Blockchains weren’t built for DeFi. That was the idea behind Katana, a layer 2 blockchain incubated by Polygon Labs and GSR.

Katana was designed to address two fundamental problems. First, the yield that lured users to new blockchains and protocols was often unsustainable, fueled by token inflation rather than value-generating activity. Second, digital assets were siloed across those blockchains and protocols, limiting liquidity and, in turn, efficiency.

Take Ethereum. There might be $135 billion in stablecoins parked on the blockchain, but they’re spread across more than 200 decentralized exchanges and lending protocols.

Katana’s solution? Privilege key protocols. Idle crypto was automatically deposited in low-risk lending pools, and the returns it generated were used to boost yield on Sushi and Morpho — its preferred decentralized exchange and lending protocol, respectively. That would make competitors to Sushi and Morpho, well, uncompetitive, concentrating liquidity and making the DeFi ecosystem more efficient.

Now, Katana is doubling down on this approach. It is acquiring three of its preferred protocols and overhauling the tokenomics of its $KAT cryptocurrency. 

Together, these changes are intended to tie activity on the blockchain directly to the $KAT token. Network growth will fund token buybacks. Token buybacks will reward the $KAT takers who seure the network.

Katana’s token was inspired by the ve(3,3) model, which powers DeFi applications like Aero. 

$KAT holders could lock their tokens, and receive vKAT. Then, vKAT holders could vote on where to direct chain incentives. 

Katana is acquiring its Sushi deployment, KatanaSwap; perpetual futures trading platform Katana Perps; and Vault Bridge, the protocol that automatically places idle crypto in low-risk lending pools in order to generate a steady flow of yield.

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