SORA Kensetsu Explained: Stablecoins and DeFi on Polkaswap

Stablecoins have transformed DeFi by providing price stability in volatile crypto markets. Unlike fiat-backed models, SORA Kensetsu introduces a decentralized, over-collateralized approach that puts users fully in control of issuance and risk.

Imagine minting a digital dollar backed entirely by your own crypto assets — safely locked in a smart vault — while supporting a balanced, decentralized economy. That’s the essence of SORA Kensetsu.

Kensetsu is SORA’s native over-collateralized stablecoin system, letting users lock assets like XOR, VAL, PSWAP, ETH, DAI, or TBCD to mint KUSD (Kensetsu USD) — a blockchain-based stablecoin pegged to the U.S. dollar and governed collectively by the SORA community.

TL;DR: As of November 2025, SORA Kensetsu is an over-collateralized vault system that lets users mint KUSD, a stablecoin backed by approved collateral such as XOR, VAL, PSWAP, TBCD, ETH, and DAI. Governed by XOR holders, Kensetsu maintains solvency through collateralization rules, liquidation safeguards, and parameters like a 1% borrow tax. Alongside the KEN reward token and Polkaswap liquidity, it helps lock XOR, deepen SORA’s liquidity, and support future multi-stablecoin swaps under SORA v3.

What Is SORA Kensetsu?

Before looking at the detailed parameters, it helps to understand how Kensetsu fits into SORA’s broader architecture.

SORA Kensetsu (建設) means construction — an apt metaphor for a system that builds financial stability on top of SORA’s decentralized economy. Modeled after MakerDAO’s collateralized debt position design but tailored to SORA’s unique tokenomics, Kensetsu introduces vaults, liquidation mechanics, and stability fees that maintain a strong USD peg and aim to reduce volatility in daily DeFi use.

As of November 2025, Kensetsu’s architecture is among the first components planned for SORA v3 (Nexus), which is being developed on Hyperledger Iroha 3 — a next-generation version introducing enhanced modularity, performance, and consensus mechanisms. This bridges open-source transparency with compliant, enterprise-grade security. SORA v2, based on Iroha 2, provides the foundation for this transition.

How the KUSD Stablecoin Works

KUSD — Kensetsu USD — is an over-collateralized stablecoin minted through Kensetsu vaults. Each KUSD is backed by more than $1 worth of collateral, ensuring every token remains solvent and redeemable.

Core principles of KUSD

• 1 KUSD = 1 USD peg
• Always over-collateralized
• Fully transparent and redeemable
• Interoperable across SORA, Polkaswap, and other networks

Minting KUSD transforms idle assets into productive collateral, generating liquidity while supporting SORA’s economic base.

Why Kensetsu Matters

SORA Kensetsu brings together three key pillars of decentralized finance:

1. Collateral-backed stability — Each stablecoin is fully over-collateralized.
2. Community governance — XOR holders determine monetary parameters.
3. Deflationary alignment — Reduced circulating XOR increases network stability.

Locking XOR and other assets as collateral naturally reduces supply, reinforcing scarcity and long-term price support. This mechanism aligns with SORA’s elastic-supply model and Polkaswap’s liquidity logic, fostering stability without inflation.

Using TBCD instead of minting new XOR for KUSD creation prevents supply expansion, helping keep the system balanced.

Together these design choices create a sustainable, permissionless global economy built on transparency and real-world value.

Kensetsu Vaults: How to Mint KUSD

Kensetsu Vaults are at the core of the protocol — smart vaults that hold collateral and track outstanding KUSD debt.

Five simple steps to mint KUSD

1. Deposit collateral: Lock XOR, VAL, TBCD, PSWAP, ETH, or DAI into your vault.
2. Borrow KUSD: Mint stablecoins up to your loan-to-value (LTV) limit.
3. Monitor your vault: Add collateral or repay KUSD if market prices fall.
4. Automatic protection: If your ratio drops too low, the system liquidates a portion via Polkaswap.
5. Repay and unlock: Return your KUSD to release collateral.

Vault Mechanics & Parameters

• Over-Collateralization: Each KUSD > 100% backed in crypto value.
• Stability Fee: Ongoing interest on outstanding KUSD.
• Borrow Tax: 1% when minting.
• Liquidation Penalty: Applied when vaults breach safety thresholds.

These controls maintain solvency and safeguard the peg across market cycles.

The Role of the KEN Token

Kensetsu Token (KEN) powers liquidity and incentives across the Kensetsu ecosystem. Initially distributed to users who burned ≥ 1 million XOR, KEN now underpins farming and reward systems.

Key KEN mechanics

• 1% of all newly minted KUSD is used to buy back and burn KEN.
• 80% of burned KEN is re-minted daily and distributed to liquidity providers, primarily the XOR–KUSD pair.
• This loop sustains liquidity while introducing controlled deflation.

Governance: How XOR Holders Shape Kensetsu

SORA’s governance keeps Kensetsu fully decentralized and community-directed. XOR holders can:

• Vote on collateral ratios, fees, and liquidation penalties
• Approve new collateral types
• Propose upgrades to Kensetsu or KUSD monetary policy
• Guide multi-stablecoin expansion modules

This participatory model reinforces SORA’s vision of “Many Worlds, One Economy”.

Phase 2: Expanding to Multi-Stablecoin Swaps

As of November 2025, Kensetsu is designed to support cross-stablecoin swap modules, conceptually similar to MakerDAO’s Peg Stability Module (PSM). These modules are intended to let users swap between approved stablecoins — KUSD, XSTUSD, and TBCD — at low slippage, enhancing liquidity and price stability when fully deployed.

Deep integration with Polkaswap ensures consistent market depth, efficient arbitrage, and robust peg maintenance across the ecosystem.

Incentives & Participation

Liquidity providers who supply XOR–KUSD pairs on Polkaswap can earn:

• Trading fees
• Shared stability fees
• KEN reward emissions

These incentives drive continuous liquidity and healthy markets. For broader DeFi engagement, the Apollo Protocol adds lending and borrowing features that complement Kensetsu’s stablecoin system.

Conclusion

SORA Kensetsu is a core component of SORA’s monetary design rather than a standalone DeFi module. Through vault-based collateralization, decentralized governance, and token-driven incentives, Kensetsu provides a structured framework for issuing and managing KUSD within open finance.

As SORA v3 unfolds on Hyperledger Iroha, Kensetsu and KUSD are positioned to support a more transparent, interoperable, and community-driven digital economy for SORA and Polkaswap users.

🧠 Learn More • KUSD on SORA Wiki • Kensetsu Vaults Documentation • KEN Token Mechanics • SORA’s Token Bonding Curve Dollar (TBCD) Explained • Understanding SORA’s (XOR) Token Supply Explained