Acala Review by Jesse

With the holidays coming into full swing the markets appear to be in a state of limbo. Aside from a quick run here or there. Nothing has maintained its upwards momentum the past few weeks. Generally, one week’s gains are erased by the next week’s losses and that’s not the time when anyone wants to take enormous risks. Of course, if you are someone accumulating your favorite project while everyone else is liquidating theirs. You might be a crypto OG who knows that these downtrends are always a temporary bump in the road. Especially coming into a new year. Well, it’s time to move away from talking about Solana and start discussing some of the new developments over on Polkadot, starting this week with their first parachain auction winner Acala Network.

Introduction

Acala Network is a Polkadots first-ever decentralized finance consortium built to deliver a set of stablecoin protocol tools to serve as Polkadot's DeFi building block. The focuses of Acala is to build a sound and stable currency for low transactional costs across all blockchains connected to the Polkadot network. Acala will allow for collateral to be used from any interconnected network and used to mint Acala Dollars. Anyone who owns the type of crypto assets supported by the ACALA network can leverage them to generate aUSD tokens by creating a Collateralized Debt Position (CDP) through the Honzon Protocol. Honzon will serve as the proxy module that users will interact with for stablecoin functionalities like creating, updating, and transferring CDPs. The CDP mechanism design is inspired by the first decentralized stablecoin project MakerDAO, having become the DeFi building block in the Ethereum ecosystem. Together with a set of incentives, supply & demand balancing, and risk management mechanisms as the