What is Kusama?
Kusama is an experimental blockchain platform where developers can test out their decentralised applications (dApps). It inherits its infrastructure design from Polkadot and involves a large number of independent blockchains called parachains. Every parachain can host a different dApp, with each chain being optimised for a specific use case and having its own token and economics.
The KSM token has three main functions: it can be staked to secure the network in Kusama’s nominated Proof of Stake (NPoS) consensus system, it can be used to create parachains through bonding, and it functions as a governance token to allow holders to vote on things such as protocol changes, upgrades, and feature requests.
One difference between Kusama and Polkadot is that the on-chain governance process is much faster on Kusama, meaning developments and improvements are implemented quicker. This is why many developers are keen to deploy to Kusama and test their dApps in a scalable and interoperable environment.
Ways to Invest in Kusama
Kusama has attracted a range of investors—all with different aims, levels of experience and amounts of free time. For this reason, people like to buy KSM in different ways—from short-term traders to long-term investors.
Buy and hold Kusama
Simply buying and holding KSM can be a good way to take advantage of long-term price appreciation. Your KSM doesn’t have to sit idle while you hold it though—holders can stake their tokens to earn interest.
What’s more, with many projects deciding to crowdfund their bids for parachain slots, KSM holders can also bond their KSM to help a project win a slot. Successful projects may choose to reward those who contributed with airdrops of their native token.
Best Kusama wallets
If you decide to buy and hold KSM, you’ll need somewhere to keep it. The platform where you purchased it will likely provide you with a web wallet where you can store your KSM for free. While this is convenient, it isn’t the most secure storage solution, which is why many investors choose to self custody their KSM in a private wallet.
Software wallets such as MetaMask, Atomic Wallet and Trust Wallet can be downloaded onto a desktop or mobile device and tend to be free and easy to use. Hardware wallets, on the other hand, include the likes of Ledger, Trezor and KeepKey. While these are the most expensive type of wallets, they also provide the best possible security.
Those with less patience may also find Kusama appealing as its volatility makes it well suited to making quick profits. Traders can simply buy and sell KSM, but on a much shorter timescale than investors. Alternatively, they can trade derivatives such as futures, options, and contracts for difference (CFDs), which allow traders to speculate on the price of KSM without actually owning it.
Traders probably won’t need to set up their own private wallet for KSM, as constantly transferring tokens to and from an exchange or broker to make trades could be costly and time-consuming. The web wallet provided by the platform will likely be the most convenient option for traders.
Should I buy Kusama now?
This is something you’ll need to decide for yourself based on your own preferences, but there are a few factors worth considering. As the scalability issues and soaring gas costs of Ethereum become more apparent, developers and users alike have been looking for alternatives, and Kusama is already ahead of Ethereum in terms of throughput and efficiency.
One development that could contribute to KSM’s future price movement is the rollout of the parachain auctions. Kusama’s independent blockchains are being auctioned off to the highest-bidding crypto projects. Bids for parachain slots must be made in KSM and the winner will have the tokens they bid locked up for the duration of their lease period. This simultaneously drives demand and puts downward pressure on the token supply—potentially a very positive combination for KSM price action.
Even once Polkadot rolls out its own parachain auctions, Kusama could still be a valuable project. There will always be fresh startups looking for a testing ground, and even more established projects might prefer the faster pace of development and lower barrier to entry that Kusama offers.
Finally, Kusama is already developing its own decentralised finance (DeFi) ecosystem that might one day rival Ethereum’s, bringing more use cases and demand for KSM. Kusama certainly appears to have a lot of promise, which might explain why so many retail and institutional investors are starting to turn their attention to this innovative project.