Introduction
Kujira is a layer 1 blockchain built using the Cosmos-SDK. Built as a dApp on Terra back in November 2021, Kujira’s ambitions were cut short with the chaos of its native ecosystem. Now it looks to keep pursuing its ambitions as its own chain to create an all-in-one DeFi hub with an expansive range of products.
Kujira has impressed Cosmonauts with its FIN and ORCA products, and just recently released its highly anticipated $ATOM-backed $USK stablecoin. Now a growing part of the central IBC ecosystem, Kujira’s determination to ship has never been stronger.
The Problem
While Cosmos is outstandingly innovative, it lacks a comprehensive DeFi ecosystem. While a few products stand out like Osmosis’s superfluid staking, Cosmos as a whole still yearns for a far-reaching suite of DeFi-focused appchains.
Terra’s $UST was previously the de-facto Cosmos stablecoin. After its collapse, Cosmos was left searching for new decentralized money for its ecosystem. Ideally solutions would be both decentralized and IBC-native (not bridged).
The Goal
Kujira is on the rise alongside a new wave of Cosmos chains improving the overall lack of DeFi product diversity. It aspires to be a one-stop hub for trading, liquidating, and minting decentralized money, on a network with a current block time of just 2.3 seconds. The chain is semi-permissioned to prevent bloat, so any contracts deployed on Kujira must first be approved by governance.
The FIN order book DEX can facilitate quick trades with low network fees, while ORCA serves as a liquidation marketplace for IBC collateral auctions. Kujira’s $USK stablecoin is over-collateralized and backed by $ATOM, bringing a new fully decentralized and IBC-native stablecoin to the Cosmos ecosystem.
How Does it Work? FIN
Traditionally, DEXes have preferred the AMM and liquidity pool model, mostly due to the general lack of onchain liquidity and poor L1 scalability. Now however, onchain liquidity has significantly improved and scalability with L2/appchain solutions make decentralized order books much more practical.
FIN is an order book-based DEX on Kujira designed for spot trading (and soon perpetuals). Unlike AMMs where users trade with a liquidity pool, order books match buyers and sellers on either side of the book to fill their orders. This means FIN doesn’t need liquidity pools to operate, and as such does not need to pay liquidity providers.
It currently supports a total of 19 trading pairs amongst 16 different assets, and FIN relies on Kujira Oracles for asset pricing. Most pairs use a stablecoin base like Axelar’s $axlUSDC or $USK, with the rest pairing against $ATOM or $OSMO. FIN supports both market and limit orders, and does not use the standard Cosmos “first in, first out” (FIFO) model for matching orders. Instead, orders at the same price are executed equally based on weight, giving all orders a fair chance at being filled at that price.
While FIN only offers spot trading now, perpetual futures trading is right around the corner. Users can open spot or margin leverage long/short positions, which is all possible without a separate liquidity component like GMX’s GLP. Kujira sources liquidity from FIN’s books, so liquidity is self-sustained by those placing orders on margin (and no incentives are necessary to generate it!).
Black Whale
Black Whale is a totally automated market making software integrated on top of FIN. Like an AMM, users can supply liquidity to Black Whale vaults corresponding to different FIN trading pairs and earn yield from the profits generated by Black Whale’s market making bot. In short, Black Whale offers a familiar way to earn yield that’s especially ideal for passive LPs.
How Does it Work? ORCA
ORCA is a decentralized liquidation market where users can scan the IBC realm for debt positions where collateral value has fallen below the minimum threshold. ORCA levels a playing field traditionally dominated by bots to allow regular individuals to profit from onchain liquidations.
For the IBC ecosystem, ORCA users fill a necessary role (liquidators) for debt protocols that need to remain solvent. If a position is under-collateralized, ORCA liquidators can bid on the liquidation-ready collateral at a discount upwards of 30%. Liquidators choose the discount on their bid, but bids are filled from smallest discount to largest until all the auctioned collateral is sold. This naturally pushes the market to find an optimal discount rate based on what rates are likely to be filled (which bids have the lowest rates).
Currently, the only market live on ORCA is $ATOM collateral liquidation for $USK positions. There are several other markets in the pipeline for more $USK collateral types, FIN perpetuals collateral, and collateral for Polkadot’s $aUSD stablecoin.
How Does it Work? $USK
$USK is a CDP-style $ATOM-backed stablecoin, allowing users to take out over-collateralized loans of $USK (similar to Maker DAO’s $DAI). Unlike $DAI, $USK is fully backed by decentralized collateral making it significantly more censorship-resistant.
The downside to this collateral type is the volatility of $ATOM, making liquidation events more likely and requiring more conservative loan parameters. To counter volatility risk, Kujira has set the maximum loan-to-value ratio (LTV) to 60% meaning a user can mint at most 60% of their collateral value in $USK. Collateral is auctioned on ORCA if its value falls enough to push LTV above 60%.
While only backed by $ATOM now, Kujira intends to diversify $USK’s collateral types over time. It has plans already to add Nomic’s $NBTC coming soon, and has also announced ambitions to eventually add $KUJI and staked $ATOM collateral.
How Does it Work? BLUE and POD
BLUE is the “heart” of Kujira, serving as a convenient and all-encompassing dashboard for users of the network. Users can go to BLUE for staking, voting, minting $USK, bridging, or simply viewing their portfolio. Kujira’s BELUGA product lets users send funds to multiple wallets in one transaction, and has now been integrated into a tab of the BLUE dashboard.
Kujira’s other product POD is a dashboard for viewing any IBC chain’s stake distribution. Users can seamlessly rebalance their stake amongst as many validators as they’d like (or all of them) to improve validator decentralization.
Partnerships
Kujira has an established partnership with Polkadot’s Acala $aUSD protocol to provide ORCA liquidators for $aUSD, also launching on Polkadot’s Karura. The Atlo “interchain launch aggregator” is an IBC launchpad for growing Cosmos projects. Atlo is building on Kujira with interchain accounts, allowing any IBC chain to establish their own “storefront” for raising funds for their native ecosystem. Kujira has also partnered with Kado Money to integrate a fiat onramp directly to Kujira on the BLUE dashboard.
Kujira has an extensive list of other notable partnerships. The ORCA and FIN products alike are a prime way to integrate protocols with Kujira, especially with the rise of composable developments like interchain accounts.
Tokenomics
$KUJI Price: $1.04
Market Capitalization: ~$91.4 million
Circulating Supply: 87,758,188
Total Supply: 122,396,313
$USK Price: $1.00
Market Capitalization: $225,509
Circulating Supply: 222,717
Learn more about token distribution and vesting here.
$KUJI stakers vote in governance and secure the Kujira network. New integrations (e.g. Black Whale), new FIN trading pairs, new ORCA markets, and more are all voted on by $KUJI stakers. Users can pay with more than just $KUJI for gas, as Kujira validators currently accept $ATOM, $OSMO, and $axlUSDC for gas. New gas tokens are also voted on by governance.
$KUJI stakers collect fees from various parts of the network. Fees earned by stakers currently come from gas fees, FIN and ORCA fees, and $USK fees. Any yield paid to $KUJI stakers is 100% “real yield"; none of the yield comes from emissions/inflating $KUJI. Stakers naturally tend to qualify for Kujira airdrops as well, and sometimes even other airdrops in the Cosmos ecosystem.
Conclusion
The Kujira network powers a complex suite of DeFi products ranging from order book trading, collateral auctions, a decentralized stablecoin, and much more. The Cosmos IBC ecosystem can plug into Kujira’s ecosystem and take advantage of its powerful liquidity infrastructure. As a whole, Kujira’s diverse product set is advancing the IBC ecosystem to unexplored and exciting places.
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DISCLOSURE: I hold and stake a small amount of $KUJI (<1% of my portfolio). I was not asked to write this article and have not been compensated in any way. The information provided in this article is solely for educational purposes and should not be considered financial advice. The views expressed in this article are my own and do not necessarily reflect the official policy or position of any company or organization. Readers should always conduct their own research before making any financial decisions.