KR1 (AQSE:KR1 ) has started generating revenue from staking activities on the Kusama ("Kusama") network, an incentivised 'canary' network for the Polkadot blockchain project.
“Staking” means holding a digital currency in a wallet for a fixed time in order to support the security and operations of a blockchain network where you receive rewards for the “stake”.
Kusama, which is a portfolio holding received at zero cost in line with the KR1’s Polkadot ("DOT") position, is designed to battle-test technical upgrades for Polkadot and allow aspiring Polkadot parachain projects to test their systems before deploying on Polkadot.
‘However, Kusama may become home to a range of lower value blockchain projects that do not require Polkadot's 'stability' and far superior safety guarantees. Kusama could therefore become an important standalone platform with a thriving economy over time,’ said KR1.
The Kusama blockchain launched back in early 2019 and then migrated to a decentralised 'Proof-of-Stake' network in November 2019. Since then, KR1’s staking activities have been generating revenue on an ongoing basis in Kusama's native ‘KSM’ digital asset.
To date, KR1 has generated a total of 3,258.70 KSM from staking activities, which the group said have not been realised into fiat currency but are being 'compounded' by staking them. KR1’s total holding of Kusama tokens is 40,270.10 KSM, which are being actively staked.
KR1 also explained to investors that Kusama is a 'Proof-of-Stake' network that, unlike 'Proof-of-Work' networks, such as Bitcoin, does not require enormous computing power and energy consumption to guarantee the security and censorship-resistance of the network.
Instead, holders of KSM tokens can stake their KSM as a 'security deposit' to participate in block creation, network maintenance and securing connected Kusama 'parachains'. The revenues generated from these activities are referred to as 'staking yields', it noted.
Given the ‘high tolerance for technically breaking-changes for the Kusama network and potentially rapidly changing network conditions’, KR1 highlighted that it is currently not able to provide useful estimates as to how many KSM it will generate on a continuous basis.
"It is extraordinary to see the various ways new crypto networks are launched, continuously innovating with new token distribution methods, which can capture a lot of value,” said George McDonaugh, Managing Director and Co-Founder of KR1.
He added, “Kusama, which currently has a $350m fully diluted network valuation, makes an incredible addition to our portfolio and staking activities. With Kusama as an experimental 'canary' network to Polkadot, we can also benefit and gain experience from the various activities being piloted.”
KR1 said its staking activities do not impose any overhead or additional operating cost. The company also added that it has been staking and will continue to stake a substantial majority of its KSM holdings with a trusted and secure third-party staking service provider.
Shares in KR1 have traded strongly over the past month to open 3.39% higher at 15.25p this morning following the announcement.
Reasons to Follow KR1
Leading Edge IP
KR1 is Europe's leading digital asset investment firm supporting early stage blockchain and DeFi projects. It is a first investor in many key blockchain and DeFi projects that will power the decentralised platforms and protocols that form the emerging Web3 infrastructure.
Generating Material Revenue
KR1 unveiled back in August 2020 that it had started generating material revenue from staking activities on the Polkadot network, its largest investment and portfolio holding to date.
The company has been staking activities on Polkadot to generate revenue on an ongoing basis following its migration to a ‘Proof-of-Stake’ blockchain network back in June 2020.
To date, KR1 holds a total of Polkadot 3,558,490.89 DOT tokens, post-re-denomination. This differs from its original DOT allocation as a result of the bonus pool of unlisted digital tokens allocated pursuant to KR1’s 2017 bonus scheme, which included Polkadot as an asset.
George McDonaugh, Managing Director and KR1’s Co-founder, described the launch of Polkadot as “a momentous event” in the group’s history and one that shareholders have been waiting for since KR1 backed the project in an early funding round in 2017.
Commenting on the group’s largest investment activities, McDonaugh told investors: “We are pleased to have locked in some profit at good prices and we're delighted that Polkadot is further expanding the Company's staking activities as a yield-bearing asset."
Positive Outlook
McDonaugh also said KR1 is seeing huge interest flowing into numerous new projects building on Polkadot, many of which it has already supported, or currently in active discussions.
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