Overview of the Kasu Ecosystem
Last updated
Last updated
Kasu is a Real World Asset (“RWA”) business lending protocol that utilises proprietary technology to optimise businesses’ cash flows, thereby improving credit risk to deliver superior risk management for higher-quality yields. The protocol brings together everyday DeFi Lenders (“Lenders”) with creditworthy ‘real world’ business borrowers (“End Borrowers”), all curated by industry leading loan portfolio and risk managers (“Delegates”) that are exclusive to Kasu.
The following provides a summary of the protocol features in context of how the Kasu ecosystem functions:
The core of Kasu's ecosystem is its Lending Strategies. Kasu enables Delegates to offer a range of business lending opportunities with differing risk profiles and interest rate returns. As a Lender, you select Lending Strategies that align with your financial goals and risk tolerance. This provides Lenders with exposure to global private credit markets, which are uncorrelated to cryptocurrency markets.
Interest rates on Kasu are stated as an Annual Percentage Yield (APY). It is noted that the stated APY does not factor in any compound interest, and therefore assumes a Lender withdraws all their interest earnings every epoch. Accordingly, Lenders can earn a higher effective interest rate than the stated APY if they avail of compound interest.
Lenders are individuals, businesses and institutions who deploy capital to any of the Lending Strategies on Kasu. For smaller Lenders (who deploy less than 350,000 USDC), funds are not ‘pooled’ like a managed fund. Therefore, Kasu provides smaller Lenders with choice, transparency and control as to the various business lending opportunities available and the deployment of their funds from one End Borrower to another. This includes full disclosure of every End Borrower to which funds are deployed, with the opportunity to opt out within a designated timeframe. This level of choice and control provides Lenders with decision-making influence on how Delegates allocate capital.
Delegates are seasoned loan originators and risk managers of commercial loans. Each Lending Strategy offers an interest rate reflective of the credit risk associated with its underlying real world business borrowers. Delegates possess a historical track record of outstanding loan portfolio performance and credit quality. They bring unique proprietary deal flow, which is enhanced by Kasu’s technology that delivers superior risk management for the highest quality yields. An example of the calibre of Delegates that Kasu partners with is our launch partner, Apxium, an award-winning ‘SaaS+Fintech’ business. Through this partnership, Kasu and Apxium deliver innovative Accounts Receivable Automation Software and Smart Payments technology, ensuring the most intelligent working capital financing solutions for real-world businesses.
Each Lending Strategy is structured into three loan Tranches (or less) - Junior, Mezzanine, and Senior Tranches. Each Tranche has a distinct risk profile in terms of its ranking priority in the capital structure when it comes to the recovery of funds in the event of losses. This presents varied balances of risk and potential returns, which enables Lenders to tailor their approach and diversify risk within a single Lending Strategy, in line with their own risk tolerance.
For simplicity and stability, all lending and withdrawals on Kasu are transacted in USDC, a regulated digital currency (stablecoin) issued by Circle that is pegged to the US dollar. This ensures Kasu is able to source global capital in a manner which is borderless and cost effective for all stakeholders that is also highly regulated. Lenders deploy USDC into their preferred Lending Strategy, which is then converted to fiat currency for Delegates to original loans to End Borrowers. Kasu can facilitate the instant conversion of other cryptocurrencies to USDC on behalf of Lenders (via 1inch) during the Lending Request process, if required.
Whilst Lenders aren’t required to purchase the native Kasu token ($KSU) to participate in USDC lending, the lending experience is enhanced by locking $KSU to achieve certain utility and rewards. By locking the $KSU token for a minimum period, Lenders can participate in the Kasu loyalty program, which is designed in a manner that promotes Kasu’s commitment to inclusiveness, where any Lender can avail of the same utility and relative rewards, regardless of their wealth. This includes priority access and capital withdrawal to and from Lending Strategies, along with APY bonuses and Protocol Fee Sharing.
Transactions on Kasu occur in weekly epochs, with a Clearing Period occurring within 48 hours of the end of the each given epoch. This system manages Lending and Withdrawal Requests in a batched clearing system, enabling Kasu algorithms to manage the liquidity status of Lending Strategies in terms of liquidity surpluses and shortage for more efficient capital allocation. The epoch system also manages weekly interest calculations efficiently and other key transactions. This system reduces on-chain transactions, thereby minimising potential vulnerabilities in the protocol.
The components outlined above bridge decentralised finance and traditional private credit markets. Lenders gain access to opportunities previously reserved for large institutions and High-Net-Worth individuals. End Borrowers benefit from optimised cash flows and improved credit risk management through Kasu's proprietary technology. Delegates fill the essential role of sourcing high quality opportunities that are exclusive to Kasu. They must possess a historical track record of outstanding portfolio performance and credit quality to validate their ability to ensure best-in-class risk management of Lenders’ capital.
This harmonious ecosystem maintains transparency and efficiency, aligning the interests of Lenders, End Borrowers and Delegates throughout the entire loan management lifecycle and lending value chain.