Acala is a specialized decentralized finance (DeFi) platform that offers a range of protocols serving as building blocks for the Polkadot blockchain. At the heart of Acala is the stablecoin protocol, providing a decentralized stablecoin network fully managed by the holders of the Acala Network Tokens (ACA). This model aims to promote a transparent and truly decentralized future for finance.
The Acala platform provides its own Ethereum-compatible virtual machine (EVM) - the Acala EVM. This facilitates developers in developing decentralized applications (dApps) written in the Ethereum-specific smart contract coding language Solidity. It also enables the minting of assets that function similarly to ERC-20 tokens. The asset minting functionality is a central aspect of Acala's interoperability framework and allows the minting of cross-chain assets like DOT, renBTC, and Acala's native tokens, ACA and aUSD.
Acala leverages the capabilities of the Polkadot network for cross-chain interoperability to introduce its algorithmic stablecoin, aUSD. aUSD is pegged 1:1 to the USD and is fully backed by crypto collateral. The operation of aUSD stablecoins is quite simple. When collateral is deposited, aUSD is minted, and a so-called collateral debt position (CDP) is opened. The CDP is just a type of debt; the loan plus interest must be repaid later.
