THELOGICALINDIAN - Acala Network is a DeFioptimized Polkadot parachain centered about the aUSD stablecoin
Acala Network is an Ethereum-compatible Polkadot parachain ambitious to become an all-in-one DeFi hub for Web3. Its ecosystem is centered about the Acala Dollar (aUSD) stablecoin and hosts an arrangement of banking applications, including a congenital decentralized barter and a aqueous staking account for built-in tokens of Proof-of-Stake based chains.
Acala Explained
Acala Network is a scalable, Ethereum-compatible DeFi-optimized belvedere natively interoperable with the absolute Polkadot ecosystem.
To accept Acala’s amount proposition, it’s account highlighting that the activity inherits best of its advantages over added Band 1 protocols by advantage of actuality congenital on Polkadot appliance Substrate. The Polkadot arrangement can be declared as a scalable, heterogeneous, multi-chain ecosystem with a alleged basement “Relay Chain” at its center. Where best added Band 1 blockchains are advised with capricious degrees of generality apropos abeyant applications, the Polkadot Relay Alternation has no inherent appliance functionality at all. Instead, it is an apprehensible alternation that serves as the basal aegis band for a arrangement of interconnected, interoperable blockchains.
In added words, the Polkadot Relay Chain can be anticipation of as a Layer 0 framework that hosts and connects an expanding, parallelized arrangement of either ambiguous or application-specific Layer 1 blockchains alleged parachains. These are modular and calmly customizable absolute blockchains that can accept different architectures, tokenomics, and babyminding structures. This is area Acala’s moat lies—it’s a scalable, high-throughput parachain that supports forkless upgradability and custom optimizations.
While there are hundreds of DeFi applications on dozens of altered Layer 1 chains, they’re all apparently bound in their capabilities because they are hosted on ambiguous chains. In these cases, decentralized appliance developers charge acclimate to the constraints of their accurate environments. If they’re architecture DeFi apps on Ethereum, for example, there are assertive things that their protocols will and won’t be able to do because of how Ethereum is designed.
Acala turns this assumption on its head. Instead of the applications adapting to the constraints of fixed, ambiguous blockchains, Acala can acclimate to the needs of the applications by always advance to become added application-specific. Acala’s Chief Growth Officer Dan Reecer sat bottomward with Crypto Briefing to altercate the project, and he explained how the arrangement is geared against DeFi. He said:
“Because Acala is congenital with Substrate, we’ve been able to body a alternation that is optimized for decentralized finance. One of abounding things that this allows us to do, for example, is that users can pay fees on Acala in any badge accurate by the native, congenital decentralized exchange. Another different affair is the on-chain transaction scheduling. This allows us to body congenital balustrade for automated and alternating payments acknowledging cable services, automated profit-taking, reinvestment mechanisms, defalcation mechanisms not codicillary on alien keepers, and so on.”
The “Substrate” Reecer refers to is a framework developed by the aggregation abaft Polkadot, Parity Technologies. Developers can use it to body their blockchains and again use pre-built, plug-and-play modules alleged “pallets” to add custom functionalities on top. Substrate pallets acquiesce assertive applications such as decentralized exchanges or amount oracles to be congenital anon into the blockchain rather than on top of it, authoritative them decidedly added adjustable and efficient.
Acala’s Native DeFi Infrastructure
The Acala ecosystem is congenital about a decentralized, Maker-inspired, crypto-collateralized stablecoin alleged Acala Dollar (aUSD). It’s congenital application the Honzon stablecoin agreement that leverages several custom modules or Substrate pallets to administer assorted aspects of the protocol, including the accumulation and appeal acclimation and the accident administration mechanisms.
To excellent aUSD, users charge to drop accessory and accessible a Collateralized Debt Position (CDP) application accustomed assets assets, which can be cross-chain by attributes and accommodate Polkadot, Acala, Ethereum-native assets, and Bitcoin. The bazaar amount of the crypto accessory charge consistently beat the amount of the aUSD loan, and it cannot be removed until the accommodation is repaid to the agreement in full.
The mechanics of the Acala stablecoin agreement are about absolutely based on Maker’s DAI and, in that regard, aren’t groundbreaking by any means. However, aUSD itself is somewhat different because it is a cross-chain interoperable asset, acceptation it can be acclimated beyond the absolute Polkadot parachain ecosystem after relying on cross-chain bridges or defective to be wrapped. Commenting on the important role aUSD plays in the Polkadot ecosystem, Reecer said:
“There’s a huge befalling for Acala to be the aboriginal in accouterment a absolutely decentralized, crypto-backed stablecoin built-in to the Polkadot ecosystem. We autonomous for this archetypal because algebraic stablecoins are still abundantly an experiment, alike today, while collateralized ones are a accurate model.”
Another centralized DeFi appliance that has been congenital into the Acala parachain is the decentralized barter AcalaSwap. Like Uniswap on Ethereum, AcalaSwap is additionally a connected function, automatic bazaar maker-based decentralized exchange. However, instead of actuality congenital as a acute arrangement agreement on top of the blockchain, it is congenital into the blockchain as a Substrate pallet.
As AcalaSwap is chip into the Acala parachain itself, it can do things that agnate decentralized exchanges on added Layer 1 ecosystems cannot. For example, it provides clamminess and backend functionality for added decentralized applications in the Polkadot ecosystem, including an able defalcation apparatus for the aUSD stablecoin system, MEV protection for swaps acknowledgment to affiliation with a abstracted centralized Oracle pallet, and the adeptness to pay transaction fees on Acala with any badge accurate on the exchange.
The aftermost affection is abnormally important because it appreciably lowers the barrier to access to decentralized finance. Instead of actuality appropriate to own Acala’s built-in badge ACA (a risk-on, airy asset) to pay for transaction fees, users can accumulate their absolute portfolios in, for example, aUSD and pay for transaction fees with a stablecoin. In the background, the aUSD can automatically be swapped for ACA via AcalaSwap and again paid to the alleged collators amenable for acceptance affairs on Polkadot parachains.
On top of that, because Acala is natively interoperable with the absolute Polkadot ecosystem, users can use the AcalaSwap barter to bandy built-in assets from added blockchains after bridging or wrapping them. Commenting on the accent of AcalaSwap, Reecer said that the barter would acceptable comedy a axial role aural the ecosystem. He explained:
“There’s activity to be a ton of clamminess on Acala because of the decentralized barter and the aqueous DOT staking protocol. So back someone’s architecture a decentralized appliance on the EVM , they can tap into the clamminess of AcalaSwap and accept composability with any added decentralized appliance aural the EVM ambiance there. It’s absolutely accessible in that regard.”
Acala has additionally congenital addition agreement alleged Homa that focuses on alms aqueous DOT staking. Homa is a non-custodial, trustless, and cross-chain aqueous staking agreement chip into the Acala blockchain as a Substrate pallet. It’s advised to break the boundless illiquidity of staked assets. It lets users pale built-in tokens of Proof-of-Stake-based chains in barter for aqueous tokens apery the assumption staked asset additional the continuously accruing staking yield. For example, application Homa, users could pale DOT in barter for communicable yield-bearing L-DOT tokens, again use the L-DOT tokens as accessory for aUSD loans or abroad in DeFi on Polkadot.
Final Thoughts
As Acala is a stablecoin-focused ecosystem, creating appeal for aUSD both central and alfresco the Polkadot cosmos is key to its success. For this reason, the activity has launched a grants affairs that focuses on DeFi development that allowances the Acala ecosystem. The abstraction is to spawn a advancing ecosystem with all the all-important DeFi primitives, including money markets, decentralized exchanges, crop optimizers, and NFT marketplaces.
Beyond crypto, Acala wants to arch the gap amid decentralized and acceptable accounts and become the arch hub for alleged amalgam accounts or “HyFi.” One of the means it affairs to do that is by partnering with fintech companies and neobanks that could advance Acala’s basement to accommodate bigger casework for their customers. As a starting point, Reecer said that Acala has already partnered with the U.S.-based fintech aggregation Current to body a DeFi backend for their Web2 accumulation account. “Current wants to be able to action a high-yield accumulation annual area dollars breeze out of coffer accounts into DeFi on Acala, acquire a crop there, and again that crop is asleep and beatific aback to Current and broadcast to barter in a Web2 application,” he explained.
Acala’s best acute amount hypothesis adeptness be its adeptness to advancement after any forks. This is a complete game-changer. Generalized blockchains that try to do aggregate on a distinct alternation are fundamentally accountable by their architecture choices and force appliance developers to agitate awkward workarounds instead of architecture specialized solutions. “Imagine Aave or Uniswap actuality able to acquaint the amount developers what they charge from the Ethereum blockchain—and again absolutely get it,” Reecer said. “Well, we accept a abounding wishlist from our app developers and the adequacy to advancement the alternation to board them.” The amount of dispatch and abeyant for advance that this affection provides is unparalleled.
Disclosure: At the time of writing, the columnist of this affection endemic ETH and several added cryptocurrencies.
