Acala: Polkadot’s DeFi Hub and Liquidity Powerhouse

Acala is a decentralized finance (DeFi) hub and a primary liquidity pool within the Polkadot ecosystem. Its vision is to become a unified DeFi platform, providing financial stability, liquidity, and fostering the growth of crypto assets.

Simply put, Acala is a Layer-1 smart contract platform built on Polkadot. This allows it to inherit Polkadot’s robust security and high scalability. Furthermore, Acala boasts compatibility with Ethereum and cross-chain protocols, enabling developers to access a broader ecosystem and attract significant capital flow.

Driven by ambitious goals, Acala offers a suite of impressive features, including an AMM DEX, a decentralized stablecoin (aUSD), and a DOT Liquid Staking program (L-DOT).

How Acala Works

Beyond its core function as a Layer-1 smart contract platform, Acala incorporates two protocols fundamental to the Polkadot ecosystem:

The Honzon Stablecoin Protocol

The Honzon protocol utilizes aUSD, Acala Network’s native stablecoin, pegged 1:1 to the US dollar. Through Honzon, users can open Collateralized Debt Positions (CDPs) by collateralizing crypto assets like Polkadot (DOT), Bitcoin (BTC), or Ether (ETH).

The mechanism operates as follows:

1. Collateral Deposit: Users deposit assets into Honzon, which are then locked as collateral.
2. CDP Creation and aUSD Borrowing: Users borrow aUSD equivalent to the value of the deposited collateral.
3. aUSD Repayment: Users close their CDPs by repaying the borrowed aUSD plus a fee (paid in ACA or aUSD).
4. Collateral Withdrawal: Users withdraw their initial collateral.

Acala partnered with Chainlink to develop a real-time oracle system that tracks asset values across multiple blockchains. Acala’s system automatically calculates and balances collateralization ratios. If collateral value within a CDP depreciates, a portion is auctioned to recover aUSD and maintain stability. Conversely, when profits exceed a certain threshold, the surplus is converted into ACA and subsequently burned to stabilize the system’s value.

The Homa Protocol

Polkadot’s Nominated Proof-of-Stake model requires projects vying for parachain slots to lock and stake a significant amount of DOT for 96 weeks. Similar to Yield Farming, users’ capital is locked for a period to earn rewards. Homa addresses this liquidity challenge.

Acala designed Homa to unlock liquidity for staked DOT. Functioning as a decentralized liquidity pool, this staking protocol mints and distributes L-DOT in exchange for staked DOT. Users can utilize L-DOT as an asset in DeFi applications across various blockchains or as collateral to borrow aUSD.

Acala’s Key Advantages

• Ethereum Virtual Machine (EVM) Compatibility: With a substantial Total Value Locked, Ethereum represents a lucrative liquidity pool that DeFi protocols strive to access. Acala EVM empowers developers to build dApps using the familiar Solidity programming language and create assets functioning similarly to ERC-20 tokens.
• aUSD Stablecoin: Provides stability and facilitates seamless capital flow within the Polkadot ecosystem.
• Homa Protocol: Offers a solution for the liquidity challenges associated with locked staked assets.
• DeFi Optimization: Designed as Polkadot’s DeFi hub, Acala offers a diverse range of products. Moreover, the network supports cross-chain functionality and enables upgrades without requiring forks.

ACA Token Information

Key Metrics

• Token Name: Acala Network
• Ticker: ACA
• Blockchain: Polkadot
• Token Standard: Updating..
• Contract: Updating..
• Token Type: Utility, Governance
• Total Supply: 1,000,000,000
• Circulating Supply: Updating…

Token Allocation

• Early Backers: 18.33%
• Backers: 11.56%
• Founding Team: 20.25%
• Community: 49.76%

Token Sale and Distribution

ACA tokens were awarded to participants in the Polkadot parachain auction who supported the project via Crowdloan. A portion of these ACA tokens were unlocked and distributed upon lease commencement. The remaining tokens are vested linearly over the duration of the parachain lease.

Specifically:

• Vesting: 80% of ACA from the parachain auction are vested linearly over the lease period.
• Total Rewards: 17% of the token supply was allocated for Crowdloan participants.
• ACA Rewards: The average conversion rate was approximately 1 DOT: 3 ACA, subject to contribution levels.
• Liquidity: 20% of ACA from the auction were unlocked for immediate use within Acala’s DeFi ecosystem.

Token Release Schedule

Token Use Cases

ACA token holders can utilize their tokens for:

• Governance: Proposing and voting on network upgrades, fee adjustments, council member elections, and other critical decisions.
• Utility: Paying transaction fees, earning staking rewards, and participating in the DeFi ecosystem.

How to Acquire ACA Tokens

While the Crowdloan has concluded, users can acquire ACA tokens by purchasing them on supported cryptocurrency exchanges.

ACA Token Storage

As a Polkadot-based token, ACA can be stored in wallets compatible with the Polkadot network.

Roadmaps & Updates

For detailed information on Acala’s roadmap, please refer to their official documentation.

Team, Partners, and Investors

Acala boasts a team with extensive experience in finance and technology, operating as a collaborative network driven by contributions from various entities. In addition to individuals from the Web3 Foundation, key members have played crucial roles in the development of prominent projects like Laminar and Polkawallet.

Similar Projects

As a Layer-1 smart contract platform optimized for DeFi applications, Acala draws inspiration from MakerDAO, a prominent DeFi platform on Ethereum. Furthermore, Acala’s Honzon protocol and aUSD stablecoin share similarities with Terra and its algorithmic stablecoin, UST. Finally, Lido Finance, like Acala, offers solutions for unlocking liquidity from staked assets.

Conclusion

Acala Network has garnered significant attention due to its ambitious vision and robust features. Backed by substantial investments and partnerships with leading institutions, including a grant from the Web3 Foundation, Acala demonstrates strong potential for growth within the Polkadot ecosystem. As a leading DeFi hub, Acala is poised to play a pivotal role in the future of decentralized finance.