Kensetsu is a new decentralized stablecoin project in the Polkadot ecosystem. The construction ("Kensetsu" means "construction" in Japanese) began in June 2023 when an anonymous contributor, Satoshi Shibarimoto, proposed the idea on the SORA blockchain forum.

SORA is one of 100 Polkadot parachains designed for specific use cases. In the case of SORA, the primary use case is the monetary system. Its governance and tokenomics are tailored for the operations in real economies. At the same time, maintaining one of the parachain slots on Polkadot it benefits from the scalability, security and interoperability of the Polkadot ecosystem.

Kensetsu is an over-collateralized stablecoin similar to MakerDAO's DAI. Users can borrow KUSD stablecoin against pledged volatile cryptocurrency. Unlike Maker, however, it incentivizes the borrowers by paying a portion of the protocol's revenues back to the community.

Mimicking central banks' inflation targeting, Kensetsu plans to mint an additional 1% stablecoin value for each KUSD issued, to buy back the early supporters' KEN token. The authors also suggest this deflationary reward token may eventually become a rare status symbol within the community.

The sign-up for the KEN token has already started and will last until tomorrow. And here, the team has come up with a novel but fair distribution concept. Unlike airdrops where recipients just wait for the first opportunity to dump them, KEN tokens are distributed to the members of the community against destroyed (burned) crypto value. The proof-of-burn idea was first introduced by the Counterparty project, where the coins were issued against the proof of burned Bitcoins. This allows the project to avoid free riders and, at the same time, comply with regulations that prohibit the sale of security-like tokens to the public.

The concept of decentralized stablecoins received much criticism after the failure of the Terra algorithmic coin. The over-collateralized subcategory, however, continues to thrive with MakerDAO leading its charts. These developers continue to propose new approaches, taking into account the mistakes of the previous projects.

As always, we continue to Observe with interest.

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