Kusama is an operational blockchain within the Polkadot ecosystem that is designed to test new features for Polkadot before they are released on the Polkadot network. Kusama is sometimes called a “canary network,” or an experimental network used by developers who want to iterate quickly, or are preparing for deployment on Polkadot.
Kusama coin (KSM) is the native cryptocurrency of the Kusama network.
Is investing in Kusama coin right for you? Here’s what investors interested in various forms of crypto need to know about the advantages and disadvantages of Kusama (KSM).
How Does Kusama (KSM) Work?
Kusama was built by the teams that built Polkadot (DOT), using Substrate, an interoperable blockchain framework that is key to the Polkadot project. Sometimes called a testnet, Kusama is actually more like a clone of Polkadot in terms of its architecture, making it a very realistic testing ground for Polkadot projects.
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In that sense, Kusama enables road-testing of various innovations, as well as staying ahead of where the Polkadot ecosystem is evolving, to insure its maximum success.
A Dual Blockchain Structure
Kusama has two different blockchains. The first is the relay chain, which is the main Kusama blockchain that connects all other blockchains together and where transactions are completed. The goal of this chain is to improve the network’s scalability.
The second blockchain is made up of parachains. These are blockchain networks that use the relay chain’s computing resources to confirm the accuracy of transactions.
Nominated Proof-of-Stake System
The Kusama network uses a nominated proof-of-stake consensus mechanism. This allows users who stake KSM coin on the network to either be a validator or a nominator. A validator is someone who checks the data on the parachain blocks. They also have the ability to vote on changes to the network.
The role of the nominator is to select the validators and assign their staked tokens and their votes to them. Staking also allows users to propose network changes (and vote on referendums), ideally to help the network evolve.
When users stake KSM coin they can vote on network upgrades, with each vote being proportional to the amount of KSM crypto they stake.
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Advantages and Disadvantages of Kusama (KSM)
There are some pros and cons to consider when deciding whether to buy Kusama. Let’s consider some of the advantages first.
The Kusama model allows for scalability given that a large number of projects can be hosted on the network without slowing it down.
This scalability is made possible by the network’s use of the proof-of-stake consensus mechanism which is less energy intensive compared to the proof-of-work model.
Kusama’s infrastructure allows developers to access different blockchains using KSM crypto. Users who hold KSM coin control the governance of the network, which speaks to the decentralized nature of Kusama.
Because Kusama acts as a staging ground for changes to the Polkadot network, it necessarily takes on more risks. And because Kusama is a testing platform for Polkadot, it is unclear if the network will be independent of Polkadot or once the testing is completed, or if the Kusama project ultimately will close down.
• Kusama moves at a faster pace than Polkadot.
• Given that Kusama is a testing platform for Polkadot, it necessarily is exposed to greater risks.
• It is built for developers who want a network where they rapidly test and iterate.
• Also, as a testing ground it’s unclear how long Kusama may exist.
• Kusama has multiple blockchains, which enables the network to run quickly and efficiently.
Who Created Kusama (KSM)?
Kusama was created in 2019 by Gavin Wood, an English entrepreneur who is best known as the co-founder and former chief technology officer of Ethereum, and the founder of Polkadot.
Wood also created Solidity, a language used by developers for building decentralized applications (dApps) and smart contracts on Ethereum. Wood was also previously a research scientist with Microsoft and was the first CTO for the Ethereum Foundation. Wood also founded a company called Parity Technologies in 2015 that maintains Substrate, a software development framework used by Kusama developers who wish to create parachains.
Kusama is also funded by the Web3 Foundation, the non-profit that conducted Polkadot’s ICOs, raising some $200 million. The Foundation supports the growth of the Kusama network with research and community development.
Why Does Kusama (KSM) Have Value?
Kusama cryptocurrency plays a key role in maintaining the network. Users on the platform need to own Kusama crypto for staking capabilities and to vote on any network changes. Users who participate in this process are rewarded with new Kusama crypto, which is commensurate with how many tokens they are staking.
Investors should know there is no capped supply of Kusama crypto. KSM is expected to be released continually at a predetermined inflation rate.
Price of Kusama (KSM)
As of May 25, 2022, KSM is worth $79.96 and is currently the 71th largest crypto with a market cap of $678 million. Like many other cryptocurrencies, KSM has been experiencing a lot of volatility, making its future value hard to predict.
Why Use Kusama (KSM)?
Crypto users may want to have access to Kusama for its multiple blockchains, which allow for interoperability.
If you are interested in Kusama crypto as an investment, you are by default also interested in the Polkadot blockchain. Since Kusama supports the development of the Polkadot network, Polkadot investors may find Kusama an appealing investment.
Developers who build applications on blockchains, may like the fact that projects can be maintained on both Kusama and Polkadot. First, they can use the Kusama network to test their project, and once they’re ready, they can deploy it to the Polkadot network.
How Can I Buy Kusama (KSM)?
You may have to do a little research to find platforms that enable KSM trades. Also, be sure to review how crypto exchanges work, as well as any fees that may apply.
Step 1. Choose an exchange and fund your account.
Set up a crypto trading account and then fund your account with a secure wire transfer from your bank, or even with a credit or debit card transfer (but check with your bank in the case of restrictions). Fees may apply.
Step 2. Set up a wallet to store your assets.
Just as you might keep money in a physical wallet, cryptocurrencies are held in digital “wallets.” Be sure to select a cryptocurrency wallet that supports KSM.
Note that some crypto exchange accounts come with a custodial wallet, and there may be restrictions about moving your crypto off-platform.
Step 3. Trade KSM.
Once you’ve executed the trade, you can transfer your holdings to your wallet. You may want to leave your holdings there if you plan to keep trading.
Sharing Personal Data
Depending on where you choose to trade your crypto, different platforms may require different forms of identification. Some exchanges adhere to Know Your Customer (KYC) rules, a common set of standards that require investors to disclose certain information. Others may allow anonymous or P2P transactions.
Similar to trading securities, there are fees to consider
when trading crypto. Be sure to understand the associated costs that may come with trading crypto on one platform versus another, or using one form of payment versus another.
How to Sell Kusama (KSM)
Once you’ve decided to sell your KSM, the next step is deciding whether you plan to cash out for a fiat currency like U.S. dollars (USD) or trade another type of crypto.
Step 1. Decide what to sell.
If you’re exchanging KSM for USD, the steps may be different than if you’re buying another form of crypto — or you may have to complete a more extensive KYC identification.
Step 2. Find the best price.
Crypto prices fluctuate by the minute, so do your research beforehand so you know a good offer when you see one.
Step 3. Sell KSM.
Complete the trade and move your crypto (or cash) to your wallet, unless you plan to keep trading on the exchange.
4. Keep taxes in mind.
Remember that crypto gains are subject to taxes. Be sure to consider the tax implications of selling KSM coin, and consult a professional as needed.
Does Kusama (KSM) Have Staking?
Yes, but one of the differences between Kusama and Polkadot is that Kusama has a lower threshold for staking requirements.
You can stake KSM to earn more cryptocurrency and participate in Kusama’s governance process. Users on the KSM network can stake KSM cryptocurrency if they want to be selected to validate new blocks. When staking on Kusama you can either be a validator or a nominator. Validators play a more substantial role in the governance process. They produce new block candidates, vote and and help with other network operations. The nominators monitor the validator’s performance. Users who stake receive transaction fees and block rewards.
Kusama is a pre-production blockchain version of the Polkadot network that allows developers to test new features before they go live on the Polkadot network. Kusama projects are transitioning from the testing phase into the completed phase, which gives Kusama a strong value proposition. Investing in Kusama can be a great way to invest in crypto assets that support interoperability or to simply diversify your digital assets.
If you want to invest in Kusama and other cryptocurrencies, you can easily do so by setting up an Active Invest account with SoFi Invest. SoFi has dozens available for users to trade, in addition to stocks, exchange-traded funds (ETFs), IPOs, and more. SoFi does not offer staking or a crypto wallet, but you can trade crypto 24/7 from SoFi’s secure platform.
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