The cross-chain DeFi hub and stablecoin of Polkadot
Acala Network is the financial hub of Polkadot and their team aims to focus on decentralized finance protocol, mechanism design, parachain economic modelling as well as governance. This project supplies users with key financial primitives including decentralized stable coin, staking derivatives and DeX, Acala Network powers cross-blockchain open finance (DeFi) applications on Polkadot and beyond.
With the empowerment of Polkadot, it is looking quite promising tha Acala Network can enable true interoperability, economic and transactional scability. Acala was the first decentralized financial corporation to offer a set of protocols: a stablecoin protocol to play the role of Polkadot's DeFi building.
The project aims to issue Acala Dollar (aUSD) which is a decentralized stablecoin. Users can redeem 1 aUSD for each US dollar, Acala uses DOT, BTC, or ETH as collateral assets. People can send or receive USD easily across any blockchains connected to the Polkadot network. The project also designs to release staked assets (DOTs) as fungible & liquid assets (L-DOTs), extracting the derivative value of staked assets to fuel DeFi without sacrificing the security of the whole network. Acala Network is secured under Polkadot's shared security model, ensuring high resilience and forkless upgradability.
Key Features and Highlights
- Multi Collateral Type CDP:
Every aUSD is backed in excess by a crypto asset through Honzon Protocol, it follows the mechanism known as an over-collateralized debt position (or CDP). Together with a set of incentives, supply & demand balancing, and risk management mechanisms, the price of aUSD will be stabilized. The CDP mechanism design is inspired by the first decentralized stablecoin project MakerDAO, which has become the DeFi building block in the Ethereum ecosystem. However, in comparison with Ethereum, the Honzon Protocol can use Off – chain Worker to automate the process and increase the security and stability of the stable coin.
- ACA Token Utility & Governance:
ACA is the native token of ACALA Network, its total supply will be minted at the launch of the mainnet and stored in the ACA Reserve Pool. Their token has three main functions in ACALA Network. First of all, ACA Tokens will be used as network utility tokens in order to pay transaction fees, stability fees as well as penalty fees in case of liquidation. Secondly, when holding ACA tokens, users will have the right to propose network upgrade and parameter adjustment, which will be approved or declined by the elected on – chain General Council. Finally, in case there is a price collapse of a collateral asset resulting in under – collateralized CDPs, ACA tokens will be automatically diluted and sold on the market for system recapitalization.
- Price Stability Mechanisms
The value of one aUSD token is designed to peg to US Dollar at 1:1 ratio at all times through an automatic risk management algorithm within the Honzon Protocol together with community governance.
- Automatic Liquidations of risky CDPs
The value of collateral in every active CDP is constantly monitored by the Honzon Protocol to ensure that the associated outstanding debt in aUSD can be recovered anytime by selling the collateral. The Honzon Protocol will trigger the liquidation if an active CDP is considered to be too risky. And after the liquidation is triggered, it will run a special auction mechanism to cover the outstanding debt by selling the minimum proportion of the collateral as possible.
Ruitao Su, Acala Co-Founder & CEO
Bette Chen, Acala Co-Founder & COO
Bryan Chen, Acala Co-Founder & CTO
Fuyao Jiang, Acala Co-Founder & Polkawallet Founder