dlfBio1jwQxi2YylSrh3gZf">Further reading</h2>
<div class="ace-line ace-line old-record-id-A6DidAypLoX3sJxspdKlndOkgOb"><a href="https://www.kucoin.com/news/flash/polkadot-dot-surges-41-amid-halving-and-etf-anticipation" data-lark-is-custom="true">Polkadot (DOT) Surges 41% Amid Halving and ETF Anticipation</a></div>
<div class="ace-line ace-line old-record-id-A0fBdPdxjoW6D8xAnRzle6qVgrb"><a href="https://www.kucoin.com/news/articles/polkadot-set-to-implement-landmark-2-1-billion-dot-supply-cap-in-march-2026" data-lark-is-custom="true">Polkadot Set to Implement Landmark 2.1 Billion DOT Supply Cap in March 2026</a></div>
<div class="ace-line ace-line old-record-id-VyfBdpBSMo0TgkxMYHLlMftfgPe"><a href="https://www.kucoin.com/news/flash/polkadot-to-reduce-annual-supply-for-first-time-in-2026-inflation-rate-to-drop-to-3-11" data-lark-is-custom="true">Polkadot to Reduce Annual Supply for First Time in 2026; Inflation Rate to Drop to 3.11%</a></div>
</div>

How Does Polkadot (DOT) Work?

<div data-page-id="BCMFdRTJAoeTsWx7qwHllo9lglp" data-lark-html-role="root" data-docx-has-block-data="true">
<h2 class="heading-2 ace-line old-record-id-FgSLdKa8ioaAi9xJ4M2lN7RzgRd">Key Takeaways</h2>
<ul class="list-bullet1">
<li class="ace-line ace-line old-record-id-PQvtd4wD1oYFfOxHNSNlRGAfg8g" data-list="bullet">
<div><strong>Hashgraph Technology:</strong> Unlike linear blockchains, Hedera uses a <strong>Directed Acyclic Graph (DAG)</strong> called Hashgraph, allowing for parallel transaction processing and sub-5 second finality.</div>
</li>
<li class="ace-line ace-line old-record-id-PZGZdDKHgos3vKxnGlHluGLRgPd" data-list="bullet">
<div><strong>Gossip-about-Gossip:</strong> This unique protocol enables nodes to share transaction data and the history of that data, creating a secure and fair chronological record of all events.</div>
</li>
<li class="ace-line ace-line old-record-id-VZvPdqAo5osrkvx7598lS2T1gTh" data-list="bullet">
<div><strong>Enterprise Governance:</strong> The network is managed by the <strong>Hedera Governing Council</strong>, a group of global giants (including Google and IBM) ensuring stability and institutional compliance.</div>
</li>
<li class="ace-line ace-line old-record-id-FQDTdMHX5oaqeHxSKO0lDcWHgic" data-list="bullet">
<div><strong>Predictable Utility:</strong> HBAR serves as the network&rsquo;s fuel for transaction fees&mdash;which are pegged to the USD for business predictability&mdash;and as the mechanism for Proof-of-Stake security.</div>
</li>
</ul>
<div class="ace-line ace-line old-record-id-D0w3d3y4joaQKSxPPLklcDbYgjb">In the rapidly evolving world of distributed ledger technology (DLT), Hedera has carved out a distinct niche by moving away from traditional blockchain structures. To understand <strong>how Hedera (HBAR) works</strong>, one must first recognize that it is built on an entirely different mathematical foundation known as <strong>Hashgraph</strong>. This technology was engineered to provide the performance, security, and governance required for the next generation of enterprise-grade decentralized applications (dApps).</div>
<div class="ace-line ace-line old-record-id-Sy1Nd1QGOoAZ16x2420lGYwjg8O">For traders and institutional investors monitoring the <a href="https://www.kucoin.com/en-eu/markets" data-lark-is-custom="true">KuCoin Markets</a>, Hedera represents a "third-generation" public network. Its focus on energy efficiency, massive throughput (10,000+ TPS), and institutional backing makes it a critical infrastructure layer for everything from supply chain tracking to tokenized real-world assets.</div>
<h2 class="heading-2 ace-line old-record-id-C5HKdbDwioIMmFxuGQElAICLgNf">The 6W Framework of the Hedera Network</h2>
<div class="ace-line ace-line old-record-id-GOFcdz4lvosUQgxkO25l4bJogff">To define the core value proposition of Hedera, we apply the <strong>6W principles</strong>:</div>
<ul class="list-bullet1">
<li class="ace-line ace-line old-record-id-FYRNdSWOeoJLh8xQmnIlmC9qgBe" data-list="bullet">
<div><strong>Who:</strong> Invented by Dr. Leemon Baird and managed by a council of world-leading organizations across diverse industries.</div>
</li>
<li class="ace-line ace-line old-record-id-WzZldazTlo7aeEx7DhOl5jtDgwg" data-list="bullet">
<div><strong>What:</strong> An <strong>enterprise-grade public DLT</strong> that utilizes a hashgraph consensus algorithm rather than a chain of blocks.</div>
</li>
<li class="ace-line ace-line old-record-id-I9o6dqXCcouOzHxldRPlUIAPgtb" data-list="bullet">
<div><strong>Where:</strong> A global network of nodes maintained by various stakeholders, designed to support massive scale.</div>
</li>
<li class="ace-line ace-line old-record-id-IV82drgLFotCwdxDEVmlfhVBguh" data-list="bullet">
<div><strong>When:</strong> Achieving asynchronous Byzantine Fault Tolerance (aBFT) and consensus finality in seconds.</div>
</li>
<li class="ace-line ace-line old-record-id-V5B6dCJ84ooWfdxGbd8l5265gDv" data-list="bullet">
<div><strong>Why:</strong> To solve the "Blockchain Trilemma" by offering high speed and low cost without sacrificing security or decentralization.</div>
</li>
<li class="ace-line ace-line old-record-id-AqS1d0LaUoIm4ax5eEnltHMNgtb" data-list="bullet">
<div><strong>How:</strong> Through the <strong>Gossip-about-Gossip protocol</strong>, virtual voting, and a Proof-of-Stake (PoS) consensus layer.</div>
</li>
</ul>
<ol class="ace-line ace-line old-record-id-SsRVdJwS2o0ZvgxiCeZlrEvEgs0" start="1">
<li data-list="number">
<h2 class="heading-2">The Core Innovation: Hashgraph Consensus</h2>
</li>
</ol>
<div class="ace-line ace-line old-record-id-AGajdNa5cow1FFxOKdNl6cuWgXb">The most fundamental answer to "how does Hedera work" lies in its consensus mechanism. Most blockchains are like a single-lane road where only one block can be added at a time. Hashgraph is more like a multi-lane highway where all "branches" of transactions are woven back together.</div>
<h3 class="heading-3 ace-line old-record-id-NCcddLVetoLSd3xlECdlWYnFgse">Gossip-about-Gossip</h3>
<div class="ace-line ace-line old-record-id-AcGjdnpNcor32nxxQSklXRGhgRd">Nodes on the Hedera network do not just share transaction data; they share information about the <em>process</em> of sharing. Each node tells a random neighbor everything it knows, including the "hash" of the last person who shared that information. This metadata creates a "gossip sync" history, allowing every node to see the entire history of how information moved through the network.</div>
<h3 class="heading-3 ace-line old-record-id-NwCTdazMooX2M8xHyEuljo9sgIb">Virtual Voting</h3>
<div class="ace-line ace-line old-record-id-HDHrdQaYvoWvkMxKvUolWYqcgYg">Because every node has a copy of the "hashgraph" (the map of who talked to whom and when), they do not need to send votes to each other over the internet. Instead, each node can "virtually" calculate how every other node would have voted. This eliminates the massive bandwidth overhead found in traditional voting-based consensus models, allowing Hedera to achieve the highest possible security standard: <strong>asynchronous Byzantine Fault Tolerance (aBFT)</strong>. Technical deep-dives into this security model are frequently explored in the <a href="https://www.kucoin.com/en-eu/blog" data-lark-is-custom="true">KuCoin Blog</a>.</div>
<ol class="ace-line ace-line old-record-id-PJeudKrN5oGXdYx262Qlh9llggd" start="2">
<li data-list="number">
<h2 class="heading-2">Hedera Service Layers: Beyond Simple Payments</h2>
</li>
</ol>
<div class="ace-line ace-line old-record-id-XCtmdeIHKoTPT3xyfQXlmeFwgnd">Hedera is not just a payment rail; it is a full-service development platform. It offers three primary services that can be accessed via APIs:</div>
<ul class="list-bullet1">
<li class="ace-line ace-line old-record-id-SHBXdbwYloM5EexN5j7lQ3sdgwd" data-list="bullet">
<div><strong>Hedera Consensus Service (HCS):</strong> This allows any application to utilize the network&rsquo;s decentralized trust. It provides verifiable timestamps and ordering of events, which is crucial for supply chains and audit logs.</div>
</li>
<li class="ace-line ace-line old-record-id-IvupdYOuFoaxLHx7xevlYCBZgYb" data-list="bullet">
<div><strong>Hedera Token Service (HTS):</strong> This enables the native minting and management of both fungible and non-fungible tokens (NFTs). Because these are native to the protocol and do not require complex smart contracts, transfers are faster and significantly cheaper.</div>
</li>
<li class="ace-line ace-line old-record-id-YAPKdbbGoo9aCMxjOMwlZbqAgbe" data-list="bullet">
<div><strong>Smart Contract Service:</strong> Fully compatible with Solidity (the language of Ethereum), this service allows developers to port over EVM-based dApps while enjoying the sub-5 second finality of the Hashgraph.</div>
</li>
</ul>
<div class="ace-line ace-line old-record-id-NGdNdV3NXocbxGxKxU1lDMJJgFg">Users looking for a streamlined way to interact with these assets can utilize the <a href="https://www.kucoin.com/en-eu" data-lark-is-custom="true">KuCoin Lite Version</a> for high-speed trading and asset management.</div>
<ol class="ace-line ace-line old-record-id-TfWRdYQzXoyRYPx05AZl4hPZgRh" start="3">
<li data-list="number">
<h2 class="heading-2">Governance: The Hedera Governing Council</h2>
</li>
</ol>
<div class="ace-line ace-line old-record-id-BeSDdfgm5of2d0x6yOgl5Rcxg7d">A major "different" between Hedera and other public ledgers is its governance model. The network is managed by the <strong>Hedera Governing Council</strong>, which consists of up to 39 term-limited global enterprises including <strong>Google, IBM, Boeing, and Dell</strong>.</div>
<div class="ace-line ace-line old-record-id-HFF0dnDWbocjIgxjwNLllrPdgwg">This model ensures that no single entity can control the network or force a "hard fork." The council is responsible for setting the codebase roadmap, managing the treasury, and ensuring the network adheres to regulatory standards across different jurisdictions. Updates on new council members and strategic shifts are regularly listed in the <a href="https://www.kucoin.com/zh-hant/announcement" data-lark-is-custom="true">official announcements</a> section.</div>
<ol class="ace-line ace-line old-record-id-L5GEd6jkWoKVFCxUivtl2K9Cgbc" start="4">
<li data-list="number">
<h2 class="heading-2">The Role and Utility of the HBAR Token</h2>
</li>
</ol>
<div class="ace-line ace-line old-record-id-GeQRdaJfVo43c1x86r7lJx0Cglb">The HBAR token is the native utility coin of the Hedera ecosystem. It performs two critical roles:</div>
<ol class="list-number1" start="1">
<li class="ace-line ace-line old-record-id-Cnv5dS3l5oKSFPxNY4slw8CFg4N" data-list="number">
<div><strong>Network Fuel:</strong> Every transaction&mdash;whether a simple HBAR transfer or a complex smart contract call, requires a fee paid in HBAR. A unique feature of Hedera is that these fees are <strong>fixed in USD</strong> (e.g., $0.0001 per transfer) but paid in HBAR. This ensures that businesses can predict their operational costs regardless of HBAR's market volatility.</div>
</li>
<li class="ace-line ace-line old-record-id-GPsKdvAtAoN0xtxzDH2lzlNqgUb" data-list="number">
<div><strong>Network Security:</strong> Hedera is a Proof-of-Stake network. HBAR holders can "stake" or delegate their tokens to a node to help secure the network and earn a portion of the transaction fees as a reward.</div>
</li>
</ol>
<h2 class="heading-2 ace-line old-record-id-K6LFdlrcqoTE5wxWEZ1lBd9Agge">Comparison: Hedera vs. Traditional Blockchain</h2>
<div class=" old-record-id-Wv7ZdgKEWo2viexNbyZl21lMgyW" data-type="sheet">
<table border=""><colgroup><col width="247"><col width="247"><col width="247"></colgroup>
<tbody>
<tr>
<td>Feature</td>
<td>Hedera (HBAR)</td>
<td>Traditional Blockchain (L1)</td>
</tr>
<tr>
<td>Data Structure</td>
<td>Hashgraph (DAG)</td>
<td>Linear Chain of Blocks</td>
</tr>
<tr>
<td>Speed</td>
<td>10,000+ TPS</td>
<td>~15 - 100 TPS</td>
</tr>
<tr>
<td>Finality</td>
<td>3 - 5 Seconds</td>
<td>10 - 60 Minutes</td>
</tr>
<tr>
<td>Security</td>
<td>aBFT (Highest)</td>
<td>Probabilistic</td>
</tr>
<tr>
<td>Fee Predictability</td>
<td>High (USD-pegged)</td>
<td>Low (Gas-market based)</td>
</tr>
</tbody>
</table>
</div>
<h2 class="heading-2 ace-line old-record-id-PFPfdvql7oNq5oxqQA1lBznQgAd">Conclusion: The Institutional Standard for DLT</h2>
<div class="ace-line ace-line old-record-id-Xtc1dtnZSoCFgExiCpQl12esgWh">Understanding <strong>how Hedera (HBAR) works</strong> reveals why it has become a preferred choice for large-scale institutional projects. By replacing the inefficient linear block structure with a highly optimized Hashgraph, Hedera achieves the throughput and security required for a global, digitized economy.</div>
<div class="ace-line ace-line old-record-id-YNsid3toAo584zxcclTlzIWNgie">As the industry moves toward the tokenization of Real-World Assets (RWA) and decentralized identity (DID), Hedera&rsquo;s unique combination of enterprise-grade governance and aBFT security positions it as a leader in the Layer 1 race. You can monitor the growth of this ecosystem and HBAR&rsquo;s liquidity across various pairs on <a href="https://www.kucoin.com/en-eu/markets" data-lark-is-custom="true">KuCoin Markets</a>.</div>
<h2 class="heading-2 ace-line old-record-id-DEjvdoiQaoE92UxPC2ilgVGvgkD">FAQs</h2>
<h3 class="heading-3 ace-line old-record-id-B60PdNShto8KgExL8QvlhvRqgvg">Is Hedera an open-source network?</h3>
<div class="ace-line ace-line old-record-id-WfWpdaz93o6TGMx6szdl4kgQgZb">Yes. Hedera&rsquo;s codebase is fully open-source, allowing developers to audit the Hashgraph algorithm and contribute to the ecosystem's development.</div>
<h3 class="heading-3 ace-line old-record-id-RTXCdGbgxoBznWxp67UlbLWJgHB">What is the maximum supply of HBAR?</h3>
<div class="ace-line ace-line old-record-id-JjZwdO5Y3o5jvPx6RMNlqdU0gpf">The total supply of HBAR is capped at 50 billion tokens, ensuring long-term scarcity and a predictable issuance schedule.</div>
<h3 class="heading-3 ace-line old-record-id-CGD3dLi5PoviKrxd0HGlbYINgqh">How does virtual voting work without miners?</h3>
<div class="ace-line ace-line old-record-id-S3b9dcCCeoIVwZxKFajlciCngLe">In Hashgraph, nodes don't need to "vote" because they already know what every other node knows. They use the history of the "gossip" to calculate consensus locally, which is far faster than a network-wide vote.</div>
<h3 class="heading-3 ace-line old-record-id-L0WydrrEeouvT1xysHkl7wiHg4c">Can I run a node on the Hedera network?</h3>
<div class="ace-line ace-line old-record-id-FFYldoWywosoLBxkeZqliZOfgvc">Currently, the mainnet nodes are operated by members of the Governing Council. However, the roadmap includes a transition to a fully permissionless network where anyone can run a node.</div>
<h3 class="heading-3 ace-line old-record-id-JYXydoVkJoezHcxxO20lCYYlgod">Where can I learn more about Hedera's technical upgrades?</h3>
<div class="ace-line ace-line old-record-id-A1ybdkh2EogP8axK64YlbcLtg1d">For the latest technical deep-dives and network news, check the <a href="https://www.kucoin.com/en-eu/blog" data-lark-is-custom="true">KuCoin Blog</a> and the <a href="https://www.kucoin.com/zh-hant/announcement" data-lark-is-custom="true">official announcement</a> page.</div>
<div class="ace-line ace-line old-record-id-AinJdmu8UoKFyRxSbZtlzrQngBd">Join 30 million global users on the world&rsquo;s leading crypto exchange by signing up for your free account now. <a href="https://www.kucoin.com/ucenter/signup" data-lark-is-custom="true">Register Now!</a></div>
<h2 class="heading-2 ace-line old-record-id-DyQ4diI0SoWF0RxvBsPl2YDTgHm">Further reading</h2>
<div class="ace-line ace-line old-record-id-XCKwdMufdoFt2rxctGeluhkigdd"><a href="https://www.kucoin.com/blog/en-if-i-have-xrp-should-i-even-buy-hedera-crypto-hbar-analysis-of-tech-use-cases-and-portfolio-diversification" data-lark-is-custom="true">If I Have XRP, Should I Even Buy Hedera Crypto (HBAR)? Analysis of Tech, Use Cases, and Portfolio Diversification</a></div>
<div class="ace-line ace-line old-record-id-LwNOdYA8ZoNAGoxYubUlRvXmgbb"><a href="https://www.kucoin.com/news/flash/hedera-hbar-gains-quiet-institutional-adoption-despite-low-hype" data-lark-is-custom="true">Hedera (HBAR) Gains Quiet Institutional Adoption Despite Low Hype</a></div>
<div class="ace-line ace-line old-record-id-MG78deoBPoO7FtxqZ0AlOfkWgQp"><a href="https://www.kucoin.com/news/flash/hbar-eyes-0-145-as-etf-inflows-boost-sentiment" data-lark-is-custom="true">HBAR Eyes $0.145 as ETF Inflows Boost Sentiment</a></div>
</div>

How Does Hedera (HBAR) Work?

<div data-page-id="W4lIdrNLjonWw0x4WGalQdFngNe" data-lark-html-role="root" data-docx-has-block-data="true">
<h2 class="heading-2 ace-line old-record-id-TQgudxyVbo5SoMxh3udl2Wtvgzf">Key Takeaways</h2>
<ul class="list-bullet1">
<li class="ace-line ace-line old-record-id-Prdud2g9focb8ZxFBuklaumcgad" data-list="bullet">
<div><strong>Ecosystem Evolution:</strong> Shiba Inu has transitioned from a simple ERC-20 token to a high-utility decentralized ecosystem powered by <strong>Shibarium</strong>, its proprietary Layer-2 scaling solution.</div>
</li>
<li class="ace-line ace-line old-record-id-ArACdbEWEohhzuxWRrEl6V8vgWc" data-list="bullet">
<div><strong>Triple-Token Economy:</strong> The network operates via three distinct assets&mdash;<strong>SHIB</strong> (currency), <strong>BONE</strong> (governance &amp; gas), and <strong>LEASH</strong> (exclusivity)&mdash;each serving a unique mechanical purpose.</div>
</li>
<li class="ace-line ace-line old-record-id-AzEedvSKSo3LYZxkq7glm3ODgvb" data-list="bullet">
<div><strong>Deflationary Mechanics:</strong> A significant portion of transaction fees on Shibarium is automatically converted to SHIB and "burned," permanently reducing the massive circulating supply.</div>
</li>
<li class="ace-line ace-line old-record-id-IlKZdlvXGoGCEOxnYkClvGJHgbb" data-list="bullet">
<div><strong>Community Governance:</strong> Through the <strong>Doggy DAO</strong>, the ecosystem remains strictly community-led, allowing token holders to vote on key development proposals and treasury allocations.</div>
</li>
</ul>
<div class="ace-line ace-line old-record-id-BmdQdBSotoXxKvxWrS4l4MWgg7b">Once dismissed as a mere "meme coin" alternative to Dogecoin, Shiba Inu has undergone one of the most significant technical transformations in blockchain history. To truly understand <strong>how Shiba Inu (SHIB) works</strong>, one must look past canine branding and analyze its sophisticated multi-layered infrastructure. Since its inception by the anonymous creator "Ryoshi," the project has matured into a comprehensive decentralized economy featuring its own Layer-2 blockchain, decentralized exchange (DEX), and metaverse.</div>
<h2 class="heading-2 ace-line old-record-id-Meb3djHZloW6MyxY68LlN21Tgab">The 6W Framework of the Shiba Inu Ecosystem</h2>
<div class="ace-line ace-line old-record-id-IQsOdyLQ7omH0Kxx4dzlNJnqgEd">To categorize the fundamental nature of this evolved network, we apply the <strong>6W principles</strong>:</div>
<ul class="list-bullet1">
<li class="ace-line ace-line old-record-id-PZmmd7IeDoCaw3xckfzlsFR5gyg" data-list="bullet">
<div><strong>Who:</strong> Founded by the anonymous "Ryoshi," it is now a fully decentralized project led by a global community of developers and the "SHIB Army."</div>
</li>
<li class="ace-line ace-line old-record-id-SCbLdB4kDofdV3x19SXl9HjHged" data-list="bullet">
<div><strong>What:</strong> A <strong>decentralized multi-token ecosystem</strong> originally built on Ethereum, now optimized via its own Layer-2 solution, Shibarium.</div>
</li>
<li class="ace-line ace-line old-record-id-N28Md1aGeouxhBx49silAahjgNd" data-list="bullet">
<div><strong>Where:</strong> Globally distributed across decentralized wallets and accessible for high-liquidity trading on top-tier platforms.</div>
</li>
<li class="ace-line ace-line old-record-id-HazSdxXTyoK2Svx3NBXlYXglgJg" data-list="bullet">
<div><strong>When:</strong> Operating 24/7 with near-instant transaction finality on the Shibarium network.</div>
</li>
<li class="ace-line ace-line old-record-id-BBE5d0b4TohcHLxGVeDl0ajEgEg" data-list="bullet">
<div><strong>Why:</strong> To prove that a 100% community-driven project can build enterprise-grade utility and a self-sustaining economy.</div>
</li>
<li class="ace-line ace-line old-record-id-X8JUdYkHEoB6LuxzMXqlKmpHgXb" data-list="bullet">
<div><strong>How:</strong> Utilizing a Proof-of-Stake (PoS) consensus on its L2, automated burn portals, and the Doggy DAO for governance.</div>
</li>
</ul>
<ol class="ace-line ace-line old-record-id-QvRTdmSbLoApZWxczQdldXawg8b" start="1">
<li data-list="number">
<h2 class="heading-2">The Foundation: Shibarium Layer-2 Scaling</h2>
</li>
</ol>
<div class="ace-line ace-line old-record-id-STvedmsu6oJMvqxdeTwloht8gAf">The most critical technical answer to "how does Shiba Inu work" is <strong>Shibarium</strong>. For years, SHIB operated strictly as an ERC-20 token on Ethereum, meaning users were subject to high gas fees and network congestion. Shibarium was launched to solve these bottlenecks.</div>
<div class="ace-line ace-line old-record-id-IITzdj3eVoxwElx0R3QlGOujgvd">As a Layer-2 scaling solution, Shibarium processes transactions off-chain before settling them in batches on the Ethereum mainnet. This architecture allows for:</div>
<ol class="list-number1" start="1">
<li class="ace-line ace-line old-record-id-IzfDdKEABoxu3CxewPcl1BDQgze" data-list="number">
<div><strong>Drastically Lower Fees:</strong> Micro-transactions for gaming and NFTs become economically viable.</div>
</li>
<li class="ace-line ace-line old-record-id-O94gdcDploLWakxWzztllSSPgKb" data-list="number">
<div><strong>Enhanced Speed:</strong> Transaction finality is achieved in seconds rather than minutes.</div>
</li>
<li class="ace-line ace-line old-record-id-Ot6Fdac38oR2kAxNXall7yY2glc" data-list="number">
<div><strong>Dedicated Throughput:</strong> Ecosystem dApps no longer compete with non-Shiba traffic on Ethereum.</div>
</li>
</ol>
<div class="ace-line ace-line old-record-id-XExvd3lbioBNBexLEFqlJAJ4gUc">Traders often use the <a href="https://www.kucoin.com/en-eu" data-lark-is-custom="true">KuCoin Lite Version</a> to manage their SHIB assets, ensuring they can move liquidity quickly to take advantage of these technological efficiencies. The transition to Shibarium has effectively turned SHIB from a token into the centerpiece of its own blockchain network.</div>
<ol class="ace-line ace-line old-record-id-Jcyods8VIoxX0MxRu3Sl5aWugZf" start="2">
<li data-list="number">
<h2 class="heading-2">The Triple-Token Economy: SHIB, BONE, and LEASH</h2>
</li>
</ol>
<div class="ace-line ace-line old-record-id-G7IZdeYpToRL6axu5i6lEpEWgkd">Unlike many projects that rely on a single asset, the Shiba Inu ecosystem utilizes a trio of tokens to separate utility, governance, and exclusivity.</div>
<h3 class="heading-3 ace-line old-record-id-X5lmd7hEeox9VJxrrNultFVggPc">SHIB (The Currency)</h3>
<div class="ace-line ace-line old-record-id-Q4i6dT5pUoYMeixLZHNlDzLmgae">SHIB is the primary medium of exchange. It is the token most recognized by the public and is used for payments, staking, and as a base pair for trading. Despite its massive initial supply, it remains the "gateway" token for new users entering the ecosystem.</div>
<h3 class="heading-3 ace-line old-record-id-BSP0d2wbtoxULmx3OpOlOXG4gNf">BONE (Governance &amp; Gas)</h3>
<div class="ace-line ace-line old-record-id-WU6FdDiH8o4oyVx2A0YlzmgAgrg">BONE is perhaps the most technically vital token in the stack. It serves two main roles:</div>
<ul class="list-bullet1">
<li class="ace-line ace-line old-record-id-LB2cdq7fjor5zYxmhhflfdmVg5g" data-list="bullet">
<div><strong>Gas Token:</strong> All transaction fees on the Shibarium network are paid in BONE.</div>
</li>
<li class="ace-line ace-line old-record-id-Gus8dAtAcozm63xO9bElIbqQgEf" data-list="bullet">
<div><strong>Governance:</strong> It is the voting chip for the Doggy DAO. The more BONE a user holds, the more weight their vote carries regarding future protocol upgrades.</div>
</li>
</ul>
<h3 class="heading-3 ace-line old-record-id-Fz8hdaJRfobxk8xE2apl5ysFgxf">LEASH (The Exclusive Asset)</h3>
<div class="ace-line ace-line old-record-id-OMCydKVauoovwxxjj2Mlp3kXgUb">With a total supply of only ~107,000 tokens, LEASH is the ecosystem&rsquo;s "VIP" token. It provides holders with priority access to land sales in the Shiba Metaverse and early access to NFT minting events. Insights into how these tokens correlate during market cycles are a frequent focus of the <a href="https://www.kucoin.com/en-eu/blog" data-lark-is-custom="true">KuCoin Blog</a>.</div>
<ol class="ace-line ace-line old-record-id-VQW7dLsMGoM8pwxteJClWed7gbh" start="3">
<li data-list="number">
<h2 class="heading-2">The Burn Mechanism: Engineering Scarcity</h2>
</li>
</ol>
<div class="ace-line ace-line old-record-id-PdfVdiU87oSQWex48hYl223fglh">A common question regarding <strong>how Shiba Inu (SHIB) works</strong> concerns its massive supply. To address this, the developers implemented an automated burn mechanism integrated directly into the Shibarium protocol.</div>
<div class="ace-line ace-line old-record-id-CEWidGP0DoJCpBxMeuklEW8XgJc">When a transaction occurs in Shibarium, a base fee is charged in BONE. This fee is split:</div>
<ul class="list-bullet1">
<li class="ace-line ace-line old-record-id-DFsadjrRjoMEEGxQlzblPzICgff" data-list="bullet">
<div><strong>70% for Burning:</strong> This portion is converted into SHIB and sent to a "dead wallet"&mdash;an address with no private key, effectively removing those tokens from circulation forever.</div>
</li>
<li class="ace-line ace-line old-record-id-Ms0TdaKybo5nvRxHmMOlurwmg8c" data-list="bullet">
<div><strong>30% for Maintenance:</strong> This portion is used to pay for network upkeep and node rewards.</div>
</li>
</ul>
<div class="ace-line ace-line old-record-id-FEI9da9vyoXkozx9hk7l49xMgqg">As network usage increases, the rate of SHIB burning accelerates. This deflationary pressure is designed to reward long-term holders by slowly increasing the scarcity of the remaining tokens. Detailed updates on burn milestones are regularly listed in <a href="https://www.kucoin.com/zh-hant/announcement" data-lark-is-custom="true">official announcements</a>.</div>
<ol class="ace-line ace-line old-record-id-UGhedkTuTohcFkxng1SlQIO9gxc" start="4">
<li data-list="number">
<h2 class="heading-2">ShibaSwap: The Decentralized Exchange (DEX)</h2>
</li>
</ol>
<div class="ace-line ace-line old-record-id-KyQjdxnPYoh82Pxvls3lNKwegdf">Shiba Inu features its own DEX, <strong>ShibaSwap</strong>, which allows users to interact with their tokens in a non-custodial environment. On ShibaSwap, the terminology reflects dog-themed branding:</div>
<ul class="list-bullet1">
<li class="ace-line ace-line old-record-id-Oi7EdCWqJoovE1xPmuVl9svwgLd" data-list="bullet">
<div><strong>Bury (Staking):</strong> Users stake their SHIB, LEASH, or BONE to earn passive interest.</div>
</li>
<li class="ace-line ace-line old-record-id-NZDqdDVQVoi3zLxaVBMlBurngog" data-list="bullet">
<div><strong>Dig (Liquidity Provision):</strong> Users provide pairs of tokens to a liquidity pool to earn "Woof Returns" (a share of transaction fees).</div>
</li>
<li class="ace-line ace-line old-record-id-LemFdiDHxoOaFexQb66lOnOEgUT" data-list="bullet">
<div><strong>Swap:</strong> A traditional decentralized trading interface for moving between ecosystem tokens.</div>
</li>
</ul>
<div class="ace-line ace-line old-record-id-D08zdXlN8oZNYSx9UbSlWiNOgfe">This internal DEX ensures that the ecosystem's liquidity remains healthy and provides a natural environment for users to grow their holdings without leaving the Shiba Inu umbrella.</div>
<h2 class="heading-2 ace-line old-record-id-ISPcduHfYo1Obdx2VJflshRygBd">Comparison: SHIB vs. Conventional Meme Projects</h2>
<div class=" old-record-id-OHrYdaVFVoPd1HxD9BFlzxPEgud" data-type="sheet">
<table border=""><colgroup><col width="229"><col width="229"><col width="229"></colgroup>
<tbody>
<tr>
<td>Feature</td>
<td>Shiba Inu (SHIB)</td>
<td>Traditional Meme Coins</td>
</tr>
<tr>
<td>Blockchain</td>
<td>Layer-2 (Shibarium)</td>
<td>Typically Layer-1 Token</td>
</tr>
<tr>
<td>Supply Model</td>
<td>Automated Burn (Deflationary)</td>
<td>Fixed or Inflationary</td>
</tr>
<tr>
<td>Governance</td>
<td>Community DAO</td>
<td>Centralized Dev Team</td>
</tr>
<tr>
<td>Utility</td>
<td>DEX, Metaverse, Gaming</td>
<td>Primarily Speculative</td>
</tr>
<tr>
<td>Gas Fee Role</td>
<td>BONE powers the network</td>
<td>Depends on Parent Chain</td>
</tr>
</tbody>
</table>
</div>
<h2 class="heading-2 ace-line old-record-id-ZjB2dFDEFoI5F6x5fgulvTL0gZg">Conclusion: A Blueprint for Community Evolution</h2>
<div class="ace-line ace-line old-record-id-X25OdBl5xoSjT5xDx16lc5AvgRf">Understanding <strong>how Shiba Inu (SHIB) works</strong> reveals a project that has successfully navigated the "Lindy Effect"&mdash;the idea that the longer something survives, the more likely it is to persist. By building its own scaling infrastructure, creating a multi-token economy, and automating its deflationary mechanics, Shiba Inu has set a blueprint for how a community-led project can achieve institutional-grade utility.</div>
<div class="ace-line ace-line old-record-id-LN3OdXlSRoBos5xegTolAt1Ig9f">As more developers build on Shibarium and the burn rate continues to climb, the SHIB ecosystem is positioned as a resilient and innovative force in the Web3 space. For those tracking these developments on <a href="https://www.kucoin.com/en-eu" data-lark-is-custom="true">KuCoin</a>, the project serves as a prime example of how social energy can be harnessed to build lasting decentralized technology.</div>
<h2 class="heading-2 ace-line old-record-id-LRludwumboTBZyx1JiolPsqkguc">FAQ</h2>
<h3 class="heading-3 ace-line old-record-id-DB3bdTUKEoy2D5xDmDwlbjeKgkb">Is SHIB still just an Ethereum token?</h3>
<div class="ace-line ace-line old-record-id-L7eId6Q0dosSQXxGBpulpzbpgtf">While SHIB can still be held on Ethereum, its primary utility is now centered on Shibarium, a Layer-2 network that is faster and significantly cheaper than the Ethereum mainnet.</div>
<h3 class="heading-3 ace-line old-record-id-FpvddD9m3oNM3oxjABylKpPsgAB">What is the purpose of the SHIB burn?</h3>
<div class="ace-line ace-line old-record-id-HobzdtI95oi80Px7gPPlpMuBg5g">The burn mechanism is designed to reduce the total circulating supply over time. By removing tokens from the market, the protocol aims to increase the scarcity of the remaining SHIB.</div>
<h3 class="heading-3 ace-line old-record-id-FD8Vdv34ZoXVGUxNqq8ligtNgxf">Can I participate in Shiba Inu governance?</h3>
<div class="ace-line ace-line old-record-id-R6ZadqPsAoiqO8xGpHLlE3Oagsh">Yes. By holding and staking BONE tokens, you gain the right to vote on proposals in the Doggy DAO, which determines the future direction of the ecosystem.</div>
<h3 class="heading-3 ace-line old-record-id-FrnOdCSWBopY17xcmOYlqY5Cgpd">What makes LEASH different from SHIB?</h3>
<div class="ace-line ace-line old-record-id-EmMHdxlZLolZSnx4Fg3lxkS2g5f">LEASH has a much smaller supply (around 107,000) and is used for exclusive access within the ecosystem, such as early land sales in the Shiba Metaverse.</div>
<h3 class="heading-3 ace-line old-record-id-YvLXdJvU0otqzXxyBLblS9aEgty">Where can I find the latest ecosystem technical updates?</h3>
<div class="ace-line ace-line old-record-id-U3WydaU5GoulsqxwuGElkq0dgvb">You can follow technical deep-dives on the <a href="https://www.kucoin.com/en-eu/blog" data-lark-is-custom="true">KuCoin Blog</a> or stay informed via <a href="https://www.kucoin.com/zh-hant/announcement" data-lark-is-custom="true">official announcements</a> regarding network upgrades.</div>
<div class="ace-line ace-line old-record-id-URhvdPmUVo2h4ex7p1ElhobHg3d">Join 30 million global users on the world&rsquo;s leading crypto exchange by signing up for your free account now. <a href="https://www.kucoin.com/ucenter/signup" data-lark-is-custom="true">Register Now!</a></div>
<h2 class="heading-2 ace-line old-record-id-Ine3dvKY0osTpIxNv83lroS3gqc">Further reading</h2>
<div class="ace-line ace-line old-record-id-OzixdOs8SoDyy4xyNs2lj1YTg2d"><a href="https://www.kucoin.com/news/flash/shiba-inu-tokens-surge-into-exchanges-raising-concerns-over-price-recovery" data-lark-is-custom="true">Shiba Inu Tokens Surge into Exchanges, Raising Concerns Over Price Recovery</a></div>
<div class="ace-line ace-line old-record-id-REUidQfO3oa4egx3yCSlaifvgxb"><a href="https://www.kucoin.com/news/flash/shiba-inu-futures-traders-turn-bearish-as-oi-drops-8" data-lark-is-custom="true">Shiba Inu Futures Traders Turn Bearish as OI Drops 8%</a></div>
<div class="ace-line ace-line old-record-id-D4J2dRn8so5aDLxZwuYlO6rSgub"><a href="https://www.kucoin.com/news/flash/shiba-inu-shib-price-analysis-bears-maintain-control-amid-negative-funding-rates" data-lark-is-custom="true">Shiba Inu (SHIB) Price Analysis: Bears Maintain Control Amid Negative Funding Rates</a></div>
</div>

How Does Shiba Inu (SHIB) Work? 

<p><strong>Key Takeaways</strong></p>
<div data-page-id="VHeedXRNdoHIsFxl5AjlHbKWgzg" data-lark-html-role="root" data-docx-has-block-data="true">
<ul class="list-bullet1">
<li class="ace-line ace-line old-record-id-NVkmdIou9o6R1PxmM4plGjQhgXb" data-list="bullet">
<div><strong>Network Speed:</strong> <a href="https://www.kucoin.com/price/LTC" target="_blank" rel="noopener noreferrer">Litecoin</a> produces blocks every <strong>2.5 minutes</strong>, which is four times faster than Bitcoin, enabling rapid transaction finality.</div>
</li>
<li class="ace-line ace-line old-record-id-NEGtdffxCoE0FlxgkbOlXRipgdg" data-list="bullet">
<div><strong>Scrypt Algorithm:</strong> By using the <strong>Scrypt hashing algorithm</strong>, Litecoin offers a more memory-intensive Proof-of-Work (PoW) system compared to <a href="https://www.kucoin.com/price/BTC" target="_blank" rel="noopener noreferrer">Bitcoin</a>&rsquo;s SHA-256.</div>
</li>
<li class="ace-line ace-line old-record-id-BNybd2GzAozLbPxYChglE6r9gad" data-list="bullet">
<div><strong>Enhanced Privacy:</strong> The <strong>MimbleWimble Extension Blocks (MWEB)</strong> upgrade allows users to hide transaction amounts and addresses on an opt-in basis.</div>
</li>
<li class="ace-line ace-line old-record-id-NLSpd9EiZoDemjxVbUbleqQ8g8c" data-list="bullet">
<div><strong>Economic Scarcity:</strong> With a fixed supply of <strong>84 million <a href="https://www.kucoin.com/price/LTC" target="_blank" rel="noopener noreferrer">LTC</a></strong> and regular halving events, Litecoin maintains a deflationary monetary policy designed for long-term value retention.</div>
</li>
</ul>
<div class="ace-line ace-line old-record-id-W8fFdArwmoUYKgxlqEilRuTtgsf">Often referred to as the "silver to Bitcoin's gold," Litecoin was one of the first successful alternative cryptocurrencies. To understand <strong>how Litecoin (LTC) works</strong>, one must view it as an evolution of the original Bitcoin protocol&mdash;optimized for everyday use and higher transaction volumes. Since its launch in 2011, it has maintained a reputation for being a lighter, faster version of its predecessor.</div>
<div class="ace-line ace-line old-record-id-VBV2dcGkKoeeaOx5IW8lBuzUgPf">For traders navigating the <a href="https://www.kucoin.com/en-eu/markets" data-lark-is-custom="true">KuCoin Markets</a>, Litecoin serves as a reliable barometer for the broader Proof-of-Work ecosystem. Its technical architecture balances the robust security of PoW with modern upgrades that enhance transaction speed and user privacy.</div>
<h2 class="heading-2 ace-line old-record-id-OHLuddpinokG3KxFkSll1y9SgZf">The 6W Framework of the Litecoin Network</h2>
<div class="ace-line ace-line old-record-id-BiGzddAIAoEmMfx5S4mlSpQVgdf">To categorize the fundamental nature of this veteran blockchain, we apply the <strong>6W principles</strong>:</div>
<ul class="list-bullet1">
<li class="ace-line ace-line old-record-id-P12ZdjtDUoXatSxi0gGlu972gKb" data-list="bullet">
<div><strong>Who:</strong> Created by Charlie Lee, a former Google engineer, as a fork of the Bitcoin Core client.</div>
</li>
<li class="ace-line ace-line old-record-id-EKjSdGipyo9UpmxSK2YlQ2qqgvh" data-list="bullet">
<div><strong>What:</strong> A <strong>decentralized peer-to-peer cryptocurrency</strong> designed to be a "lite" alternative to Bitcoin for payments.</div>
</li>
<li class="ace-line ace-line old-record-id-HtoudjzXzo0mxUxkhbTlu2okgFc" data-list="bullet">
<div><strong>Where:</strong> A globally distributed network of nodes and miners that verify transactions without central authority.</div>
</li>
<li class="ace-line ace-line old-record-id-AvKwdWFMIoe2wyxUPI6le8WRgm1" data-list="bullet">
<div><strong>When:</strong> Blocks are generated consistently every 2.5 minutes, providing 24/7 network availability.</div>
</li>
<li class="ace-line ace-line old-record-id-X4phdZLrkoSWtvxDuvjl2iobgTe" data-list="bullet">
<div><strong>Why:</strong> To address the scalability bottlenecks and high transaction fees found in earlier blockchain iterations.</div>
</li>
<li class="ace-line ace-line old-record-id-LET9dqTQIoI1QIxGLK6lkTnFgR5" data-list="bullet">
<div><strong>How:</strong> Utilizing the <strong>Scrypt hashing algorithm</strong> and recent privacy innovations like <strong>MWEB</strong>.</div>
</li>
</ul>
<ol class="ace-line ace-line old-record-id-BdJPd0au0oHQpuxaGCpl4LTZgbf" start="1">
<li data-list="number">
<h2 class="heading-2">The Core Engine: Scrypt Hashing Algorithm</h2>
</li>
</ol>
<div class="ace-line ace-line old-record-id-Gw13dXi1po2luRxDPpil91XbgXe">The most significant technical "different" between Litecoin and Bitcoin lies in their mining algorithms. While Bitcoin uses SHA-256, Litecoin utilizes <strong>Scrypt</strong>.</div>
<div class="ace-line ace-line old-record-id-Rx1LdV4w9oHjojxROOJlzEljgqc">Scrypt was specifically chosen to be more memory-intensive. In the early years of the network, this made it difficult for specialized ASIC (Application-Specific Integrated Circuit) hardware to dominate, allowing individual users to participate in mining with consumer-grade GPUs. While Scrypt ASICs have since been developed, the algorithm continues to support a high hashrate and network security. Furthermore, Litecoin employs <strong>Merged Mining</strong> with Dogecoin, allowing miners to secure both networks simultaneously with the same energy expenditure&mdash;a technical synergy frequently discussed in the <a href="https://www.kucoin.com/en-eu/blog" data-lark-is-custom="true">KuCoin Blog</a>.</div>
<ol class="ace-line ace-line old-record-id-C8uJdGK8WomBoUxzj93lNONKgod" start="2">
<li data-list="number">
<h2 class="heading-2">Faster Block Times: 2.5 Minutes</h2>
</li>
</ol>
<div class="ace-line ace-line old-record-id-ZpesdQIceoVgEJxzHoMlRE0PgYg">One of the primary answers to "how does Litecoin work" is its efficiency in block generation. By reducing the block time from 10 minutes to <strong>2.5 minutes</strong>, the network can handle a higher throughput of transactions.</div>
<div class="ace-line ace-line old-record-id-QI8PdhyADowGHhxLKWOlf14mgnf">This shorter block time reduces the waiting period for confirmations. For merchants and users using the <a href="https://www.kucoin.com/en-eu" data-lark-is-custom="true">KuCoin Lite Version</a>, this means that transfers settle four times faster than Bitcoin. This speed makes Litecoin an ideal medium for moving liquidity across platforms or conducting micro-payments without the frustration of long settlement delays.</div>
<ol class="ace-line ace-line old-record-id-HmnldqnOto8sB1xMNj1lZrp3gfe" start="3">
<li data-list="number">
<h2 class="heading-2">Privacy and Scalability: MimbleWimble (MWEB)</h2>
</li>
</ol>
<div class="ace-line ace-line old-record-id-RTjbdcJe0o7pRNxtUJol9ocNgDg">Perhaps the most transformative upgrade in Litecoin&rsquo;s history is the implementation of <strong>MimbleWimble Extension Blocks (MWEB)</strong>. This feature provides users with the option to conduct confidential transactions.</div>
<div class="ace-line ace-line old-record-id-TNImdig9locgS0xnOuOlBBPSgCf">Inside the MWEB layer, transaction amounts and addresses are concealed from public view through cryptographic aggregation and compression. This ensures <strong>fungibility</strong>&mdash;the idea that every unit of a currency is equal because its history is not easily traceable. While the main chain remains transparent for auditing, MWEB offers a sanctuary for users who value financial privacy. You can track the adoption of such privacy-focused features through <a href="https://www.kucoin.com/zh-hant/announcement" data-lark-is-custom="true">official announcements</a>.</div>
<ol class="ace-line ace-line old-record-id-PcLedvj2XodoefxWxxylTaefg8c" start="4">
<li data-list="number">
<h2 class="heading-2">Fixed Supply and Halving Cycles</h2>
</li>
</ol>
<div class="ace-line ace-line old-record-id-V0HgdqnrUon6XixFcSRldFUegqd">Litecoin&rsquo;s economic model is designed to mimic precious metals.</div>
<ul class="list-bullet1">
<li class="ace-line ace-line old-record-id-KPVCd9WcAoVhPexXJ3LlIJOfgUb" data-list="bullet">
<div><strong>Hard Cap:</strong> Only 84 million LTC will ever be minted.</div>
</li>
<li class="ace-line ace-line old-record-id-IbbYdeLJ7oe3yGx0v47lgfnBg4c" data-list="bullet">
<div><strong>Halving Events:</strong> Every 840,000 blocks (roughly every four years), the block reward given to miners is cut in half.</div>
</li>
</ul>
<div class="ace-line ace-line old-record-id-RegQd1r5wouMBgxWlQslVuAWgWg">As of 2026, the network continues to follow this deflationary path. This scarcity ensures that as long as demand remains constant or grows, the value proposition of LTC remains strong. Traders on <a href="https://www.kucoin.com/en-eu/markets" data-lark-is-custom="true">KuCoin Markets</a> often monitor these halving cycles as they historically serve as catalysts for increased market volatility and interest.</div>
<h2 class="heading-2 ace-line old-record-id-KARmdMnUGosAb4xmVAOlUD6Ng0g">Comparison: Litecoin vs. Bitcoin</h2>
<div class=" old-record-id-IlCGdOPfDodq7SxMz05lUSZig6e" data-type="sheet">
<table border=""><colgroup> <col width="225"> <col width="225"> <col width="225"> </colgroup>
<tbody>
<tr>
<td>Feature</td>
<td>Litecoin (LTC)</td>
<td>Bitcoin (BTC)</td>
</tr>
<tr>
<td>Algorithm</td>
<td>Scrypt</td>
<td>SHA-256</td>
</tr>
<tr>
<td>Block Time</td>
<td>2.5 Minutes</td>
<td>10 Minutes</td>
</tr>
<tr>
<td>Max Supply</td>
<td>84 Million</td>
<td>21 Million</td>
</tr>
<tr>
<td>Privacy</td>
<td>Optional (MWEB)</td>
<td>Transparent</td>
</tr>
<tr>
<td>Best For</td>
<td>Daily Payments</td>
<td>Store of Value</td>
</tr>
</tbody>
</table>
</div>
<h2 class="heading-2 ace-line old-record-id-Lln2drmsBoM0sdxaXjJlDOjCgCQ">Conclusion: The Enduring Utility of LTC</h2>
<div class="ace-line ace-line old-record-id-DWQ0dFPvHoSv1exZJ5ylYVaYgtc">Understanding <strong>how Litecoin (LTC) works</strong> reveals a network that is both conservative in its security and progressive in its features. By focusing on faster confirmations, a memory-intensive algorithm, and optional privacy, Litecoin has successfully transitioned from a mere "clone" to a specialized payment powerhouse.</div>
<div class="ace-line ace-line old-record-id-M0SBd9Xh4osZc3x9DMKl6Corg7c">As the industry moves toward wider mainstream adoption, Litecoin&rsquo;s established history of 100% uptime and its integration of advanced tech like MWEB make it a formidable player in the <a href="https://www.kucoin.com/learn/web3/what-is-decentralized-finance-defi" target="_blank" rel="noopener noreferrer">decentralized finance</a> landscape. For those managing a diverse portfolio on <a href="https://www.kucoin.com/en-eu" data-lark-is-custom="true">KuCoin</a>, Litecoin remains a reliable asset for both liquidity and long-term holding.</div>
<h2 class="heading-2 ace-line old-record-id-FqeRd9M64oaj8lxllyKlyU05gQd">FAQs</h2>
<h3 class="heading-3 ace-line old-record-id-R6VkdlWlLouHAMxBhsVlwkMxgag">What makes Litecoin faster than Bitcoin?</h3>
<div class="ace-line ace-line old-record-id-QicQdEFwTokF3mxPfzclpEn3gBe">Litecoin&rsquo;s protocol is designed to generate blocks every 2.5 minutes, whereas Bitcoin&rsquo;s takes 10 minutes. This allows Litecoin to clear its transaction queue four times faster.</div>
<h3 class="heading-3 ace-line old-record-id-LzU7dLk73or9lpxjmEBlzyIngmb">Can I choose to keep my transactions private on Litecoin?</h3>
<div class="ace-line ace-line old-record-id-D2cfdIR4mo281VxPqYklBzEHgNY">Yes, using the MWEB (MimbleWimble Extension Blocks) feature, you can "peg-in" your LTC to a private layer to hide transaction details.</div>
<h3 class="heading-3 ace-line old-record-id-OUACdhIaBoA1Ocx915qlEZn1gYf">How does Scrypt mining benefit the network?</h3>
<div class="ace-line ace-line old-record-id-V0kIdXG5io6E6cxVjKrl6EVCgkd">Scrypt is a memory-hard algorithm that makes the network resistant to the extreme centralization of mining power, supporting a more diverse and secure hardware environment.</div>
<h3 class="heading-3 ace-line old-record-id-OmACd3KzLoAXznxwQwwlJML8gFI">Will there ever be more than 84 million LTC?</h3>
<div class="ace-line ace-line old-record-id-OjeCdnqzmo5NHrxSw1dlDbqZgv5">No. The supply is hard-capped at 84 million. Once that number is reached, no more LTC will be minted, and miners will be rewarded solely through transaction fees.</div>
<h3 class="heading-3 ace-line old-record-id-PQUZdn3Y6oNAWgx5sZOl0joggfe">Where can I find the latest Litecoin hashrate data?</h3>
<div class="ace-line ace-line old-record-id-IYWZdzamloIAMhxwm05lYld1gTf">Detailed network statistics and technical deep-dives are available on the <a href="https://www.kucoin.com/en-eu/blog" data-lark-is-custom="true">KuCoin Blog</a> and via <a href="https://www.kucoin.com/zh-hant/announcement" data-lark-is-custom="true">official announcements</a>.</div>
<div class="ace-line ace-line old-record-id-WFUSdLaznoDOiexDYfklwJqvgth">Join 30 million global users on the world&rsquo;s leading <a href="https://www.kucoin.com/learn/crypto" target="_blank" rel="noopener noreferrer">crypto</a> exchange by signing up for your free account now. <a href="https://www.kucoin.com/ucenter/signup" data-lark-is-custom="true">Register Now!</a></div>
<h2 class="heading-2 ace-line old-record-id-JB3adXVNloQmMRxLCfblGh2CgTo">Further reading</h2>
<div class="ace-line ace-line old-record-id-OWg7dnDE8obJ5OxeaLqlWfMDgDc"><a href="https://www.kucoin.com/how-to-buy/litecoin-cash" data-lark-is-custom="true">How to Buy Litecoin Cash (LCC): A Step-by-Step Guide</a></div>
<div class="ace-line ace-line old-record-id-U44idDyxEoxg8LxkJpKlMwp4gmg"><a href="https://www.kucoin.com/learn/crypto/litecoin-halving-countdown" data-lark-is-custom="true">Litecoin Halving Countdown: Everything You Need to Know</a></div>
<div class="ace-line ace-line old-record-id-GgG6d5br3oIaqvxQRKHl6TfDgvg"><a href="https://www.kucoin.com/news/articles/sec-likely-to-approve-litecoin-ltc-etf-with-90-chance" data-lark-is-custom="true">SEC Likely to Approve Litecoin (LTC) ETF With 90% Chance</a></div>
</div>

How does Litecoin (LTC) work?

<div data-page-id="TngLdR2uXoK6vwxF2X4lWNR0gMe" data-lark-html-role="root" data-docx-has-block-data="true">
<h2 class="heading-2 ace-line old-record-id-NrXkd3b01oSzNzx1ZETl5RWkgEe">Key Takeaways</h2>
<ul class="list-bullet1">
<li class="ace-line ace-line old-record-id-TG0IdUYHLou1zVxc6nKlVy0Tghf" data-list="bullet">
<div><strong>Over-Collateralization:</strong> Every DAI in circulation is backed by a surplus of digital assets (like <a href="https://www.kucoin.com/price/ETH" target="_blank" rel="noopener noreferrer">ETH</a> or WBTC) held in decentralized smart contracts.</div>
</li>
<li class="ace-line ace-line old-record-id-JkkvdsoqCoxuESxkKwFlR0nMg5W" data-list="bullet">
<div><strong>Vault-Based Minting:</strong> Users generate DAI by locking collateral in "Vaults"; this debt must be repaid with a "Stability Fee" to reclaim the assets.</div>
</li>
<li class="ace-line ace-line old-record-id-GmqPdkhJdo4ACIxvSAJlYhMNgqe" data-list="bullet">
<div><strong>Sky Protocol Evolution:</strong> By 2026, the <a href="https://www.kucoin.com/price/MKR" target="_blank" rel="noopener noreferrer">Maker</a> ecosystem has rebranded to <strong>Sky</strong>, introducing the <strong>USDS</strong> <a href="https://www.kucoin.com/learn/crypto/all-you-need-to-know-about-stablecoins" target="_blank" rel="noopener noreferrer">stablecoin</a> while maintaining DAI as the censorship-resistant "legacy" core.</div>
</li>
<li class="ace-line ace-line old-record-id-PLHhddtPiol7Pvx3w4GlnnlmgMf" data-list="bullet">
<div><strong>Stability via Liquidations:</strong> Automated "Dutch Auctions" liquidate under-collateralized positions to ensure the 1:1 USD peg remains solvent during market volatility.</div>
</li>
</ul>
<div class="ace-line ace-line old-record-id-GWeXdUV6eoozz0xlrWdlAkBfgyg">In the vast landscape of stablecoins, DAI occupies a unique position as the industry's most successful decentralized, collateral-backed currency. To understand <strong>how DAI (DAI) work</strong>, one must look beyond the traditional bank-reserve model used by centralized competitors. Instead of holding physical dollars in a vault, DAI is "minted" through a complex system of smart contracts, game theory, and over-collateralization.</div>
<div class="ace-line ace-line old-record-id-XE6Rdq4j5o493Qx4B8olygRVgAg">For professional traders and liquidity providers on <a href="https://www.kucoin.com/en-eu/markets" data-lark-is-custom="true">KuCoin Markets</a>, DAI is more than just a stable asset; it is a fundamental building block of <a href="https://www.kucoin.com/learn/web3/what-is-decentralized-finance-defi" target="_blank" rel="noopener noreferrer">Decentralized Finance</a> (DeFi). In the 2026 era of the "Sky" ecosystem, DAI remains the premier choice for users seeking a censorship-resistant dollar alternative that no single entity can freeze or control.</div>
<h2 class="heading-2 ace-line old-record-id-CVcldzlXloBg81xnCbQl8ULJgSc">The 6W Framework of the DAI Ecosystem</h2>
<div class="ace-line ace-line old-record-id-VAR0d19qTo3BfPxIwtslbo7Lgzg">To grasp the scale and mechanism of the protocol, we apply the <strong>6W principles</strong>:</div>
<ul class="list-bullet1">
<li class="ace-line ace-line old-record-id-BDskdjVELoUgeYxMEYqltGFEgfh" data-list="bullet">
<div><strong>Who:</strong> Governed by the <strong>Sky <a href="https://www.kucoin.com/learn/web3/everything-you-need-to-know-about-daos" target="_blank" rel="noopener noreferrer">DAO</a></strong> (formerly MakerDAO), a global community of SKY (formerly MKR) token holders.</div>
</li>
<li class="ace-line ace-line old-record-id-JIdFdFbb7oIp7fxd8M6lKPNQgic" data-list="bullet">
<div><strong>What:</strong> A <strong>multi-collateral stablecoin</strong> soft-pegged to the US Dollar ($1.00).</div>
</li>
<li class="ace-line ace-line old-record-id-Uq94dBwDBooOgCxuwGFlXKhng3j" data-list="bullet">
<div><strong>Where:</strong> Operating natively on the <a href="https://www.kucoin.com/price/ETH" target="_blank" rel="noopener noreferrer">Ethereum</a> blockchain with deep integration across all major <a href="https://www.kucoin.com/learn/crypto/top-ethereum-layer-2-crypto-projects" target="_blank" rel="noopener noreferrer">Layer 2</a> networks.</div>
</li>
<li class="ace-line ace-line old-record-id-PoIFdpH0XowgucxxGjFlMQPIgLc" data-list="bullet">
<div><strong>When:</strong> Maintaining 24/7 stability through automated on-chain processes since its inception in 2017.</div>
</li>
<li class="ace-line ace-line old-record-id-Ho0wd2GO5o17jix5eOxlHObZgzC" data-list="bullet">
<div><strong>Why:</strong> To eliminate the need for centralized "gatekeepers" and provide a trustless medium of exchange for the global economy.</div>
</li>
<li class="ace-line ace-line old-record-id-Qfesd1bISowuFXxrZkNlinxhgkr" data-list="bullet">
<div><strong>How:</strong> Utilizing <strong>Collateralized Debt Positions (Vaults)</strong>, the Dai Savings Rate (DSR), and the 2026 "Endgame" upgrades.</div>
</li>
</ul>
<ol class="ace-line ace-line old-record-id-GGI5d4hr9oMrXvx5KEhlm3PCg69" start="1">
<li data-list="number">
<h2 class="heading-2">The Engine: Collateralized Debt Positions (Vaults)</h2>
</li>
</ol>
<div class="ace-line ace-line old-record-id-OogOdV9WGoy8RjxIkwXlx90Og1g">At the heart of <strong>how DAI works</strong> is the concept of a "Vault." Unlike centralized stablecoins that are issued upon a bank deposit, DAI is created when a user locks up a surplus of digital assets.</div>
<h3 class="heading-3 ace-line old-record-id-Kn2EdOMr9o2ijvxMUpAlcSWNgyd">The Minting Process</h3>
<div class="ace-line ace-line old-record-id-UvLQdQxG9o95gSxMG3MlUFNrgQb">To generate DAI, a user interacts with the protocol to lock an approved asset (such as ETH) as collateral. By 2026, this process has become highly streamlined, allowing users to manage their positions through the <a href="https://www.kucoin.com/en-eu" data-lark-is-custom="true">KuCoin Lite Version</a> or direct <a href="https://www.kucoin.com/markets/defi" target="_blank" rel="noopener noreferrer">DeFi</a> dashboards.</div>
<h3 class="heading-3 ace-line old-record-id-E3v3dlTkVoJnTNxEoTJltINvgKK">Over-Collateralization</h3>
<div class="ace-line ace-line old-record-id-BouqdhjRYoDn6mxEB9HlDrxWgad">Because cryptocurrencies are inherently volatile, DAI employs <strong>over-collateralization</strong>. If the liquidation ratio for Ethereum is 150%, you must deposit at least $1,500 worth of ETH to mint 1,000 DAI. This buffer ensures that even if <a href="https://www.kucoin.com/price/THE" target="_blank" rel="noopener noreferrer">the price</a> of ETH drops by 30%, the system still holds enough value to back the outstanding debt.</div>
<ol class="ace-line ace-line old-record-id-ZFUVdSNXMonSeTxMnJblMYvhgod" start="2">
<li data-list="number">
<h2 class="heading-2">Stability Mechanisms: Fees and Liquidations</h2>
</li>
</ol>
<div class="ace-line ace-line old-record-id-SPoTdCgFeoSG54xWVPPl3rIWgfC">Maintaining a $1.00 peg in a decentralized environment requires constant algorithmic adjustment. The protocol uses two primary "levers" to ensure DAI stays on target.</div>
<h3 class="heading-3 ace-line old-record-id-Kt9adlRzfoz0PZxazvrlsifXgLe">The Stability Fee</h3>
<div class="ace-line ace-line old-record-id-Xsf4dRKWEoOGPZxpUJ0l79wpgSd">Think of the Stability Fee as a decentralized interest rate. It is an annual percentage yield (APY) paid by Vault owners on the DAI they have generated.</div>
<ul class="list-bullet1">
<li class="ace-line ace-line old-record-id-OCWYdnGqooFJ5Vxx9Q0lFg6qgfe" data-list="bullet">
<div><strong>If DAI &gt; $1.00:</strong> The DAO decreases the Stability Fee to make borrowing cheaper, increasing supply and lowering the price.</div>
</li>
<li class="ace-line ace-line old-record-id-EHLUd68RoolKsSx6R6dlgKjagjb" data-list="bullet">
<div><strong>If DAI &lt; $1.00:</strong> The DAO increases the Stability Fee, encouraging users to repay their debt and "burn" DAI, which reduces supply and raises the price.</div>
</li>
</ul>
<div class="ace-line ace-line old-record-id-MECFdh88lon91CxPSo8lM9mkgwn">Technical deep-dives into these interest rate adjustments are frequently published in the <a href="https://www.kucoin.com/en-eu/blog" data-lark-is-custom="true">KuCoin Blog</a>.</div>
<h3 class="heading-3 ace-line old-record-id-KznxdYfFGoKJU5xcvrOlN9y4g7J">Automatic Liquidations</h3>
<div class="ace-line ace-line old-record-id-BGFydOYXvoR3p0xy82slrYFzgje">If a user's collateral value falls below the required ratio, the system triggers a <strong>Dutch Auction</strong>. The protocol automatically sells the collateral to the highest bidder to recover the outstanding DAI debt plus a liquidation penalty. This "fail-safe" ensures the entire ecosystem remains solvent even during market crashes.</div>
<ol class="ace-line ace-line old-record-id-NpDFd9eEyokP2IxSWLal1t4mg0t" start="3">
<li data-list="number">
<h2 class="heading-2">The 2026 Evolution: The Sky Rebrand &amp; USDS</h2>
</li>
</ol>
<div class="ace-line ace-line old-record-id-XBtVddX9Aob4jexRyOilmHPKgBc">By 2026, the Maker ecosystem has undergone its most significant transformation, known as the <strong>"Endgame."</strong> The protocol has rebranded to <strong>Sky</strong>, introducing a two-token system for the next generation of DeFi.</div>
<ul class="list-bullet1">
<li class="ace-line ace-line old-record-id-QMVnd12GEok8xYxFFU1ljq24gHe" data-list="bullet">
<div><strong>SKY (Governance):</strong> The successor to MKR, used for protocol voting and capturing system surpluses.</div>
</li>
<li class="ace-line ace-line old-record-id-OBTjdZttyoEDwixlYA0lJPXpgoc" data-list="bullet">
<div><strong>USDS (Stablecoin):</strong> An upgraded stablecoin launched alongside DAI. While USDS offers enhanced yield features and better regulatory compliance, <strong>DAI continues to exist</strong> as the "purely decentralized" option for those who prioritize censorship resistance over native rewards.</div>
</li>
</ul>
<div class="ace-line ace-line old-record-id-QfQQdriPaoBXUtxBXC0lPPYHgje">Users can seamlessly upgrade their DAI to USDS at a 1:1 ratio. Many of these transition guides and asset swap details can be found in <a href="https://www.kucoin.com/zh-hant/announcement" data-lark-is-custom="true">official announcements</a>.</div>
<ol class="ace-line ace-line old-record-id-PcrYdb4Tlo8CQoxuAZ9lRuRpgYg" start="4">
<li data-list="number">
<h2 class="heading-2">Why Use DAI for Trading and Savings?</h2>
</li>
</ol>
<div class="ace-line ace-line old-record-id-El26dkX4do25ERxcXMnll5NCgqf">For traders on <a href="https://www.kucoin.com/en-eu" data-lark-is-custom="true">KuCoin</a>, DAI offers several advantages over its fiat-backed counterparts:</div>
<ol class="list-number1" start="1">
<li class="ace-line ace-line old-record-id-JP7Gd9KK3oKk5Fx72NylXGrBgpe" data-list="number">
<div><strong>Censorship Resistance:</strong> Unlike <a href="https://www.kucoin.com/price/USDT" target="_blank" rel="noopener noreferrer">USDT</a> or USDC, DAI does not have a "blacklist" or "freeze" function in its core smart contract.</div>
</li>
<li class="ace-line ace-line old-record-id-IFpsdJRLxojKxDxa0VjlJgkfgqf" data-list="number">
<div><strong>On-Chain Transparency:</strong> Every single DAI in circulation is auditable in real-time on the blockchain. You never have to wonder if the reserves exist.</div>
</li>
<li class="ace-line ace-line old-record-id-SMQdd99pQowVn1xyGVGl4AO2gVh" data-list="number">
<div><strong>The Dai Savings Rate (DSR):</strong> By locking DAI into a specific smart contract, holders can <a href="https://www.kucoin.com/earn" target="_blank" rel="noopener noreferrer">earn</a> a share of the protocol's stability fees. In 2026, this provides a "risk-free" benchmark rate for the entire Ethereum-based economy.</div>
</li>
</ol>
<h2 class="heading-2 ace-line old-record-id-W3WXdxRpYoVIY5xOx4Bl9UkcgCb">Comparison: DAI vs. Centralized Stablecoins</h2>
<div class=" old-record-id-KBdUdfpywosxT3xbICJlQH5RgAh" data-type="sheet">
<table border=""><colgroup> <col width="187"> <col width="279"> <col width="279"> </colgroup>
<tbody>
<tr>
<td>Feature</td>
<td>DAI (Decentralized)</td>
<td>USDT / <a href="https://www.kucoin.com/price/USDC" target="_blank" rel="noopener noreferrer">USDC</a> (Centralized)</td>
</tr>
<tr>
<td>Asset Backing</td>
<td>On-chain <a href="https://www.kucoin.com/learn/crypto" target="_blank" rel="noopener noreferrer">Crypto</a> &amp; RWA</td>
<td>Off-chain Bank Deposits</td>
</tr>
<tr>
<td>Freeze Function</td>
<td>None (Permissionless)</td>
<td>Centralized Blacklisting</td>
</tr>
<tr>
<td>Auditability</td>
<td>Instant On-Chain</td>
<td>Monthly/Quarterly Reports</td>
</tr>
<tr>
<td>Governance</td>
<td>Decentralized SKY Holders</td>
<td>Corporate Management</td>
</tr>
<tr>
<td>Issuance</td>
<td>User-generated via Vaults</td>
<td>Company-issued</td>
</tr>
</tbody>
</table>
</div>
<h2 class="heading-2 ace-line old-record-id-Uc57dEUpPoWOtZxDc07lWvNbgye">Conclusion: The Resilience of Decentralized Stablecoins</h2>
<div class="ace-line ace-line old-record-id-HFMidlYHToUnIPxUd7Clli8Pgdf">Understanding <strong>how DAI (DAI) work</strong> highlights the incredible resilience of decentralized governance. By surviving multiple market cycles and successfully transitioning into the Sky ecosystem in 2026, DAI has proven that code-based stability is not just a theory, but a functional pillar of the global financial system.</div>
<div class="ace-line ace-line old-record-id-QbcKdfJPLoMHnyxfoLhljyRSgfc">Whether you are using it to hedge against volatility on <a href="https://www.kucoin.com/en-eu/markets" data-lark-is-custom="true">KuCoin Markets</a> or as collateral for complex DeFi strategies, DAI remains the gold standard for trustless digital dollars. Its evolution through the Endgame strategy ensures that it will continue to scale alongside the broader blockchain industry.</div>
<h2 class="heading-2 ace-line old-record-id-UAzwd0RiEooWc3xvGs1ld1XGgup">FAQs</h2>
<h3 class="heading-3 ace-line old-record-id-KLDIdQLFTo6yYixkXEKlv0NXgHf">Can I lose my collateral in a DAI Vault?</h3>
<div class="ace-line ace-line old-record-id-H5wIdSe8ToV6o2xf2GRlynLYg2b">Yes. If the value of your collateral falls below the required liquidation ratio and you do not add more collateral or pay back your debt, your vault will be liquidated.</div>
<h3 class="heading-3 ace-line old-record-id-JIDwdsklHoIWFfxC1BGlj7D1gJd">Is DAI still relevant after the Sky (USDS) launch?</h3>
<div class="ace-line ace-line old-record-id-QjLsdSD2lozZD9xTFIilr6g2gnd">Absolutely. DAI remains the primary decentralized stablecoin for users who want to avoid the "freeze" functions that may be present in more compliant tokens like USDS.</div>
<h3 class="heading-3 ace-line old-record-id-BpaKdrtudoFIT1xLVa5lPaacgsd">How does the protocol handle a major ETH crash?</h3>
<div class="ace-line ace-line old-record-id-XgYodJoTuoOVNxxZKxclb0Opg0d">The system relies on over-collateralization and high-speed Dutch auctions. Even if the market drops quickly, the "buffer" of extra collateral is usually enough to cover the debt.</div>
<h3 class="heading-3 ace-line old-record-id-CTo7dpIsroSnDqx9ud5lqc7SgJg">Where does interest in the Dai Savings Rate (DSR) come from?</h3>
<div class="ace-line ace-line old-record-id-CqvGdEWCdo4IQ2xhZ8PlFBGqgNe">The interest is paid out from the <strong>Stability Fees</strong> collected from Vault owners. It is essentially a distribution of the protocol's earnings back to its holders.</div>
<h3 class="heading-3 ace-line old-record-id-XAABdTJHsoFVDSxqHiBlLqLSgYf">How can I stay updated on Sky DAO governance votes?</h3>
<div class="ace-line ace-line old-record-id-SM23dua2uo3UAfxJlGnlyQ2Lg6e">The most reliable way to track changes in Stability Fees or collateral types is through <a href="https://www.kucoin.com/zh-hant/announcement" data-lark-is-custom="true">official announcements</a> and the <a href="https://www.kucoin.com/en-eu/blog" data-lark-is-custom="true">KuCoin Blog</a>.</div>
<div class="ace-line ace-line old-record-id-JS9vdwEoEoiBXzxwXGplbrkEgAc">Join 30 million global users on the world&rsquo;s leading crypto exchange by signing up for your free account now. <a href="https://www.kucoin.com/ucenter/signup" data-lark-is-custom="true">Register Now!</a></div>
<h2 class="heading-2 ace-line old-record-id-W7ZJdhFGvo8yLDx7U2mlpLydg9f">Further reading</h2>
<div class="ace-line ace-line old-record-id-E7D5dtefDohtISxrJPklDzXgg5P"><a href="https://www.kucoin.com/learn/crypto/how-to-earn-hamster-coin-with-daily-combo-and-daily-cipher" data-lark-is-custom="true">How to Earn Hamster Kombat (HMSTR) With Daily Combo and Daily Cipher</a></div>
<div class="ace-line ace-line old-record-id-MUeidC4ykoolNVx6buulSB2Kgub"><a href="https://www.kucoin.com/news/flash/dropee-daily-combo-2025-12-05-play-games-to-win-coins" data-lark-is-custom="true">Dropee Daily Combo: Play Games to Win Coins</a></div>
<div class="ace-line ace-line old-record-id-EYLQdJw48oH9smxsaIpl2lNDgCf"><a href="https://www.kucoin.com/news/articles/hamster-kombat-daily-cipher-for-july-13-answers-to-claim-1-million-coins" data-lark-is-custom="true">Hamster Kombat Daily Cipher: Answers to Claim 1 Million Coins</a></div>
</div>

How Does DAI (DAI) Work?

<div data-page-id="HHfWdbpHJomzWAxeS5tlXRvegsb" data-lark-html-role="root" data-docx-has-block-data="false">
<h2 class="heading-2 ace-line old-record-id-SFiIda51RofIyDx5XuIlRs2dgUd">Key Takeaways</h2>
<ul class="list-bullet1">
<li class="ace-line ace-line old-record-id-EbOMdWd5yoOzJsxgT4alzna2g2f" data-list="bullet">
<div><strong>DAI&rsquo;s Evolutionary Successor:</strong> USDS is the upgraded, decentralized stablecoin from <strong>Sky Protocol</strong> (formerly MakerDAO), designed to maintain a 1:1 soft peg to the US Dollar.</div>
</li>
<li class="ace-line ace-line old-record-id-UyYLdLVchoYciMxsrrXlIPAwgmf" data-list="bullet">
<div><strong>Over-Collateralization Engine:</strong> New USDS is minted by locking assets like ETH, USDC, or tokenized Real-World Assets (RWAs) in decentralized "Sky Vaults."</div>
</li>
<li class="ace-line ace-line old-record-id-HwqwdnGJhoarKqxqmpkl0RQKgXc" data-list="bullet">
<div><strong>Sky Savings Rate (SSR):</strong> Holders can convert USDS to <strong>sUSDS</strong> to earn a variable protocol-native yield funded by loan interest and RWA returns.</div>
</li>
<li class="ace-line ace-line old-record-id-Tpj3dHEvAoAV2RxiNXnlpdsFgWh" data-list="bullet">
<div><strong>Cross-Chain Native Mobility:</strong> Through <strong>SkyLink</strong>, USDS moves natively across Layer 2 networks like Base and Arbitrum without traditional third-party bridging risks on <a href="https://www.kucoin.com/en-eu" data-lark-is-custom="true">KuCoin</a>.</div>
</li>
</ul>
<div class="ace-line ace-line old-record-id-F1AxdzlvZoyjTHxmFAFl4ZKvgBg">In the current landscape of decentralized finance, the question "<strong>How does USDS (USDS) work?</strong>" represents the evolution of the industry's most battle-tested stablecoin architecture. Launched as the core asset of the <strong>Sky Protocol, </strong>the comprehensive rebrand of MakerDAO&mdash;USDS is the "Decentralized Dollar Upgrade." It combines the censorship-resistant DNA of its predecessor, DAI, with enhanced rewards and cross-chain capabilities.</div>
<h2 class="heading-2 ace-line old-record-id-MVmgdqQ2ioXjARxMKXxlLwPEgOc">The 6W Framework of USDS</h2>
<div class="ace-line ace-line old-record-id-VegmdducKo7BypxtiKOlCpopgFh">To understand the technical and economic logic of USDS, we can analyze it through the <strong>6W principles</strong>:</div>
<ul class="list-bullet1">
<li class="ace-line ace-line old-record-id-EFQOdilNToAcjoxztm7lwVXUgdh" data-list="bullet">
<div><strong>Who:</strong> Governed by the <strong>Sky DAO</strong>, a decentralized community of SKY token holders who vote on risk parameters and collateral types.</div>
</li>
<li class="ace-line ace-line old-record-id-QOOjdsyI9oquayxWgtnl3cOJg7b" data-list="bullet">
<div><strong>What:</strong> A <strong>decentralized, over-collateralized stablecoin</strong> pegged to the US Dollar.</div>
</li>
<li class="ace-line ace-line old-record-id-X9kTd4uduoCC0kxRpiKlzbqggUe" data-list="bullet">
<div><strong>Where:</strong> Initially anchored on Ethereum, it now functions as a multi-chain asset via the <strong>SkyLink</strong> protocol.</div>
</li>
<li class="ace-line ace-line old-record-id-BreHdDRcXoKKJzxfYMilCfqpglh" data-list="bullet">
<div><strong>When:</strong> New tokens are minted whenever a user opens a vault or swaps eligible stablecoins at a 1:1 ratio.</div>
</li>
<li class="ace-line ace-line old-record-id-Y6KjdiaBToDHY9xA6QSlpeN1gTd" data-list="bullet">
<div><strong>Why:</strong> To provide a stable store of value that generates <strong>native DeFi yield</strong> while remaining independent of centralized banking freezes.</div>
</li>
<li class="ace-line ace-line old-record-id-YQmIdMSreoOM5Ex2sTulYM0dgVf" data-list="bullet">
<div><strong>How:</strong> Secured by a surplus of crypto-collateral and <strong>tokenized Treasury bills</strong>, ensuring every USDS is backed by more than $1 of value.</div>
</li>
</ul>
<h2 class="heading-2 ace-line old-record-id-AOOudi8FIoyi3rxksgMltbIxgKh">How does USDS (USDS) work? Vaults and Minting</h2>
<div class="ace-line ace-line old-record-id-MW0CdDzAwo8awKxbld5lvIx6gwd">The "How" of USDS&rsquo;s stability relies on its rigorous <strong>over-collateralization</strong> model. Unlike centralized stablecoins that rely on bank audits, USDS is backed by code and on-chain assets.</div>
<ol class="ace-line ace-line old-record-id-XRuVd6Glpoc30sxL3bSlFL5cgff" start="1">
<li data-list="number">
<h3 class="heading-3">Sky Vaults and Collateral</h3>
</li>
</ol>
<div class="ace-line ace-line old-record-id-MBWqdTRUhopGdNxK2sMlUL4ugdg">Users create USDS by locking assets into smart contracts called Vaults. For example, to mint 1,000 USDS, a user might need to deposit $1,500 worth of ETH. This "collateralization ratio" provides a buffer against market volatility. If the value of the ETH drops below a certain threshold, the protocol automatically liquidates the collateral to ensure the USDS remains fully backed.</div>
<ol class="ace-line ace-line old-record-id-ZXGodHFt7oIxAVxuaKPlBpmTgMg" start="2">
<li data-list="number">
<h3 class="heading-3">The 1:1 Swap Facility</h3>
</li>
</ol>
<div class="ace-line ace-line old-record-id-OC09dhLiBor4RnxcT42leshegGh">To ensure deep liquidity, the protocol allows for 1:1 swaps between legacy DAI and USDS, as well as USDC and USDS. This mechanism helps maintain the peg by allowing arbitrageurs to instantly correct any price deviations from $1.00.</div>
<div class="ace-line ace-line old-record-id-BqIEdTNKeojuIMxVZhilAKWigCe">For a deeper technical analysis of how these vaults handle extreme market stress, the <a href="https://www.kucoin.com/en-eu/blog" data-lark-is-custom="true">KuCoin Blog</a> provides frequent research-heavy deep dives.</div>
<h2 class="heading-2 ace-line old-record-id-Mcbpd5KLPofHhQxJ69Llb8Fdgih">Why are sUSDS and SKY Rewards Different?</h2>
<div class="ace-line ace-line old-record-id-WMHrdPC2SoFjXNxWuMblqz0UgQc">A primary driver of how USDS works is its "active" nature. Unlike traditional cash, USDS is designed to work for its holder.</div>
<ul class="list-bullet1">
<li class="ace-line ace-line old-record-id-SzNGd3keDolZhDx8dewlo5FhgOg" data-list="bullet">
<div><strong>Sky Savings Rate (SSR) &amp; sUSDS:</strong> When users deposit USDS into the protocol's savings module, they receive <strong>sUSDS</strong> (Savings USDS). This is an accumulating token; it doesn't "rebase" in your wallet but rather grows in value relative to USDS over time. The yield is sourced from the interest paid by borrowers and the revenue from the protocol&rsquo;s Real-World Asset (RWA) investments.</div>
</li>
<li class="ace-line ace-line old-record-id-Qo9Fd1wckow5X1xVY5glLuyFgwe" data-list="bullet">
<div><strong>Sky Token Rewards (STRs):</strong> The protocol incentivizes ecosystem growth by allowing USDS holders to earn <strong>SKY tokens</strong> (the upgraded governance token). This creates a "flywheel" effect where holding USDS provides both stability and a stake in the protocol&rsquo;s future.</div>
</li>
</ul>
<div class="ace-line ace-line old-record-id-NALBdKQutot1aCxfipBlBksEgth">Significant updates regarding the current SSR rates and new collateral types are regularly posted in the <a href="https://www.kucoin.com/zh-hant/announcement" data-lark-is-custom="true">official announcement</a> section.</div>
<h2 class="heading-2 ace-line old-record-id-KEkad4neso4l0vxXqNzlCPINgPd">SkyLink: The Cross-Chain Multiplier</h2>
<div class="ace-line ace-line old-record-id-Y8Hed0qrDouo9WxrggOlmaN0gpc">In 2026, the utility of USDS is defined by its ability to move across the fragmented blockchain landscape.</div>
<div class="ace-line ace-line old-record-id-JH3fdkcYkosBlyxOADxl30Pggdh"><strong>SkyLink</strong> is the native bridging system that connects the Sky ecosystem to Layer 2 networks. Unlike traditional "wrapped" tokens, USDS on Layer 2s like Base or Arbitrum is native. This reduces transaction costs and eliminates the "bridge risk" that has historically plagued DeFi. By using SkyLink, users can access the Sky Savings Rate from their preferred low-cost network without moving back to the Ethereum mainnet.</div>
<div class="ace-line ace-line old-record-id-JWFHdtMG6o3G1cxoPrUl39Lngvx">For traders who prefer a more streamlined experience without managing complex bridging transactions, the <a href="https://www.kucoin.com/en-eu" data-lark-is-custom="true">KuCoin Lite Version</a> offers a simplified gateway to trade and manage USDS with institutional-grade security.</div>
<h2 class="heading-2 ace-line old-record-id-T68rdhVj3o3NgvxNXzUleCVwgFd">Conclusion: A More Productive Dollar</h2>
<div class="ace-line ace-line old-record-id-E0cddaVF0omG4MxGmyLl5I72gWh">In summary, <strong>how USDS (USDS) work</strong> is a story of vertical integration in DeFi. By owning the collateral engine, the savings mechanism, and the cross-chain bridge, Sky Protocol has created a stable coin that is as efficient as it is secure. As the protocol continues to integrate more Real-World Assets and expand its "Sky Star" sub-DAOs, USDS is positioned to be the primary decentralized alternative to centralized fiat-backed tokens.</div>
<h2 class="heading-2 ace-line old-record-id-Mvjxd8vjDo7HmRxgbwMlNr3Egve">FAQs</h2>
<h3 class="heading-3 ace-line old-record-id-RKVEdQzI0ohm3FxXHVClE0Fagmg">Is USDS different from DAI?</h3>
<div class="ace-line ace-line old-record-id-QcETdp9tSotmggxs98TlquBMgSG">USDS is the upgraded version of DAI. While DAI remains active, USDS offers direct access to Sky Token Rewards and the native Sky Savings Rate. Users can swap between the two at a 1:1 ratio.</div>
<h3 class="heading-3 ace-line old-record-id-ViHndt4kLomHY0xsZBplHlCugii">How is the USDS yield generated?</h3>
<div class="ace-line ace-line old-record-id-LdncdeZFgogrS0xl4M7lqkFogWf">The yield (Sky Savings Rate) is funded by protocol revenue, which includes interest paid by borrowers on their vaults and earnings from the protocol's holdings of tokenized U.S. Treasury bills.</div>
<h3 class="heading-3 ace-line old-record-id-AHeSd8QiboFuTsxHXodlA8BxgWe">What is sUSDS?</h3>
<div class="ace-line ace-line old-record-id-NvFIdC29wojUSjxocS2lq88ygKW">sUSDS is a tokenized representation of USDS deposited in the savings rate. It is an "accumulating" token, meaning its value in terms of USDS increases every few seconds as interest is added to the pool.</div>
<h3 class="heading-3 ace-line old-record-id-UK9td35A9oA0POxW2utlaVGSgZg">Is the USDS centralized because it uses RWAs?</h3>
<div class="ace-line ace-line old-record-id-IWf5dk6DHo2kmVxaBVslT6tLgMb">USDS is decentralized in its governance (via Sky DAO). However, its collateral includes some centralized assets like USDC and Treasury bills to enhance price stability and provide a consistent yield for holders.</div>
<h3 class="heading-3 ace-line old-record-id-V5XidDZBooTvpvxGJ8BlQDN5gif">How do I move USDS to Layer 2?</h3>
<div class="ace-line ace-line old-record-id-Q9pddq3CGocK8WxHb0jlqnKHgOg">You can move USDS using <strong>SkyLink</strong>, the protocol's native bridge. This allows you to use USDS on networks like Arbitrum or Base while still participating in the Sky ecosystem's rewards.</div>
<div class="ace-line ace-line old-record-id-LRKtdZsxvoQRkuxJOk1lqurUgDd">Join 30 million global users on the world&rsquo;s leading crypto exchange by signing up for your free account now. <a href="https://www.kucoin.com/ucenter/signup" data-lark-is-custom="true">Register Now!</a></div>
<h2 class="heading-2 ace-line old-record-id-TCscdRNhSoRr1IxXEjylqR7cghh">Further reading</h2>
<div class="ace-line ace-line old-record-id-I8nadpX9DolPW1xeRBWlxdy8gdg"><a href="https://www.kucoin.com/news/flash/sui-and-stripe-partner-to-launch-yield-bearing-usdsui-stablecoin" data-lark-is-custom="true">Sui and Stripe Partner to Launch Yield-Bearing USDSui Stablecoin</a></div>
<div class="ace-line ace-line old-record-id-NXRfdDvfmoWxS2xByohlymZ7gnE"><a href="https://www.kucoin.com/news/flash/sky-launches-stusds-its-first-risk-capital-token-for-high-yield-defi-investors" data-lark-is-custom="true">Sky Launches stUSDS, Its First Risk-Capital Token for High-Yield DeFi Investors</a></div>
<div class="ace-line ace-line old-record-id-YZMWdQZ9ooth2ex5SIrlyFnHgNh"><a href="https://www.kucoin.com/news/flash/sui-launches-usdsui-stablecoin-for-gasless-transfers" data-lark-is-custom="true">Sui Launches USDSui Stablecoin for Gasless Transfers</a></div>
</div>

How does USDS (USDS) work?

<div data-page-id="Bbdjdi6Gto17icx20T5letrRgwd" data-lark-html-role="root" data-docx-has-block-data="true">
<h2 class="heading-2 ace-line old-record-id-EfyLd1ZB6ob1dixXU8hl1XP8gjd">Key Takeaways</h2>
<ul class="list-bullet1">
<li class="ace-line ace-line old-record-id-LEsMdSas3osSISxbNHSlU4SSgtb" data-list="bullet">
<div><strong>Novel Consensus Engine:</strong> Avalanche uses the <strong>Snow family of protocols</strong>, which achieves sub-second finality through repeated random subsampling rather than leader-based validation.</div>
</li>
<li class="ace-line ace-line old-record-id-HSvCdmrWLoYqgpxRszJl2lyogNg" data-list="bullet">
<div><strong>Three-Chain Architecture:</strong> The network distributes tasks across the <strong>X-Chain</strong> (Assets), <strong>P-Chain</strong> (Metadata), and <strong>C-Chain</strong> (Ethereum-compatible Smart Contracts) to optimize performance.</div>
</li>
<li class="ace-line ace-line old-record-id-KPJDdRBgXoRT6lxEHj7lWXRegzc" data-list="bullet">
<div><strong>Horizontal Scaling via Subnets:</strong> Avalanche allows for the creation of sovereign blockchains called <strong>Subnets</strong>, enabling infinite horizontal scaling with custom validator rules.</div>
</li>
<li class="ace-line ace-line old-record-id-RzNjdAUpmoJHJ1xNfIslTylMgWZ" data-list="bullet">
<div><strong>Deflationary Tokenomics:</strong> 100% of transaction fees on the Avalanche primary network are <strong>burned</strong>, directly linking network activity to the scarcity of the AVAX token.</div>
</li>
</ul>
<div class="ace-line ace-line old-record-id-UDrYdeiwjoFLzJx8RmcluLJXgmb">In the pursuit of the "Blockchain Trilemma"&mdash;balancing decentralization, security, and scalability&mdash;Avalanche has emerged as one of the most technically unique Layer-1 platforms in the industry. To understand <strong>how Avalanche (AVAX) works</strong>, one must look beyond a single ledger and visualize a "platform of platforms." It is not just a blockchain; it is an umbrella for thousands of interconnected, application-specific networks.</div>
<div class="ace-line ace-line old-record-id-MQNmdjhthoDXAzx5D6SlJNr0gCb">For traders and developers engaging with <a href="https://www.kucoin.com/en-eu/markets" data-lark-is-custom="true">KuCoin Markets</a>, Avalanche represents a fundamental shift in how consensus is reached and how multi-chain ecosystems are structured. By separating execution, coordination, and asset management into distinct layers, it provides a high-performance environment suitable for both institutional finance and decentralized gaming.</div>
<h2 class="heading-2 ace-line old-record-id-B3PwdUqAMoTDEwx306flAwrfguc">The 6W Framework of the Avalanche Ecosystem</h2>
<div class="ace-line ace-line old-record-id-K8BhdGWchozybwxKKx9lDTCAgsc">To categorize the fundamental nature of this network, we apply the <strong>6W principles</strong>:</div>
<ul class="list-bullet1">
<li class="ace-line ace-line old-record-id-RB4EdbwQzoa9yXx3nVwlAG3aghg" data-list="bullet">
<div><strong>Who:</strong> Founded by Ava Labs and led by Dr. Emin G&uuml;n Sirer, a pioneer in peer-to-peer systems.</div>
</li>
<li class="ace-line ace-line old-record-id-RE9ZdlRhSokvTMxNg18lbIYOgYb" data-list="bullet">
<div><strong>What:</strong> A <strong>heterogeneous multi-chain platform</strong> built on a novel, probabilistic consensus mechanism.</div>
</li>
<li class="ace-line ace-line old-record-id-DudpdNQrYoxSzhxs1Bsl767Mged" data-list="bullet">
<div><strong>Where:</strong> A global, permissionless network of validators securing the Primary Network and its constituent Subnets.</div>
</li>
<li class="ace-line ace-line old-record-id-SmvKdklUto6HGwxjhYClfI7Egqf" data-list="bullet">
<div><strong>When:</strong> Designed for near-instant finality, processing transactions in under one second.</div>
</li>
<li class="ace-line ace-line old-record-id-X0rOdXeitoWCoKxQjRwlniw4gLd" data-list="bullet">
<div><strong>Why:</strong> To enable the seamless digitization of all the world's assets on a single, interoperable infrastructure.</div>
</li>
<li class="ace-line ace-line old-record-id-YzkLdyg5gosg3lxKakjl5m9ggZg" data-list="bullet">
<div><strong>How:</strong> Utilizing the <strong>Avalanche Consensus protocol</strong> and a unique tri-chain hardware-software architecture.</div>
</li>
</ul>
<ol class="ace-line ace-line old-record-id-DTbHdyUqloCpyhx5lr6lrdD3g6B" start="1">
<li data-list="number">
<h2 class="heading-2">The Core Innovation: Avalanche Consensus</h2>
</li>
</ol>
<div class="ace-line ace-line old-record-id-AOFmdUonFoJxDgxJlz8lkfgZgFe">The "different" in Avalanche begins with its consensus engine. Traditional blockchains use either Proof of Work (PoW) or Classical Proof of Stake (PoS), both of which require all nodes to communicate with one another or rely on a "leader" node.</div>
<h3 class="heading-3 ace-line old-record-id-Xq5Sd65YhobnITxMzXGlf57JgIf">Repeated Random Subsampling</h3>
<div class="ace-line ace-line old-record-id-Ih00drCN6ozvp0xxNbtl9Ts2gAd">Avalanche uses a "probabilistic" approach. Instead of a leader proposing a block and everyone voting, a node asks a small, random group of other nodes for their preference. This process is repeated rapidly across the network. Like a snowball rolling down a hill, a small preference quickly turns into a network-wide landslide of agreement. This leaderless system allows for massive decentralization without the performance bottlenecks found in older models. Insights into such technical evolutions are a core focus of the <a href="https://www.kucoin.com/en-eu/blog" data-lark-is-custom="true">KuCoin Blog</a>.</div>
<ol class="ace-line ace-line old-record-id-M1y6ddnCVoRoVlxnzp1ltdszgld" start="2">
<li data-list="number">
<h2 class="heading-2">Tri-Chain Architecture: Specialized Efficiency</h2>
</li>
</ol>
<div class="ace-line ace-line old-record-id-UOL3dbpM8oXgj4x0dxel1XJrgM5">Most blockchains force every transaction&mdash;from simple transfers to complex smart contracts&mdash;through a single pipeline. Avalanche solves this congestion by using three specialized chains, all secured by the Primary Network.</div>
<h3 class="heading-3 ace-line old-record-id-E2UUdvp1aoPVUFxUXRTlIPRlgYb">The X-Chain (Exchange Chain)</h3>
<div class="ace-line ace-line old-record-id-TUO9dwjSioXz82xV1wwlc2KYgod">The X-Chain is optimized for the creation and trading of digital assets. It uses a Directed Acyclic Graph (DAG) model, which allows transactions to be processed in parallel rather than in a linear sequence.</div>
<h3 class="heading-3 ace-line old-record-id-MPSYd83qtoMQA3x9gillMMtEgBf">The P-Chain (Platform Chain)</h3>
<div class="ace-line ace-line old-record-id-KYGsdApFxoj8Xvxvpn3ltGWQgOc">The P-Chain acts as the metadata coordinator. It tracks active validators and facilitates the creation of Subnets. For users looking to participate in the governance or staking aspects of the ecosystem, the P-Chain is the critical infrastructure layer.</div>
<h3 class="heading-3 ace-line old-record-id-VJcwdlK5zouDhDxl6vHl95THgc9">The C-Chain (Contract Chain)</h3>
<div class="ace-line ace-line old-record-id-PRJKdNwMNozRNLxF7E4l0sHFggf">The C-Chain is the heart of Avalanche DeFi. It is an implementation of the <strong>Ethereum Virtual Machine (EVM)</strong>, meaning it is compatible with all the tools, smart contracts, and wallets used on Ethereum. When you swap tokens or use a decentralized exchange, you are likely interacting with the C-Chain. You can easily manage assets destined for the C-Chain via the <a href="https://www.kucoin.com/en-eu" data-lark-is-custom="true">KuCoin Lite Version</a> for a streamlined user experience.</div>
<ol class="ace-line ace-line old-record-id-HDuwdmtB7oHYM1xVPYylcphAgAe" start="3">
<li data-list="number">
<h2 class="heading-2">Infinite Scaling via Subnets</h2>
</li>
</ol>
<div class="ace-line ace-line old-record-id-WXwzdUezqon5IXxdO0tl2tA5gS6">Perhaps the most powerful answer to "how does Avalanche work" lies in its <strong>Subnet</strong> architecture. A Subnet is a sovereign blockchain that sets its own rules regarding membership, virtual machines, and fee structures.</div>
<div class="ace-line ace-line old-record-id-AO7sdnJOuoaDibxpGQrlRb3agih">Unlike Layer 2 rollups that depend on the main chain for data availability, Subnets are highly customizable. For example, a financial institution can create a "Permissioned Subnet" where only KYC-verified validators are allowed to join. This flexibility has made Avalanche a leader in the "Real World Asset" (RWA) space, as highlighted in several <a href="https://www.kucoin.com/zh-hant/announcement" data-lark-is-custom="true">official announcements</a>.</div>
<ol class="ace-line ace-line old-record-id-OaJudyZlWodiFmx33tMlrEgpgkd" start="4">
<li data-list="number">
<h2 class="heading-2">The Tokenomics of AVAX</h2>
</li>
</ol>
<div class="ace-line ace-line old-record-id-JmHsd1LZTodKV4x5dHUl9N41g8g">The AVAX token is the engine that drives the network. It serves as the common unit of account for fees and the primary mechanism for security through staking.</div>
<ul class="list-bullet1">
<li class="ace-line ace-line old-record-id-YiRpdnhZXo38YJxb9b7loVwbgrg" data-list="bullet">
<div><strong>Security:</strong> To become a validator and earn rewards, users must stake a minimum amount of AVAX.</div>
</li>
<li class="ace-line ace-line old-record-id-Ueoyd6NDoocYo3xYiwhlqDRKgJc" data-list="bullet">
<div><strong>Fee Burning:</strong> In a move toward long-term scarcity, <strong>100% of all transaction fees</strong> on the Avalanche Primary Network are burned. This means that as more people use the network to trade or mint NFTs, the total supply of AVAX decreases over time.</div>
</li>
<li class="ace-line ace-line old-record-id-HVDKdTCIooqaT7xQMOIlkOfWgkh" data-list="bullet">
<div><strong>Governance:</strong> AVAX holders can participate in on-chain voting to decide the rate of token emissions and other key network parameters.</div>
</li>
</ul>
<h2 class="heading-2 ace-line old-record-id-Z9nZdTkMWoPMoFxplSRlVpxbgFd">Comparison: Avalanche vs. Conventional Networks</h2>
<div class=" old-record-id-MAxSdOjJFovYJ1xffX9lPpPtgNb" data-type="sheet">
<table border=""><colgroup><col width="261"><col width="261"><col width="261"></colgroup>
<tbody>
<tr>
<td>Feature</td>
<td>Avalanche (AVAX)</td>
<td>Ethereum (ETH)</td>
</tr>
<tr>
<td>Consensus Mechanism</td>
<td>Avalanche (Probabilistic)</td>
<td>PoS (Deterministic)</td>
</tr>
<tr>
<td>Transaction Finality</td>
<td>&lt; 1 Second</td>
<td>~12 Seconds</td>
</tr>
<tr>
<td>Throughput (TPS)</td>
<td>4,500+ (Per Subnet)</td>
<td>~15-30 (L1)</td>
</tr>
<tr>
<td>Fee Model</td>
<td>100% Burned</td>
<td>Partially Burned</td>
</tr>
<tr>
<td>Scaling Strategy</td>
<td>Horizontal (Subnets)</td>
<td>Vertical (L2 Rollups)</td>
</tr>
</tbody>
</table>
</div>
<h2 class="heading-2 ace-line old-record-id-XHb2dwp1loYaqGxGg3NlIPf0gVg">Conclusion: The Future of AVAX</h2>
<div class="ace-line ace-line old-record-id-LU27diiE4oaieAxb33zlHk6Pg8c">Understanding <strong>how Avalanche (AVAX) works</strong> reveals why it remains a top-tier contender in the smart contract space. By combining the sub-second speed of its novel consensus with the infinite flexibility of Subnets, Avalanche offers a platform that can grow without the traditional limits of blockchain congestion.</div>
<div class="ace-line ace-line old-record-id-BjuYdsznVoX7Usxb2nwlpupKgBh">As more developers and institutions migrate to this ecosystem, the burning mechanism ensures that the AVAX token captures the value of this growth. For anyone tracking the evolution of Layer-1s on <a href="https://www.kucoin.com/en-eu/markets" data-lark-is-custom="true">KuCoin Markets</a>, Avalanche provides a compelling example of how architectural innovation can solve the most pressing challenges on Web3.</div>
<h2 class="heading-2 ace-line old-record-id-HZCJdHryloYVJwxOOFplSDoGgc3">FAQ</h2>
<h3 class="heading-3 ace-line old-record-id-TxMqdDohKoJDeNxEbiulsTuMg0d">Is Avalanche compatible with MetaMask?</h3>
<div class="ace-line ace-line old-record-id-Slw3dyww1os0WpxCBpWlCT4bgjc">Yes. The Avalanche C-Chain is fully EVM-compatible. You can simply add the Avalanche Network settings to your MetaMask to interact with its dApps.</div>
<h3 class="heading-3 ace-line old-record-id-YIJpdbUf7oSrCtxfeltlv1ATgff">What is the minimum stake for Avalanche validators?</h3>
<div class="ace-line ace-line old-record-id-CPLKdl5vmoWFcVxj1TYl2nstgLb">Currently, to be a validator on the P-Chain, a user must stake at least 2,000 AVAX. However, smaller holders can "delegate" their AVAX to existing validators with much smaller amounts.</div>
<h3 class="heading-3 ace-line old-record-id-BJNld3IHgold2sxocpJlUOGAgBe">Does Avalanche have its own scaling solution like Rollups?</h3>
<div class="ace-line ace-line old-record-id-D7nmd9cquo85YTxp9iQlHCvGg7m">While Avalanche supports rollups, its primary scaling strategy is "Subnets." Instead of pushing all data through one chain, it allows for the creation of thousands of independent chains.</div>
<h3 class="heading-3 ace-line old-record-id-CVicdEQTpoCOLCxAzFslyMMJgMe">Why does Avalanche burn all its fees?</h3>
<div class="ace-line ace-line old-record-id-CwkWdCwwdouc8bxkvhulwWn0gFb">Burning 100% of fees creates deflationary pressure on the token supply. This ensures that the value created by network utility is distributed proportionally to all AVAX holders.</div>
<h3 class="heading-3 ace-line old-record-id-E2dDdZIEzoSJ7RxqEctlLutSgRm">Where can I find the latest Avalanche news?</h3>
<div class="ace-line ace-line old-record-id-MbANdGOYzoriJdxmzKGlsN6Dggb">Stay updated on new Subnet launches and ecosystem partnerships through the <a href="https://www.kucoin.com/zh-hant/announcement" data-lark-is-custom="true">official announcement</a> page or read deep-dive project reviews on the <a href="https://www.kucoin.com/en-eu/blog" data-lark-is-custom="true">KuCoin Blog</a>.</div>
<div class="ace-line ace-line old-record-id-T9skdyaD4od37YxWa97lwvXZgtT">Join 30 million global users on the world&rsquo;s leading crypto exchange by signing up for your free account now. <a href="https://www.kucoin.com/ucenter/signup" data-lark-is-custom="true">Register Now!</a></div>
<h2 class="heading-2 ace-line old-record-id-FFKHdUVTvoQNy1xAfxDlyXQGgWc">Further reading</h2>
<div class="ace-line ace-line old-record-id-REKidceono3bCoxPuEMlHSfNgBf"><a href="https://www.kucoin.com/news/flash/avalanche-price-prediction-2026-2030-can-avax-reach-100" data-lark-is-custom="true">Avalanche Price Prediction 2026-2030: Can AVAX Reach $100?</a></div>
<div class="ace-line ace-line old-record-id-N6RvdhUxFoCEp5xTp79lBSLRgge"><a href="https://www.kucoin.com/news/insight/AVAX/69a0309827795300077de07d" data-lark-is-custom="true">AVAX Price Analysis: Market Trends and Future Outlook</a></div>
<div class="ace-line ace-line old-record-id-N6eSdzpuTorm2exFlzJlYOB3guf"><a href="https://www.kucoin.com/news/articles/avalanche-avax-unlocks-1-67-million-tokens-navigating-market-supply-and-ecosystem-growth" data-lark-is-custom="true">Avalanche (AVAX) Unlocks 1.67 Million Tokens: Navigating Market Supply and Ecosystem Growth</a></div>
<div class="ace-line ace-line old-record-id-AAM3dnGAwoziTKxazSDlMDNxgQ6">&nbsp;</div>
</div>

How does Avalanche (AVAX) work?

<div data-page-id="Uly2d6sEToTtZsxietjlWcqwgSe" data-lark-html-role="root" data-docx-has-block-data="false">
<h2 class="heading-2 ace-line old-record-id-LB1ed6Dh2ol7eaxH1ZEl3hHmgnd">Key Takeaways</h2>
<ul class="list-bullet1">
<li class="ace-line ace-line old-record-id-K6dadccAXoCYc1xb9mLlWDnggjb" data-list="bullet">
<div><strong>Object-Centric Architecture:</strong> Unlike traditional account-based blockchains, <a href="https://www.kucoin.com/price/SUI" target="_blank" rel="noopener noreferrer">Sui</a> treats every asset as an independent "object," allowing for massive parallel processing and specialized ownership rules.</div>
</li>
<li class="ace-line ace-line old-record-id-YN1DdmV7GorsHAxynSOl7cLCgUc" data-list="bullet">
<div><strong>Dual-Path Consensus:</strong> Sui utilizes a "Fast Path" for simple transactions (like peer-to-peer transfers) that bypasses global consensus, achieving near-instant finality.</div>
</li>
<li class="ace-line ace-line old-record-id-Pt90dZUXGohvdUxN7wclFRqLgof" data-list="bullet">
<div><strong>The Move Language:</strong> Built on a customized version of the Move programming language, Sui provides a "resource-oriented" environment that prevents common smart contract vulnerabilities like re-entrancy attacks.</div>
</li>
<li class="ace-line ace-line old-record-id-Fd2KdJxn3o5jtbxttA9lODHsghf" data-list="bullet">
<div><strong>Horizontal Scalability:</strong> By utilizing the Narwhal (mempool) and Bullshark (consensus) engines, the network can scale its throughput indefinitely by adding more validator hardware to the <a href="https://www.kucoin.com/en-eu" data-lark-is-custom="true">KuCoin</a> ecosystem.</div>
</li>
</ul>
<div class="ace-line ace-line old-record-id-JRrSdpsPVoIU5AxlAwYl4j15gRd">In the current era of high-performance Layer 1s, the question "<strong>How does Sui (SUI) work?</strong>" is best answered by its departure from traditional blockchain design. Most legacy networks process transactions like a single-lane highway, where every car must wait for the one in front of it. Sui, however, operates like a multi-lane super-highway, where unrelated transactions move in parallel without ever interacting.</div>
<h2 class="heading-2 ace-line old-record-id-JtZ0drGMdowqUJxLhjPl9wrFgfh">What is the 6W Framework of Sui?</h2>
<div class="ace-line ace-line old-record-id-AAy7dsBb7ogwpsxrXAzlJFMNg4d">To grasp why Sui is a leader in the next generation of blockchains, we can analyze it through the <strong>6W principles</strong>:</div>
<ul class="list-bullet1">
<li class="ace-line ace-line old-record-id-RVoydFY6Oo8Fr0xetX8lXYH1gKe" data-list="bullet">
<div><strong>Who:</strong> Developed by <strong>Mysten Labs</strong>, a team founded by former lead engineers from Meta&rsquo;s (Facebook) Diem project.</div>
</li>
<li class="ace-line ace-line old-record-id-J7Ntd5BdjobkVkx9lfTlzvGRgRe" data-list="bullet">
<div><strong>What:</strong> A <strong>permissionless <a href="https://www.kucoin.com/learn/crypto/top-layer-1-blockchains-to-watch" target="_blank" rel="noopener noreferrer">Layer 1</a> blockchain</strong> designed for low-latency, high-throughput asset management.</div>
</li>
<li class="ace-line ace-line old-record-id-DYtBdDWTuoBIFvxjHkulEKXbghc" data-list="bullet">
<div><strong>Where:</strong> It operates as a global network of <strong>validators</strong> that can scale horizontally by adding more workers to their nodes.</div>
</li>
<li class="ace-line ace-line old-record-id-LxVbdKKXNorlxAxmDFglaHGFgIg" data-list="bullet">
<div><strong>When:</strong> Achieves <strong>sub-second finality</strong> (approx. 480ms) for simple transactions, making it one of the fastest networks in existence.</div>
</li>
<li class="ace-line ace-line old-record-id-CTYCdW83soQ0AsxZfkVliGbtgDg" data-list="bullet">
<div><strong>Why:</strong> To solve the "consensus bottleneck" that plagues older chains, allowing for <strong>mass-market applications</strong> in gaming and DeFi.</div>
</li>
<li class="ace-line ace-line old-record-id-M4OsdWCmlofu0DxENAxlTz3pgMd" data-list="bullet">
<div><strong>How:</strong> Secured by a <strong>Delegated Proof-of-Stake (dPoS)</strong> model and powered by the <strong><a href="https://www.kucoin.com/price/SUI" target="_blank" rel="noopener noreferrer">SUI token</a></strong> for gas and governance.</div>
</li>
</ul>
<h2 class="heading-2 ace-line old-record-id-HIRkddj70oD40Dxx1mtlqRpfg9b">How Does the Object-Centric Model Enable Speed?</h2>
<div class="ace-line ace-line old-record-id-YFLkdFtnQoWAmtxYa2LlfVpAgsc">The "How" of Sui&rsquo;s performance lies in its fundamental data unit: the <strong>Object</strong>.</div>
<h3 class="heading-3 ace-line old-record-id-U0IVdY9s7owH8RxzYBQl460Dgac">Account-Based vs. Object-Centric</h3>
<div class="ace-line ace-line old-record-id-BWYQdPRKroq26cxA934l2IUhg9c">In an account-based model (like Ethereum), the blockchain tracks balances. To send a token, the network must update the state of the entire account. In Sui&rsquo;s <strong>Object-Centric Model</strong>, every asset&mdash;whether a token, an NFT, or a smart contract&mdash;is a distinct entity.</div>
<ul class="list-bullet1">
<li class="ace-line ace-line old-record-id-RHoTdGawjoxlI1xXD5oltbZsgig" data-list="bullet">
<div><strong>Owned Objects:</strong> These are assets owned by a single address (e.g., a sword in a game). Transactions involving these objects can skip the global consensus queue, resulting in "instant" execution.</div>
</li>
<li class="ace-line ace-line old-record-id-T0tTdAXrmozXwcx06TFlYWRjgcb" data-list="bullet">
<div><strong>Shared Objects:</strong> These are assets that anyone can interact with (e.g., a liquidity pool). These require the full consensus path but still benefit from parallel processing.</div>
</li>
</ul>
<h3 class="heading-3 ace-line old-record-id-SCGhdtSguoXcE0x0WwllRraqgif">Parallel Execution</h3>
<div class="ace-line ace-line old-record-id-AWABdfwFGohXc8x2ldwlQFUigSb">Because objects are independent, Sui can process transactions that touch different objects at the same time. This means a surge in <a href="https://www.kucoin.com/markets/nft" target="_blank" rel="noopener noreferrer">NFT</a> minting won't affect the speed or gas fees of a <a href="https://www.kucoin.com/markets/defi" target="_blank" rel="noopener noreferrer">DeFi</a> swap happening simultaneously. For a deeper look at how this horizontal <a href="https://www.kucoin.com/learn/topics/scaling" target="_blank" rel="noopener noreferrer">scaling</a> affects network stability, the <a href="https://www.kucoin.com/en-eu/blog" data-lark-is-custom="true">KuCoin Blog</a> provides regular architectural deep-dives.</div>
<h2 class="heading-2 ace-line old-record-id-VO3ldsDEEobtx2xWEgklt1P6gte">Why are Narwhal and Bullshark Essential?</h2>
<div class="ace-line ace-line old-record-id-WF2GdqYrToGcsZxScLTl9IYagZd">A critical component of how Sui works is its decoupled consensus engine, which separates the "data availability" from the "ordering."</div>
<ul class="list-bullet1">
<li class="ace-line ace-line old-record-id-FPg0dFVmko0M4wxGHYPlnWIBgmc" data-list="bullet">
<div><strong>Narwhal (The Mempool):</strong> This lawyer acts as the librarian. It gathers all incoming transactions, organizes them into a Directed Acyclic Graph (DAG), and ensures every validator has a copy of the data.</div>
</li>
<li class="ace-line ace-line old-record-id-DGIbdd5V4oAjrLxZ02slMa4WgUh" data-list="bullet">
<div><strong>Bullshark (The Consensus):</strong> This lawyer is the judge. It looks at the organized data in Narwhal and agrees on a specific order for the transactions.</div>
</li>
<li class="ace-line ace-line old-record-id-DS9idS2Wpo3zsLxQ9EZlaf6Ygmh" data-list="bullet">
<div><strong>The Result:</strong> By letting Narwhal handle the heavy lifting of data distribution, Bullshark can finalize transactions at record speeds. The network has even integrated <strong>Mysticeti</strong>, a further refinement that reduces consensus latency by an additional 50-80%.</div>
</li>
</ul>
<div class="ace-line ace-line old-record-id-QzAZd5HNwowWPMxFGiQlR9bmgtc">Technical milestones regarding validator upgrades and consensus efficiency are consistently shared via the <a href="https://www.kucoin.com/zh-hant/announcement" data-lark-is-custom="true">official announcement</a> section.</div>
<h2 class="heading-2 ace-line old-record-id-JucHdk2KvoXohuxLYQlldfO3gxe">How to Trade and Utilize SUI in the <a href="https://www.kucoin.com/learn/web3" target="_blank" rel="noopener noreferrer">Web3</a> Economy</h2>
<div class="ace-line ace-line old-record-id-UxVldtXk1ozxgOxbfC9lMd9rg7c">The SUI token is the lifeblood of this high-speed ecosystem, serving four primary functions:</div>
<ul class="list-bullet1">
<li class="ace-line ace-line old-record-id-RMQYddARwo68FpxhYculaZBigtW" data-list="bullet">
<div><strong>Gas Fees:</strong> Paid for all network operations. Sui uses a unique "<a href="https://www.kucoin.com/price/GAS" target="_blank" rel="noopener noreferrer">gas price</a> mechanism" that keeps fees low and predictable across epochs.</div>
</li>
<li class="ace-line ace-line old-record-id-Gs9adzYJRoIu6Uxnh6elV4r7gud" data-list="bullet">
<div><strong>Storage Fund:</strong> A portion of the gas fee goes into a fund that pays validators for storing data on-chain indefinitely. This ensures the network remains sustainable as it grows.</div>
</li>
<li class="ace-line ace-line old-record-id-JJUidSKWCo86SgxJo9ElU6Q1gSf" data-list="bullet">
<div><strong>Staking:</strong> SUI holders can delegate their tokens to validators to secure the network and <a href="https://www.kucoin.com/earn" target="_blank" rel="noopener noreferrer">earn</a> a share of the rewards.</div>
</li>
<li class="ace-line ace-line old-record-id-G7jGdybm7owI89xm5QZlfJ5rgfb" data-list="bullet">
<div><strong>Simplified Management:</strong> For users who want to engage with the Sui ecosystem without managing private keys or complex wallets, the <a href="https://www.kucoin.com/en-eu" data-lark-is-custom="true">KuCoin Lite Version</a> offers a streamlined gateway to trade and stake SUI with professional-grade security.</div>
</li>
</ul>
<h2 class="heading-2 ace-line old-record-id-CYgudvh0koB9RzxZJrql9JOQgch">Conclusion</h2>
<div class="ace-line ace-line old-record-id-Nz5wd3o4KoaMv0xdM63l0Rx4gNb">In summary, <strong>how Sui (SUI) works</strong> is a story of re-engineering blockchain for the physical world. By treating assets as objects and separating the consensus path for simple and complex transactions, Sui has removed the throughput ceiling that limited previous generations. As the network continues to scale its developer ecosystem and institutional integrations, it remains a primary contender for the foundation of the next-generation internet.</div>
<h2 class="heading-2 ace-line old-record-id-SlDCd10ghoyUF0xfrH9l7TldgJc">FAQs</h2>
<h3 class="heading-3 ace-line old-record-id-HvttdUIvroGL97xAV8slUYwFgDc">Is Sui better than Solana?</h3>
<div class="ace-line ace-line old-record-id-M530d0fYQo1TVYxXHiLlaIiNgVb">Sui and <a href="https://www.kucoin.com/price/SOL" target="_blank" rel="noopener noreferrer">Solana</a> both prioritize high speed, but they use different architectures. Solana focuses on vertical scaling (optimizing individual nodes), while Sui focuses on horizontal scaling (adding more workers) and an object-centric model, which some developers find more intuitive for complex assets like NFTs.</div>
<h3 class="heading-3 ace-line old-record-id-MXrHdV7xgo9T2kx7WMOlNekngYc">What is the Move programming language?</h3>
<div class="ace-line ace-line old-record-id-RzLqdd5glo5MRdxm2qIlUEL0gSb">Move is a "resource-oriented" language originally developed at Meta. It treats assets as first-class citizens that cannot be accidentally duplicated or deleted, providing a higher level of security for smart contracts compared to older languages.</div>
<h3 class="heading-3 ace-line old-record-id-QoV2dUCwaoXAfixE1YelX4Gggqh">How does "Fast Path" work?</h3>
<div class="ace-line ace-line old-record-id-BPXjdSH9aoAWAdxOS36lkWF6gAe">Simple transactions, such as transferring an owned object from one person to another, don't require the entire network to agree on their order. Sui allows these to be validated via a faster Byzantine Consistent Broadcast, bypassing the slower global consensus.</div>
<h3 class="heading-3 ace-line old-record-id-DBMxdUSGio3iXUxkU0zlUlBQgVe">What is the Sui Storage Fund?</h3>
<div class="ace-line ace-line old-record-id-NtuFdUnXroQ5K5xtEiQlIX9ugDe">Unlike most chains where you pay a one-time fee, Sui&rsquo;s storage fund ensures that users who put data on-chain pay for the future costs of validators keeping that data. If you delete the data, you can actually receive a "storage rebate."</div>
<h3 class="heading-3 ace-line old-record-id-OG4RdLD3IodgSZxaZM5ljXPfgFb">How can I participate in Sui governance?</h3>
<div class="ace-line ace-line old-record-id-DPLWdtdHHonFKRxE4EpliCscgUh">SUI token holders can participate in governance by <a href="https://www.kucoin.com/earn" target="_blank" rel="noopener noreferrer">staking</a> their tokens with validators. Validators vote on protocol upgrades and parameter changes on behalf of their stakers.</div>
<div class="ace-line ace-line old-record-id-MGjpd6MQBoTvspxKV4Flt6yqgkb">Join 30 million global users on the world&rsquo;s leading <a href="https://www.kucoin.com/learn/crypto" target="_blank" rel="noopener noreferrer">crypto</a> exchange by signing up for your free account now. <a href="https://www.kucoin.com/ucenter/signup" data-lark-is-custom="true">Register Now!</a></div>
<h2 class="heading-2 ace-line old-record-id-QPiSdC182og812xu0O8lYEwIgkg">Further reading</h2>
<div class="ace-line ace-line old-record-id-P4wrdHeTjoK6QJx93KflNbi9gxh"><a href="https://www.kucoin.com/learn/web3/what-is-suiplay0x1-and-how-to-buy" data-lark-is-custom="true">What Is SuiPlay0X1, and How to Buy It?</a></div>
<div class="ace-line ace-line old-record-id-ZsnJdKFGLogS7oxd1XjlOpujgnu"><a href="https://www.kucoin.com/learn/web3/how-to-add-sui-network-to-metamask" data-lark-is-custom="true">How to Add Sui Network to MetaMask</a></div>
<div class="ace-line ace-line old-record-id-QOJudL536ovQjAxONhnl3XPLgph"><a href="https://www.kucoin.com/news/flash/sui-network-suffers-6-hour-outage-freezing-10-billion-in-assets" data-lark-is-custom="true">Sui Network Experiences 6-Hour Downtime, Freezing $10 Billion in Assets</a></div>
</div>

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