Acala Network — a Multi-Collateral and Cross-Chain Capable Stable Coin Architecture

Author: @v.cryptor

Acala is a dual-protocol network that combines a Collateralised Stable Coin Protocol called Honzon and Stake Liquidity Protocol called Homa .

Honzon Protocol stands behind the first multi-collateral and cross-chain capable stable coin in the blockchain space. Acala is being built on the Substrate Framework and will become a Parachain on Kusama and Polkadot to be able to access to any other asset on both Kusama and Polkadot networks. Initially, Acala plans to support DOT and X-BTC as collateral. X-BTC is provided by ChainX , the largest BTC side chain and layer 2 network that will also become Polkadot’s Parachain. But Acala stable coin is not limited to these two assets because it is multi-collateral from day one and it takes advantage of the interoperability of Polkadot.

Honzon Protocol is in the Alpha stage. The Mandala Test Network is up and running since 17th Feb , so you can already try to create your first loan and to mint aUSD. Get Started Here.

Today’s crypto collateralized stable coin solutions like Maker use ETH as collateral. But Acala is dealing with Polkadot’s proof of stake token DOT that can be used to vote for validators and to earn rewards. You either use it as collateral or stake it in the PoS system, because DOT can not be in two places at the same time. And this is where Stake Liquidity Protocol comes into play. It introduces L-DOT that is issued when you stake DOT through Acala’s Parachain in a trust-less way. L-DOT is a redeemable receipt for staked DOT that can be freely traded and used as collateral while underlying DOT remains staked.

Stake Liquidity Protocol is Acala’s next step towards multi-collateral and cross-chain capable stable coin architecture that is going to be implemented in the near future.

Acala Network can fully customize the logic of its chain because of the Parachain Architecture and the flexibility of the Substrate Framework. It opens up a lot of interesting possibilities like charging the transaction fees in multiple types of tokens, which is impossible in MakerDAO. So, instead of paying the transaction fee in ETH for transferring DAI, with Acala you can pay for the transaction in aUSD, which brings UX to another level.

Acala Network is the first of its kind Decentralized Financial Consortium . Laminar Network and Polkawallet are two initial members of this Consortium but Acala is always open for future members to join it.

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Author’s Acala Mandala Address: 5Fj8pQ1e7iDfrAvae9k6WhrZRqM4Lqd6Umvk8J9cg1BXcJL9