Digital Asset VC KR1 plc adds to staking revenue with yields from Kusama Network

KR1 plc, a leading digital asset investment company, is pleased to announce that the Company has started generating revenue from staking activities on the Kusama network, a portfolio holding received at zero cost in line with the Company’s Polkadot (“DOT”) position.

Kusama is an incentivised ‘canary’ network for the Polkadot blockchain project. Kusama is designed to battle-test technical upgrades for Polkadot as well as allow aspiring Polkadot parachain projects to test their systems before deploying on Polkadot. However, it is also envisioned that Kusama may become home to a range of lower value blockchain projects, that do not require Polkadot’s ‘stability’ and far superior safety guarantees. As such, Kusama could become an important standalone platform with a thriving economy over time.

The Kusama blockchain launched in early 2019 and migrated to a decentralised ‘Proof-of-Stake’ network in November 2019. Since then, the Company’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 thus far have not been realised into fiat currency but instead are being ‘compounded’ by staking them.

As at the date of this announcement, KR1’s total holding of Kusama tokens is 40,270.10 KSM, which are being actively staked. These might also be utilized for future token distributions through Kusama parachain auctions or similar activities.

As with the Company’s 19 August 2020 announcement, ‘Revenue from Polkadot Staking Yields’, 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 holders of staked KSM then receive a native network reward or yield for committing their KSM for validation of transactions across the Kusama network. The revenues generated from these activities are referred to as ‘staking yields’.

Given the high tolerance for technically ‘breaking-changes’ for the Kusama network and potentially rapidly changing network conditions and parameters, it is currently not possible to provide useful estimates as to how many KSM the Company is going to generate on a continuous basis but the Company will provide updates on any revenue in future announcements.

Staked digital assets in ‘Proof-of-Stake’ networks carry certain unique risks, specifically, ‘slashing’. Slashing occurs when certain network participants are automatically penalised by the network if the network’s health is compromised by major technical issues, internal attacks or cyber-attacks.

The staking activities do not impose any overhead or additional operating costs to the Company. KR1 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.

George McDonaugh, Managing Director and Co-Founder of KR1, commented:

“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. Kusama, which currently has a US$350 million fully diluted network valuation, makes an incredible addition to our portfolio and staking activities. Further, with Kusama as an experimental ‘canary’ network to Polkadot, we can also benefit and gain experience from the various activities being piloted. We are looking forward to ‘parachain auctions’ launching with popular projects on Kusama like Acala and Moonbeam and further iterations of ‘lockdrops’ and ‘stakedrops’, which have recently proved very popular.”

The Directors of KR1 plc accept responsibility for this announcement.