Kujira is a blockchain development project that was first active on the Terra network. The effort created ORCA, a liquidation tool on the Anchor lending platform. After Terra’s algorithmic stablecoin, UST, and its stabilizer token, LUNC (then called luna), fell into a death spiral wiping out billions of dollars of investor money, Kujira moved to develop on the Cosmos protocol.
“As we plan to focus on payments and commerce and launch our own high-quality Kujira wallet, we felt that we would have far more flexibility for future integrations if we were able to launch our own native stablecoin,” the announcement said. “We rebuilt Kujira from the ashes of Terra Classic’s collapse. We understand just how important it is to handle a stablecoin correctly by pursuing transparency, community involvement, sustainable governance, while focusing on adoption and tangible value.”
Many stablecoins have struggled to keep their price stable in the last months as deleveraging and insolvencies hit crypto markets and blockchain firms. Central banks around the globe have been raising interest rates to combat surging inflation, drying up liquidity and driving investors to exit riskier investments, including crypto.
Kujira has designed USK to maintain its price stability through a combination of overcollateralization and trading incentives. The stablecoin is set to be “soft-pegged” to the U.S. dollar, allowing the exchange rate to deviate within a range versus a hard peg to $1.
Similar to DAI, USK would be overcollateralized by crypto assets, meaning that the stablecoin issuer’s treasury will hold more digital assets in value than the market capitalization of the stablecoin. The backing asset will initially be Cosmos’ native token, ATOM, with the team planning to add KUJI – the token issued by Kujira – in the near future, according to the post.
USK tokens can be minted (created) only by locking up crypto such as ATOM as collateral and borrowing USK against them for a 5% interest and a 0.5% minting fee. The fees that USK accrues will be distributed among KUJI token stakers. The interest rate and fee could be subject to change, according to the blog post.
The post emphasized that Kujira intends USK to be resistant to censorship. It explained that a key difference from DAI stablecoin is that USK doesn’t plan to hold Circle’s stablecoin USDC in its treasury to “avoid being easily censorable.” This line likely reflects news on Monday of the U.S. Treasury banning privacy-focused crypto-mixing service Tornado Cash, with Circle subsequently moving quickly to freeze the blacklisted addresses that interacted with the service.
USK will start its test mode on Friday, followed by two weeks of feedback before going live.
UPDATE (Aug. 11, 2022 06:55 UTC): Clarifies Kujira's move from Terra Classic in the first graf.
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