28 Mar, 23

What is Kujira? Decentralisation meets Sustainable Fintech

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Beau Chaseling

Innovation Analyst

An effective layer 1 is, in essence, a stage for a number of decentralised applications (DApp) working together as instruments in a harmonious symphony. Exemplifying this ideal is Kujira, the host of a diverse and synergistic ecosystem operating using the Cosmos SDK. Created to provide sustainable financial technology in the volatile web3 landscape, Kujira is one of the fastest-growing chains in the Cosmos ecosystem. Possessing a number of unique characteristics, the Kujira network is a leading contender in the DeFi space, possessing a high degree of potential for the future. 

What is Kujira?

Built on the Cosmos network, Kujira is a layer 1 blockchain aiming to provide a varied array of decentralised finance (DeFi) infrastructure and sustainable financial technology for a manifold of web3 users. Constructed with a hybrid approach, the Kujira blockchain cannot be described as a modular or a monolithic blockchain, rather relying on Cosmos’ modular software suite of software development kits (SDKs) for its underlying architecture while retaining a number of integrated natively built DApps. The Kujira ecosystem operates under a semi-permissioned model whereby new DApps must first be approved by the protocol’s governance. This approach ensures that the Kujira ecosystem maintains a high level of quality and reliability, whilst simultaneously ensuring that harmful applications do not go live on the chain. 

Kujira’s vision was shaped by the collapse of the Terra ecosystem. Initially built as ORCA, a decentralised platform for bidding on liquidated collateral, Kujira processed US$250 million of LUNA and bETH liquidations over a period of six months. Following the collapse of the Terra ecosystem, many leveraged retail traders’ assets were liquidated for less than market value due to the use of bots, causing the price of LUNA to drop from $16 to $4 in a single week. Operating on the Terra platform as ORCA, the collapse affected team Kujira greatly. Kujira took action, launching a dedicated layer 1 network and curating a sustainable DeFi ecosystem within which users could earn yield in the absence of a highly inflationary native token. 

The ORCA platform itself serves as the progenitor to the Kujira blockchain and its growing ecosystem of DApps. Guided by a philosophy of cohesive DeFi structures, the expressive type system of Kujira’s programming language Rust is user-friendly and may assist in attracting developers. The development of applications on Kujira is streamlined through the use of the CosmWasm framework, which provides templates, build systems, and contract tests to aid in the creation of smart contracts. With the combination of Rust’s expressive type system, CosmWasm’s comprehensive paradigm, and the existing DeFi structures built on Kujira, the network is poised for the expansion of its native ecosystem.

Optimisations Made Within the Kujira Network

The Kujira team built its network with a number of optimisations to enhance the functionality of its ecosystem. Built using Cosmos infrastructure such as Tendermint BFT (consensus), the Inter-Blockchain Communication (IBC) protocol (communication) and the Cosmos SDK (modules), the Kujira network was customised for its intended use case. The team also leveraged several third-party applications and software to enhance network functionality.

Being a DeFi platform, fast transactions and low latency are imperative. Therefore, the Kujira team optimised the Cosmos SDK transaction framework to shorten block times to 2.2 seconds and provide more efficient transaction processing. Block time refers to the time taken to create a new block and validate the transactions in it before adding it to the blockchain. By shortening block time, the Kujira network can alleviate congestion and provide a better user experience, as well as provide the requisite speed for intensive strategies such as high-frequency trading.


Making integrations available for developers to provide them with the tools they need was made a priority by the Kujira team during the building of their network. After all, without these tools, developer interest in Kujira would be curtailed and the ecosystem would suffer. One such integration is that of the webAssembly (wasm) virtual machine with the Kujira token factory core module, enabling the compilation and execution of said smart contract using wasm bindings. Furthermore, Kujira has integrated true on-chain randomness, supporting use cases such as lotteries, fair selections, and more. Another example is the network’s provision of inter-chain accounts using the IBC. 

Presently, the Kujira team is working to integrate a Hummingbot connector with the FIN exchange. This will enable the standardisation of trading logic and order types on FIN so that users can utilise the Hummingbot framework. Simultaneously, the Kujira team is looking to make existing Humingbot strategies deployed on CEXs such as Binance compatible with DEXs so traders can seamlessly redeploy their bots to FIN. Hummingbot itself is an open-source framework for building trading bots on cryptocurrency exchanges which will allow users to easily deploy market-making and arbitrage bots onto the FIN exchange. 

In fact, by integrating the KUJI token with the Kujira ecosystem, the Kujira team has introduced a sustainable model for driving value to the token itself. Traditionally, on networks such as Ethereum, stakers are incentivised to secure the network by being rewarded with token releases and transaction fees. This model is unsustainable considering transaction fees are the sole mechanism for value capture and token releases cannot be sustained indefinitely without excessive inflation. Therefore, on the Kujira network, the primary value driver for the KUJI token is not just transaction fees but additionally economic activity across the Kujira ecosystem. This allows the economic activity on-chain to be the primary value driver for the KUJI token, and in doing so helps secure the network and the funds it contains.

These are just a few examples of the numerous optimisations and integrations made by the Kujira team to enhance the functionality of their network. In doing so, developer interest in the network can be increased and the scope of possible DApps within the Kujira ecosystem expanded. Ultimately, these optimisations will create a better user experience and drive demand for the network.

The Kujira Ecosystem

Kujira established its ecosystem revolving around a specific philosophy; to deliver an interoperable, matured ecosystem of DApps that creates value for network participants in a sustainable and user-friendly manner. In this environment, users can not only bid on liquidations but also swap tokens, participate in governance, provide liquidity and engage in a suite of other functions. Consisting of several DApps, much of the chain’s current ecosystem was built directly by the Kujira team.

ORCA

ORCA, the forerunner to Kujira, is a marketplace for bidding on liquidated collateral. Its user-friendly interface allows participants to bid on liquidated collateral without bots or code, thereby democratising the liquidations marketplace. Liquidation is the process of selling a borrower’s collateralized assets to repay their debt to the lender. In the context of blockchains, the liquidation is often automated using smart contracts, with the liquidation being triggered when the value of the collateral falls below a certain threshold. This process protects lenders from losses incurred in case of a default by borrowers.

ORCA employs a queue-based approach whereby bids are filled from smallest to largest discount, negating the speed advantage possessed by bots that try to front-run each other. Resultantly, Kujira users experience limited gas spikes caused by bots attempting to outbid one another. A discount in the context of liquidations is the difference between the market value of an asset and the price it is sold for during a liquidation event, representing the loss incurred by the borrower. Additionally, when the value of a borrower’s collateral falls below a certain threshold they are required to pay a premium, an additional fee charged to protect lenders from losses due to default or market volatility. 

On the ORCA marketplace, liquidated assets are purchased by community members with a stake in the long-term stability of the ecosystem, and the likelihood of liquidity exiting the network is greatly reduced. ORCA’s approach to filling bids is effectively a Dutch auction, whereby the liquidation asking price lowers until bids are filled, allowing users to obtain collateral at up to a 30% discount. In doing so, ORCA provides a robust and efficient community-driven marketplace that allows loans to be facilitated within the Kujira ecosystem in a manner that minimises risk and bad debt to the network. 

FIN

Traditionally, most decentralised exchanges (DEXs) utilise an automated market-making (AMM) approach. Conversely, FIN is the first order book style decentralised exchange (DEX) on Cosmos. AMM exchanges function using liquidity pools, whereby token prices are determined based on the ratio between the tokens in the liquidity pool. In contrast, order book-style exchanges like FIN match buyers and sellers of a particular currency are matched based on the specified price they bid at. The order book approach allows FIN to operate without the use of liquidity pools, allowing for a more efficient allocation of capital within the network. 

Leveraging the Cosmos infrastructure enables FIN users to trade assets from different blockchains on the same platform. Users are able to place market or limit orders using its friendly user experience (UX). Rather than relying on yield farmers and liquidity pools, FIN makes use of sellers, arbitrage bots and market makers to provide liquidity to the order book thereby removing the risk of impermanent loss when providing liquidity in AMM models. However, to account for situations in which market liquidity is insufficient to provide an adequate trading experience, FIN makes use of BOW, a platform designed to provide liquidity to the FIN exchange.

BOW

BOW is a framework for providing optimal trading conditions on FIN by attracting liquidity providers. In effect, BOW acts as an on-chain market maker for the FIN exchange. A market maker is an entity that buys and sells assets on an order book exchange to ensure that users are not waiting long periods of time for their buy and/or sell order to be matched with another trader’s order. Traditionally, DEXs have not possessed the requisite infrastructure to attract market makers given the existence of impermanent loss. However, modern DEXs have implemented support for market makers which utilise algorithms to ensure profit for liquidity providers and negate impermanent loss. 

BOW is one such implementation of a market maker for a DEX which adds liquidity to the market and grants yield to providers without relying on traditional liquidity pools. BOW then deploys said liquidity based on its own internal algorithm which analyses its own token balances and places orders on FIN pairs, thereby filling market buy and sell orders. Thus, BOW compresses price spreads on token trades and adds depth to the FIN exchange, enabling the Kujira ecosystem to facilitate token trading without relying on fees and rewards to incentivise liquidity providers. 

BLUE

BLUE acts as the central hub for the Kujira ecosystem, allowing network participants to stake, bond and swap, execute cross-chain transfers and participate in governance. This is enabled via BLUE’s comprehensive dashboard which displays key analytics for the Kujira blockchain. It includes an interface for the Cosmos IBC as well as its own cross-chain bridge, enabling the transfer of assets across chains. Importantly, BLUE allows users to deposit collateral and mint the USK stablecoin. Additionally, BLUE contains a built-in wallet interface that possesses several unique features such as the creation of vesting contracts for Kujira native token, KUJI, or display the total amount of staked KUJI. 

FINDER

FINDER is the official block explorer for the Kujira ecosystem enabling users to track happenings on the network. It is applicable to both the mainnet and testnet networks allowing developers to track and verify their projects. FINDER includes an array of features such as bookmarking and saving which streamline the user’s experience when attempting to track a given address or transaction. 

Additional Pieces of The Kujira Puzzle

POD

POD is the native Kujira staking platform designed to facilitate decentralisation on the Proof of Stake (PoS) Cosmos network. To ensure decentralisation, POD designed a system for marking validators that possess disproportionate voting power. The platform does so by highlighting validators with different colours based on their voting power; validators with voting power significantly above the threshold are highlighted in red, validators with voting power slightly above the threshold are highlighted in yellow and validators with voting power below the threshold are coloured blue. In doing so, POD allows users to easily identify which validator pools contain a concentration of user funds and stake in a manner that facilitates decentralisation. 

kujira network validators

Source: POD

SENATE

SENATE is Kujira’s native governance platform designed to ensure that the community’s values are properly represented by the network as well as to facilitate validation, growth and stability within the ecosystem. Deriving its name from its governance structure, SENATE is composed of 9 expert senators elected by the staking community. These representatives are responsible for voting on proposals regarding the allocation of the community fund, requiring a 75% quorum and 50% support to pass a proposal. Still under development, SENATE will be implemented using two smart contracts; the CW-4 Group contract and the CW-3 Multisig contract. Ultimately, the platform serves to enhance decentralisation by amplifying the voice of the community and ensuring their values are reflected in the projects undertaken on the Kujira platform.

USK Stablecoin

Lastly, Kujira has launched a decentralised stablecoin named USK that is soft-pegged to the US dollar and backed by a basket of cryptocurrencies. Being soft-pegged means that the value of USK is generally tied to that of the US dollar, but some leeway is allowed for the value of the coin to fluctuate within a certain range. Written in the Rust programming language, USK is designed to be sovereign, uncensorable and revenue-generating with its parameters determined by the SENATE. Minted by depositing collateral, USK is overcollateralized by a minimum of 166% thereby reducing the risk of price fluctuations during market volatility. When minting USK, users pay a 0.5% fee which is paid to KUJI stakers as interest. To redeem their collateral, users can burn their USK and pay accrued interest. In case of liquidations, liquidated collateral is auctioned on ORCA. Thus, USK is designed to be a robust and stable instrument for savings, payments and loans within the Kujira ecosystem. 

Wider Ecosystem

In addition to its own projects, Kujira also hosts a variety of third-party DApps. Led by community members, Kujira’s wider ecosystem is fostered to facilitate diversity within the network. Presently, one of the more notable projects building on Kujira is Calc Finance, a decentralised execution optimisation protocol that facilitates dollar cost averaging on DEXs. Another example is Blackwhale, a decentralised market-making platform that leverages FIN’s order book. Lastly, Local is a p2p marketplace that acts as an exchange as well as an on-ramp for investor’s fiat currency. These are just some examples of third-party DApps within the Kujira ecosystem.

Interoperability Within the Ecosystem

Lying at the core of the Kujira network is a philosophy of interoperability and connectivity. Each DApp operating on the network functions as a part of the ecosystem, providing essential services which are frequently relied upon by their sibling applications. By delegating responsibility to specialised applications, the efficiency of DApps within the Kujira ecosystem can be elevated. Resultantly, there are several prominent DApp synergies demonstrating the benefits of interoperability within the Kujira ecosystem. 

The primary example of interoperability within the Kujira ecosystem is the relationship between FIN and BOW. Although FIN is an orderbook-style exchange, it requires some degree of liquidity to facilitate a positive trading experience. Instead of relying on native liquidity pools with inflationary incentives FIN leverages BOW for providing liquidity. BOW is a next-generation market maker which, using its trading algorithm, fills orders and tightens spreads on FIN while ensuring liquidity providers earn profit. Consequently, BOW facilitates trading without relying on fees and rewards to incentivise liquidity providers, offering a more sustainable and efficient solution to traditional liquidity pools.

Another example of interoperability is the relationship between BLUE, ORCA and the USK stablecoin. When taking out loans on the Kujira network users deposit collateral onto the BLUE platform and mint USK in return. Whilst users are heavily disincentivised from breaching the loan-to-value ratio through the liquidation process, there are situations in which this might be out of their control, such as periods of high market volatility. Accordingly, in the event of a liquidation, the collateral is auctioned on ORCA thereby negating the risk of a liquidation crisis causing the value of USK to drop precipitously. Thus, the interoperability between BLUE, ORCA and USK essentially provides value to each piece of infrastructure simultaneously. 

However, interoperability within the Kujira ecosystem is not limited to specific cases of integration. In fact, Kujira native applications as well as the wider ecosystem all possess a certain degree of connectivity with one another given that they operate within the same network. This is where the network effect takes place, a phenomenon whereby the utility and attractiveness of the Kujira blockchain increases simultaneously with the size of the ecosystem. Kujira has leveraged the network effect to drive growth on the platform by developing its own suite of user-friendly native DApps upon which a wider ecosystem can be built. Hence, the rapid growth of the Kujira network.

The Future of Kujira

Kujira has launched a comprehensive roadmap for its network’s future, with a strong focus on expanding its ecosystem’s functionality and enhancing the user experience. The centrepiece of this roadmap is several new DApps that will integrate seamlessly with the Kujira ecosystem, introducing novel trading methods and simplifying complex trading strategies. These DApps will not only improve the trading experience for users but also provide intuitive user interfaces.

Currently in development is SONAR, Kujira’s native wallet application designed to enable seamless interaction between users and web3 technology. SONAR is a mobile application that provides users with an interface for both their wallet and the entire suite of Kujira DApps. This will allow users to access the Kujira ecosystem without going through a webview interface unsuited for mobile platforms. SONAR is differentiated from other wallet applications via its facilitation of real-world payments directly through the app. Furthermore, SONAR is intended to enable users to seamlessly move assets between blockchains. For example, a Sonar user could restore a Metamask seed, read their Ethereum balance, and then sign and broadcast a transaction over Ethereum to deposit native ETH into their Kujira wallet in one transaction via Squid protocol and Axelar protocol. Thus, SONAR will provide an intuitive UX for its payment platform and asset manager integrated with the Cosmos ecosystem. 

Another prominent DApp intended to be launched onto the Kujira ecosystem in the future is Ghost. Ghost is a money market platform that provides features such as borrowing and lending. However, Ghost is differentiated from existing money market platforms due to its integration with the Kujira ecosystem. This integration means that Ghost can leverage the liquidation market on ORCA and the FIN exchange to provide novel trading strategies using its lending and borrowing infrastructure.

An example of said integration is the combination of the Ghost money markets with the ORCA liquidation markets to allow the earning of yield on borrowed assets. As Ghost is lending within the Kujira ecosystem, liquidations can occur using yield bearing tokens, meaning a trader could use collateral to earn a yield while waiting to be liquidated. Additionally, integration between the Ghost money market and the FIN exchange will enable Kujira to offer margin trading with assets other than the USK stablecoin used as collateral. Furthermore, the non-USK collateral does not necessarily need to be raw assets; a trader could take out a limit order and use it for collateral, for instance. 

These are just two examples of novel trading strategies enabled by the Ghost application and its integration within the Kujira ecosystem. As the platform approaches its launch, Kujira developers are poised to further integrate the application and devise even more innovative trading strategies. Once launched, users may also discover additional ways to leverage the Kujira ecosystem to achieve their trading goals. 

Beyond Sonar and Ghost, the Kujira roadmap includes several other exciting projects. One such project is BFIT, a DApp that incentivizes exercise by rewarding winners with BFIT currency. DLOYAL is an affiliate marketing platform that compensates marketers for referring users who generate revenue for web3 projects. For sports enthusiasts, RektBets is a fantasy sports betting platform. Kujira also plans to launch the Kujira name service, a tool that maps human-readable names to wallet addresses. These projects, among others, are set to launch on the Kujira network and will undoubtedly help shape its future.

Conclusion

Ultimately, the Kujira network, with its highly curated and integrated ecosystem provides an optimal platform for users to earn yield and participate in DeFi. As a layer 1 blockchain operating on Cosmos, Kujira possesses a high degree of interoperability with alternative layer 1s. The network’s numerous optimisations facilitate the operation of its integrated native ecosystem. With each DApp serving a particular purpose and several more still in development, the Kujira network is set to fill every niche of the DeFi market. Its unique characteristics, expanding ecosystem and user-friendly nature endow Kujira with the potential to expand into a leading DeFi hub.

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FAQs

What is Kujira?

Kujira is a layer 1 blockchain built on the Cosmos network. It aims to provide a diverse array of decentralised finance (DeFi) infrastructure and sustainable financial technology for various web3 users. The Kujira ecosystem operates under a semi-permissioned model where new DApps must first be approved by the protocol’s governance.

What is the vision behind Kujira?

Kujira’s vision was shaped by the collapse of the Terra ecosystem. Initially built as ORCA, a decentralised platform for bidding on liquidated collateral, Kujira processed US$250 million of LUNA and bETH liquidations over a period of six months. Following the collapse of the Terra ecosystem, Kujira took action, launching a dedicated layer 1 network and curating a sustainable DeFi ecosystem.

What are some of the unique characteristics of the Kujira network?

The Kujira network is built with a number of optimisations to enhance the functionality of its ecosystem. It uses Cosmos infrastructure such as Tendermint BFT (consensus), the Inter-Blockchain Communication (IBC) protocol (communication) and the Cosmos SDK (modules). The Kujira team optimised the Cosmos SDK transaction framework to shorten block times to 2.2 seconds and provide more efficient transaction processing.

What is the Kujira ecosystem?

The Kujira ecosystem is designed to deliver an interoperable, matured ecosystem of DApps that creates value for network participants in a sustainable and user-friendly manner. It consists of several DApps, much of the chain’s current ecosystem was built directly by the Kujira team. Some of the DApps include ORCA, FIN, BOW, BLUE, and FINDER.

What is the future of Kujira?

Kujira has a comprehensive roadmap for its network’s future, with a strong focus on expanding its ecosystem’s functionality and enhancing the user experience. The roadmap includes several new DApps that will integrate seamlessly with the Kujira ecosystem, introducing novel trading methods and simplifying complex trading strategies. These DApps will not only improve the trading experience for users but also provide intuitive user interfaces.

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