KSM is the native cryptocurrency of the Kusama Network (KSM), which is a “canary network” for Polkadot, meaning it serves as a nearly identical copy of the Polkadot blockchain to test new features before they are released on Polkadot.

KSM is a proof-of-stake (PoS) cryptocurrency that distributes KSM as a reward for validating transactions via “staking.” The staking process involves users depositing an amount of KSM into a smart contract in order to stand a chance of being selected to validate new blocks and makes KSM an inflationary asset with an inflation rate of 10% per year.

In June 2019, the Web3 Foundation announced the private token sale of 500,000 DOT, or 5% of the total DOT supply. One month later, the Polkadot team announced the upcoming launch of the Kusama Network. To incentivize Polkadot users to participate on the experimental Kusama Network, DOT holders were able to claim one KSM for every DOT held. Eventually, the Polkadot developers plan to offer a fixed-rate conversion of KSM back to DOT.

Both Kusama and Polkadot offer on-chain governance protocols for KSM and DOT token holders. What makes Kusama different from Polkadot is that governance moves at a quicker pace. Because the two networks are standalone with different parameters for governance and different protocol votes, the governance structure of Kusama allows KSM holders to vote on protocol upgrades unique to the Kusama Network.

KSM hit its all-time low of $0.9143 in January 2020 just a few months after the token’s launch and amid a widespread market sell-off because of COVID-19 concerns. As the crypto market recovered, kusama outpaced the rest of the market and spiked in August 2020 following the launch of the Rococo parachain testnet. KSM’s price reached its all-time high of $623.75 in May 2021 during the buildup to the first parachain auction on the Kusama Network.

Because the Kusama network serves as an experimental version of the Polkadot blockchain, Kusama shares the same white paper as Polkadot. Kusama uses a nominated proof-of-stake (NPoS) consensus algorithm that enables users to stake their tokens (deposit them into a smart contract) and receive transaction fees and block rewards for blockchain validation. Returns via transaction fees are distributed proportionally to the amount of KSM a user stakes.

At the center of Kusama sits the “relay chain,” a central blockchain that connects all other participating blockchains together. The relay chain processes all transactions taking place in the ecosystem at the same time, with the goal of improving scalability. The relay chains enable parachains, which are blockchain networks created within the Kusama network that communicate via the relay chain. Parachains enable specific use case blockchains that can run independently of Kusama, but share in the data, security and availability of the other blockchains.

Kusama was founded by former Ethereum co-founder and Polkadot founder Gavin Wood in 2019. During his time at Ethereum, Wood was most notably known for creating Ethereum’s smart contract and decentralized application (dapp) language Solidity as well as for serving as the chief technology officer of Ethereum.

Following his departure from the Ethereum network as CTO in 2015, Wood and Jutta Steiner co-founded Parity Technologies, an open-sourced, shared protocol that was designed for building and scaling Web 3 applications. Several projects have been developed under Parity, including Polkadot, Substrate and Parity Signer.

In 2017 Wood founded the Web3 Foundation to support decentralized web software protocols and Web3 development. While the development of the Kusama Network is based on technology developed by Parity, the Web3 Council serves as the governing body responsible for the maintenance and development of Kusama. Alongside Wood, Aeron Buchanan and Reto Trinkler serve as the three members of the Web3 Foundation Council.

Starting in June 2021, the Kusama Network opened up parachain slots for blockchain projects to use Kusama’s relay chain functionality and build on the network. Decentralized finance (DeFi) network Karura won the first parachain auction for the Kusama Network.