What is cryptocurrency Kusama (KSM) and how does it work?

What Is Kusama (KSM)?

Kusama (KSM) is a public pre-production environment for Polkadot that runs on an early unaudited release of the Polkadot blockchain. Kusama functions as a sandbox that allows any developer to test early versions of Polkadot projects in a live, realistic environment. Since Kusama acts as a “Canary Network”, it’s a crucial component of the DOT ecosystem and allows for major updates and code releases to be thoroughly tested and vetted before being released to the public on Polkadot.

The network’s native cryptocurrency, KSM, is not an ERC20 token as Kusama uses its own blockchain technology to manage the network. Kusama has its own token for several reasons: to be used for governance of the network, to be staked for operation of the network, to be bonded to connect a chain to Kusama as a parachain, and to serve as a utility token for users of the network.

How Does Kusama (KSM) Work? 

Kusama is a sister-chain to Polkadot and mimics many major design features of the Polkadot network. For example, Kusama uses two types of blockchains to process transactions and handle network activity. The main network is called the Relay Chain, where validators are staked. The Relay Chain has minimal functionality and is responsible for coordinating the system as a whole. There are also user-generated networks called Parachains which can each have different architectures, features, and use cases depending on the project using each one.

Who Are the Founders of Kusama? (History of KSM)

Kusama was founded in 2016 by the creators of Polkadot: Gavin Wood, Peter Czaban, and Robert Habermeier. From July 2019 onwards, anyone can claim KSM if they held DOT indicator tokens at the time of Kusama’s genesis block.

The token sale for Polkadot (and thus Kusama) was handled by the Web3 Foundation, of which Gavin Wood is president. Kusama was released by Web3 before DOT, opening at a price of $1.71 in December 2019. The distribution of Kusama matched the distribution of Polkadot. Eligible users who had purchased DOT during the pre-sale were able to claim an equal amount of Kusama. 1% of KSM was reserved by the team for future incentives on the KSM network.

What Makes Kusama (KSM) Unique?

Kusama serves as a unique “Canary” testnet for Polkadot. Most blockchain ecosystems only use a testnet for developing their decentralized applications (dApps) and projects. By using a live blockchain network, Kusama is able to deliver a working market and testnet conditions that other chains are unable to. Kusama also takes advantage of modified governance parameters that allow it to operate up to four times faster than Polkadot.

Another feature of Kusama is the use of two blockchains, the main network and the user-generated networks (Parachains). Parachains are quite unique and allow users to run separate layer-1 blockchains in concurrence with the Kusama network. Being able to run unique layer-1s that are tied to the Relay Chain not only ensures the security of the Parachains but greatly increases the scalability and interoperability of the Kusama network.

What Gives Kusama (KSM) Value?

Kusama’s unique placement as a canary network for Polkadot gives it a “first-mover” advantage on many new dApps and projects for the Polkadot ecosystem. Many dApps will launch on Kusama before stabilizing and updating their product for the Polkadot network.

Kusama also utilizes Parachains, separate layer-1 blockchains, which allow users to participate in token models and incentives not normally available on the Kusama Network. In order to utilize Parachains, projects need to win a slot in Parachain Auctions. Parachain slots are not only valuable but also require KSM to be locked for the duration of the lease. Participants who win a Parachain slot will need to win further auctions to renew the lease which ensures projects need a steady flow of KSM.

The ultimate role of the KSM token is to maintain and operate the Kusama network. Users realize value by participating in various activities on the Kusama network, such as staking, bonding, and governance.

Kusama KSM

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How Many Kusama (KSM) Coins Are in Circulation?

As of May 2021, Kusama has a circulating supply of 8,980,098 KSM tokens out of a total supply of 10,000,000 KSM. There is no maximum supply of KSM as the token is subject to the same 10% annual inflation rate as DOT. The distribution of the newly minted KSM tokens depends on the proportion of KSM staked, with Kusama validators receiving all-new tokens when exactly half of the KSM supply is staked. If the amount of KSM staked is above or below 50%, some of the inflation goes to the Kusama Treasury. KSM tokens can be purchased on the secondary market. KSM can also be earned through participation in Kusama’s dual node network.

Other Technical Data

Dot Indicator Token – users who purchased DOT during the initial coin offering (ICO) received this token and were able to redeem an equal amount of KSM during the Token Generation Event.

Validators – validators are able to claim staking rewards for running a validating node. The number of KSM needed to become a validating node is dynamic and changes over time.

Nominators – nominators in the Kusama network receive a passive reward in KSM by delegating their KSM to up to 16 validators. The rewards are dynamic and depend on the number of participants and current yield.

How To Use Kusama (KSM)

KSM can be used as a governance token for managing protocol updates and fixes, as well as for paying fees when ferrying messages across parachains. Validators can stake their KSM to keep the network secure and earn rewards from inflation, while nominators can stake their KSM to validators to receive a share of said rewards. Additionally, KSM can be used for bonding to support new parachains.

How To Choose a Kusama (KSM) Wallet

The type of Kusama (KSM) wallet you choose will likely depend on what you want to use it for and how much you need to store.

Hardware wallets or cold wallets provide the most secure option with offline storage and backup. Both Ledger and Trezor hardware wallets offer storage solutions for KSM. Hardware wallets can involve a bit more of a learning curve and are a more expensive option, however. As such, they may be better suited to storing larger amounts of KSM for more experienced users.

Software wallets provide another option and are free and easy to use. They are available to download as smartphone or desktop apps and can be custodial or non-custodial. With custodial wallets, the private keys are managed and backed up on your behalf by the service provider. Non-custodial wallets make use of secure elements on your device to store the private keys. While convenient, they are seen as less secure than hardware wallets and may be better suited to smaller amounts of Kusama (KSM) or more novice users.

Online wallets or web wallets are also free and easy to use and accessible from multiple devices using a web browser. They are considered hot wallets and can be less secure than hardware or software alternatives, however. As you are likely trusting the platform to manage your KSM, you should select a reputable service with a track record in security and custody. As such, they are most suited for holding smaller amounts or for more experienced frequent traders.

Kriptomat offers a secure storage solution, allowing you to both store and trade your Kusama (KSM) tokens without hassle. Storing your KSM with Kriptomat provides you with enterprise-grade security and user-friendly functionality.

Buying and selling KSM, or exchanging them for any other cryptocurrency, is done in mere moments when you choose our secure platform as your storage solution.

Kusama (KSM) Staking

Kusama has three ways to create a wallet for staking KSM: the Polkadot UI, the Polka Wallet, or the Polkadot JS staking app. Once a wallet has been created users will need to Bond their KSM using the staking section of their app (make sure to leave some KSM for gas!). Assets that are bonded are locked onto the network for the duration of the bond. After the assets have been bonded users may select up to 16 different validators to send their assets too. If any of the user’s selected validators misbehave, they will be slashed or penalized and lose a small amount of their funds.

Conclusion

Kusama (KSM) holds a unique place in the market as the most productive testnet around today. The high speed and often chaotic nature of Kusama’s chain leads to innovative and lucrative opportunities for investors and users alike. Plus, not only was it created by a founder of Ethereum, Gavin Wood, it also shares the same development team behind Polkadot, as well as the innovative and reliable Polkadot codebase. With its forward-thinking design KSM is positioned to be a market leader for dApp production and blockchain development, likely remaining one of the most active and useful testnets for many years to come.

Kusama (KSM) FAQ

Is Kusama a Competitor to Polkadot?

No. Kusama was created to complement Polkadot and serve as a “proving ground” for dApp development before moving to a more stable platform on the actual DOT network. However, due to the reduced cost of Parachains on Kusama, an active user base, and faster development, many projects may choose to remain on KSM.

What Can You Do on Kusama?

There are many different activities you can participate in on the Kusama network. Users can participate in governance or on-chain politics, practice setting up a validator, deploy a parachain, join cyber societies, yield farm on Parachain L1s, and much more!

How To Buy Kusama (KSM)

Buying KSM is as easy as visiting Kriptomat’s how to buy Kusama page and choosing your preferred method of payment.

How To Sell Kusama

If you already own KSM and hold it on a Kriptomat exchange wallet, you can easily sell KSM coins by navigating the interface and choosing your desired payment option.

Kusama Price

Several factors influence Kusama price and market cap, including exchange inflows and outflows, sentiment, technical and fundamental developments, the news cycle, and the general economic environment.

The price of KSM is decided at any given moment by the cumulative buying and selling of millions of participants worldwide. You can keep up to date on the latest price action and news using crypto exchanges like Kriptomat or one of the many different cryptocurrency tracking services.

The current Kusama (KSM) price is EUR.

The 24-hour trading volume of KSM is EUR. KSM is currently ranked of all cryptocurrencies by total market capitalization, with a market cap of EUR. It has a circulating supply of KSM.

Register now to begin your journey into the world of Kusama and cryptocurrencies with Kriptomat!

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