What Is Kusama
Kusama is a "canary network," a publicly deployed, experimental blockchain environment operating in a real environment in real-time under real economic conditions.
As such Kusama serves as a proving ground in which blockchain developers can build, deploy, test, debug, and gather vital statistics and feedback for their decentralized application (dApp) products and services. Specifically, Kusama is the live pre-production environment for developers building dApps on the Polkadot network.
Polkadot is a sharded, decentralized, cryptocurrency and utility token that supports seamless blockchain integration across multiple chains.
Polkadot's governance, operation, and security are mediated by four core components: a relay chain for consensus, interoperability, and shared security; parachains that can be developed with their own native tokens; parathreads with pay-as-you-go flexible connectivity features, and bridges that connect Polkdot's chains to external chains like Ethereum (ETH).
At the time of publication, Polkadot has a market cap in excess of USD $18 billion, and a plethora of active projects and projects in development. As such, Kusama supports a broad demand among developers and Polkadot ecosystem participants for a live, real runtime environment to develop decentralized applications on the Kusama chain before launching projects on Polkadot.
The native token for Polkadot is DOT. Kusama's utility token is Kusama Coin (KSM). Kusama price has risen dramatically since its 2020 launch. At the time of publication, the Kusama price was $211, with KSM trading within around plus or minus USD $20 of the $200 handle for most of the summer of 2021.
The KSM price reached an all-time high of just under $600 in May 2021 at the height of the cryptocurrency bull run that started in December 2020. Kusama price is affected by demand for the coin, which is a function of the network's overall health and business, as well strategic global macro factors. The overall momentum of the cryptocurrency market is also a key indicator of Kusama price.
Kusama Founders
Kusama was founded and developed by the same team that gave the world Polkadot, which was developed by the Web3 Foundation and implemented by London-based Parity Technologies Limited, a private firm with some $6 million in seed funding that "aims to enable businesses and organizations to capitalize on blockchain technology and benefit from the new opportunities."
Both Kusama and Polkadot were created by Gavin Wood, who co-founded the Ethereum network with Charles Hoskinson and Anthony Di Iorio. Polkadot's governance includes research and community development support from the growth team of the Web3 foundation.
The foundation made a grant to fund the deployment of the Kusama chain and KSM coin, hoping to "nurture and steward technologies and applications in the fields of decentralized web software protocols." With their help Parity was able to innovate on its own Polkadot blockchain with a capable, agile test chain for no holds barred, radical innovation, and integrated support for migration to launch on Polkadot from Kusama.
The Parity team has over a hundred employees in total working all over the globe, and includes some of the world's most successful blockchain developers.
How Does Kusama Work
Kusama price is tied to the value of the network and developing new decentralized finance (DeFi) and decentralized application projects on Kusama.
It's unusual among cryptocurrencies, and says a lot about the value of the cryptocurrency industry in general, that essentially a testnet for developers to deploy ambitious projects in a real environment, has been capitalized to over a billion dollars by investors, developers, users, and blockchain enthusiasts.
To use the Kusama network, developers and app users must first purchase KSM tokens to power transactions and computations on the network. So KSM price is a direct function of the demand for applications on Kusama's ecosystem, and for blockchain secured, computational power to develop, deploy, and use them. Kusama price is also affected by supply.
Also unusual among blockchains, the maximum supply of KSM is not capped at any value. Instead, in order to supply liquidity for a rapidly growing ecosystem, the founders designed Kusama coin to have built-in inflation at a rate of 10% annually. This causes a gradual downward pressure on the Kusama price.
In November 2020, just before the cryptocurrency industry's biggest bull run yet in liquid exchange markets, the circulating supply of KSM coin was some 8.5 million tokens, with a total supply of 10 million tokens.
Kusama Network Security
Validation functionality is unique in the Kusama ecosystem. The blockchain is built with a consensus mechanism called nominated proof-of-stake. In proof of stake, validation functionality is achieved by consensus through staked coins, tokens locked up some way or another, that cannot be spent or redeemed from the blockchain until some validated, protocol following activity is performed by the participating node.
This incentivizes nodes to follow network protocol, because built into the protocol is a penalty for nodes that break the rules, causing them to lose their staked coins.
In nominated proof of stake, a network of nominators called KSM stagers elect nodes to validate transactions and secure the blockchain. In addition to this consensus mechanism, Kusama also employs hash trees or Merkle trees to settle transactions across chains and lock the results into the immutable ledger of the relay layer.
Whether it sounds like it or not to the computer science layman, this is actually a simple queuing protocol to manage network traffic securely and trustlessly without a centrally-controlled third-party intermediary.
