After Moonbeam, can the Polkadot DeFi platform Acala achieve great success again?

Author: Zebra Ventures

Source: Zebra Research

1. Project Overview

Recently, Moonbeam (GLMR) has performed exceptionally well since its launch, and some dedicated users have reaped substantial rewards. Those who have gained significant returns not only have good insight but also possess solid fundamentals and a thorough understanding of the project. This month, there are major projects worth paying attention to, with Acala set to launch on exchanges. Let's first familiarize ourselves with the project's fundamentals and then summarize some dimensions for your reference~

Acala is a one-stop DeFi platform built on the Substrate framework, based on Polkadot and featuring an Ethereum-compatible development environment, bringing users a range of financial applications such as trading, lending, and liquidity release products, among others. The Acala network is a scalable, interoperable, highly secure, and customizable DeFi network.

2. Investment Institutions

Currently, Acala has received official funding support from the Web3 Foundation and investments from several globally renowned institutions, including Polychain, Pantera, ParaFi, Hypersphere, Digital Currency Group, CoinFund, 1confirmation, HashKey, and Coinbase Ventures.

On April 2, last year, Coinbase's Coinbase Ventures announced support for Acala/Karura, collaborating to build a one-stop DeFi center in the Polkadot/Kusama ecosystem. The support from Coinbase Ventures for the Acala team will assist Acala/Karura in securing the first slot on Polkadot/Kusama.

According to Acala's official disclosure, a seed round of financing was conducted on March 27, 2020, raising $1.5 million, led by Polychain, with participation from Hashkey, KR1, and other investment institutions. On August 27, 2020, a Series A round of financing raised a total of $7 million, led by Pantera Capital, with follow-on investments from 1confirmation, DCG, Arrington XRP Capital, and others. The total amount raised in these two rounds was $8.5 million. On September 8 last year, Acala announced that it had raised $61 million from over 2,600 global investors, which will be donated to the on-chain Acala treasury from the Acala Foundation.

3. Team Information

Acala is primarily initiated by the decentralized finance protocol Laminar team and the Polkawallet team, with 17 members currently listed on the official website.

Ruitao Su is the co-founder of Acala and currently serves as the CEO of Laminar Protocol. Previously, he was the Chief Technology Officer at Centrality. Su is an award-winning software engineer, entrepreneur, investor, and advisor to tech companies and startups.

Bryan Chen is another co-founder of Acala Network. He is also a co-founder and Chief Technology Officer of Laminar. Chen is a major contributor to the Substrate codebase and a Polkadot ambassador.

Bette Chen is a co-founder of Acala Network and the Chief Operating Officer of Laminar. She is an experienced product manager and entrepreneur. Chen holds degrees in software engineering and business (MBA). She has 10 years of product management experience in the software and high-tech fields.

4. Application Scenarios

1) EVM-Compatible DeFi Platform

Acala is a Layer 1 blockchain platform optimized for financial scenarios. Developers can build various DeFi applications on Acala. At the same time, Acala is compatible with the Ethereum Virtual Machine (EVM), making it very convenient for projects from ecosystems like Ethereum and BSC to deploy on Acala, which in a sense turns it into a public chain for DeFi.

2) Stablecoin aUSD

Acala USD (aUSD) is a decentralized stablecoin collateralized by multiple crypto assets, pegged to the US dollar, meaning 1 aUSD always maintains a value around 1 USD. Users can send and receive aUSD across any blockchain connected to Polkadot.

3) Liquidity Release Product L-DOT

In PoS chains like Polkadot, token holders can earn rewards through staking while ensuring network security. However, assets in staking cannot be transferred during the lock-up and unbinding periods, resulting in limited liquidity.

4) Acala DeX

Acala has a built-in decentralized exchange, Acala DeX, which uses an AMM (automated market maker) mechanism for decentralized token swaps, with trading pairs using aUSD as the base currency.

5) Decentralized Sovereign Wealth Fund dSWF

The decentralized sovereign wealth fund (dSWF) is an innovative on-chain fund management form by Acala. Similar to some countries establishing sovereign funds to manage foreign exchange, Acala uses dSWF to manage assets within the network for sustainable development.

5. Token Economics

Token: ACA
Total Supply: 1 billion
Early Supporters: 18.33%
Supporters: 11.66%
Team: 20.25%
Slot Auction Rewards: 34%
Ecosystem Development Fund: 5%
Reserve Fund: 10.76%

Value Model of ACA

1) The circulating market value of ACA at launch ≈ The value of DOT locked in the Acala network (locked amount × current price). With 32,515,989 DOT locked and the current DOT price at $26.78, the circulating value of ACA is approximately $870.6 million. The unit price of ACA is calculated based on the circulating amount on the launch day; this applies to GLMR but not to CLV due to differences in ecosystem size and the locking of DOT after CLV's launch.

2) Cost of participating in slot auctions
According to official data, each DOT rewards 4.61 ACA. The loss incurred from the decline in staked DOT from the time of the slot auction (November 4, 2022) to the ACA launch day represents the cost of participating in the auction. Based on the current DOT price, the cost of ACA is approximately $5.68.

3) Last year's ICO price was $0.67, and the public offering price was $1.50. The breakeven price is calculated based on the release ratio at launch, but the release ratio data has not been disclosed.

4) Comparison with the top 1 Polkadot parachain Moonbeam

ACA has 32.51 million DOT locked by 81,000 users. GLMR has 35 million DOT locked by 200,000 users.

Moonbeam's advantages lie in its user base and staking amount, as well as its first-mover advantage. Its sister network Moonriver has a market value of $437 million; Acala is capital-driven with a high staking ratio, leading to relatively diluted user rewards, while its sister network Karura has a market value of $74 million. This indicates that Acala and Moonbeam have certain differences, but Acala is also one of the most important projects in the Polkadot ecosystem.