One of the reasons for the complexity of the Polkadot ecosystem is its dual construction. Next to Polkadot and its parachains, we find Kusama and its parachains. Kusama is Polkadot’s canary network, allowing testing the projects at full scale. Since the launch of crowd loans, KSM’s loan system to secure projects, 27 parachains have earned their place. It is, therefore, time to take stock of this budding ecosystem. If the whole thing still has all its promises to deliver, many projects seem to die before they see the light of day.
Crowdloans on Kusama
Crowdloans are participatory loans devised by Gavin Wood, the founder of Polkadot and Kusama so that investors can choose projects secured by the two relay chains, Kusama and Polkadot. The chosen projects then become parachains. To understand what a para chain is most quickly, it can be defined as a specialized blockchain that does not have to secure its network itself. But before arriving on Polkadot, the projects have to install a test project on Kusama, which checks that it is fully operational.
The crowd leans on Kusama started in June 2021. So far, 3.5 million KSM have been deposited for these projects out of a total of 9.6. So there are more than a third of KSMs already locked in. However, this varies significantly from project to project. For example, places 1-5 had 3.5 million KSM deposited in the first round. The same was true for the second. But in the fourth round, only 50,000 KSM were loaned to the projects. We are therefore witnessing a growing lack of interest in current projects. This is quite worrying when Gavin Wood’s goal was to launch 100 parachains. It is, therefore, to be hoped that new projects will attract the attention of investors.
Kusama’s nascent ecosystem, a full-scale test before Polkadot
It would take too long to present the 25 parachains already launched. However, we can already observe some strong trends. The first projects: Moonriver, Karuk, Astar, Bifrost, are the most popular. They show that the Defi sector attracts users and investors to Kusama. On the other hand, the projects more oriented on the web3, like Crust Shadow, the Kusama project of the Crust cloud, had more difficulty gaining their place. We finally noticed that the most important and innovative projects in the long term, those that set up the web3 infrastructures, came later.
However, the first ones also made the originality of parachains. Since Moonriver is a bridge between the Polkadot universe and the Ethereum universe, Karuk introduced the transfer of tokens from one project to another (a transfer that will be generalized to all parachains), and Bifrost allows liquid staking (which allows using of locked KSMs in Defi projects). However, we can finish this overview with projects struggling to release their product. For example, the Bit Country metaverse may have wanted to go too fast. While it won a parachute spot in November, the reward tokens have not been distributed, and the lands have not been released.
This is not the only project that is struggling to move forward. Therefore, we can expect that these projects will not keep their place at the time of renewal. Indeed, the participative loans end after 48 weeks. After this time, either the project participates in crowd loans, or it becomes self-financing.
What perspective for the KSM cryptocurrency?
This last detail is essential to understand the dynamics of the KSM price. Indeed, for the moment, a third of the tokens are used for parachains. So all it takes is a market rally or the arrival of enticing projects to turn the KSM price into a bullish rally. KSM is currently at $129, almost five times lower than its all-time high in May. The current price is, therefore, a beautiful entry price. Indeed, there will be a steady need for KSM for parachains at least through 2023. Both KSM and DOT have not shown their full potential at the chartist level.
With 25 parachains launched, the Kusama ecosystem is gradually gaining momentum. However, paradoxically, we have witnessed a significantly reduced visibility for several months. This lack of interest, which consists of a drop in the price of KSM, shows the difficulty of making this innovative project fully efficient. Therefore, the Kusama ecosystem must take advantage of this moment of hindsight to take stock and put aside the weakest projects. This is the only way for this project to regain its momentum.