Katana Network, incubated by Polygon Labs and GSR, is a DeFi-first Layer 2 blockchain that launched on private mainnet in May 2025. Designed to tackle liquidity fragmentation and deliver sustainable yields, Katana aims to create a highly efficient and institution-friendly DeFi ecosystem. Built using Polygon’s AggLayer CDK and supporting OP Stack, it integrates protocols like Morpho for lending and Sushi for trading, unifying multiple DeFi functionalities on a single chain. Public mainnet access is expected in late June 2025, positioning Katana as a key driver for institutional adoption and high-efficiency liquidity management.
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Origins and Development
Katana was developed by the Katana Foundation, a nonprofit organization focused on enhancing DeFi experiences, with incubation support from Polygon Labs and GSR, leveraging their institutional market expertise. The project graduated from Polygon’s AggLayer Breakout Program and utilizes Conduit’s rollup and sequencing infrastructure, achieving over 2,000 TPS while maintaining EVM compatibility and low gas fees.
The network employs AggLayer as its canonical bridge and VaultBridge to generate real L1 yields, marking the start of AggLayer’s multistack era. This setup ensures seamless interoperability across Polygon ecosystems, addressing issues like asset siloing that have historically limited DeFi scalability.
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Core Features and Technical Design
Katana’s architecture emphasizes deep liquidity by aggregating assets from established protocols:
Morpho for optimized lending
Sushi for spot trading
Vertex for perpetual trading
The chain supports core assets like:
AUSD stablecoins from Agora
Yield-bearing BTC wrappers from Lombard
Restaked ETH from Ether.fi
All net sequencer and app fees are reinvested into chain-owned liquidity (CoL), reducing slippage and creating a self-sustaining yield engine with transparent APY reporting. For security, zero-knowledge cryptography protects institutional users, while ETH serves as gas and KAT functions as the native token for governance and incentives.
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Yield and Liquidity Mechanisms
Katana unlocks real yield through a vote-locked token model (vKAT). Token holders direct emissions, earn protocol shares, and align incentives across users, applications, and chain revenue. This contrasts with inflationary token models that often attract short-term capital.
VaultBridge enables Ethereum L1 yield generation, and approximately 15% of KAT tokens are airdropped to POL stakers to encourage early community participation. Together, these mechanisms provide predictable lending and borrowing rates, appealing to institutional actors seeking efficient markets.
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Ecosystem Integration and Adoption
Katana integrates Chainlink oracles for reliable data feeds and focuses on a curated set of protocols to enhance capital efficiency. Serving as part of Polygon’s AggLayer, it functions as a liquidity hub for other chains, offering seamless user experiences and expanding user bases for DeFi applications.
The pre-deposit campaign hosted on the Katana Foundation website encourages early liquidity provisioning. With $240 million in productive TVL at launch, Katana is poised for significant institutional adoption, with DeFi participation projected to reach 75% by 2027.
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Tokenomics and Governance
The KAT token serves as the native utility and governance token across Katana’s ecosystem. Users can:
Stake and farm yields
Integrate with DeFi applications
Lock tokens into vKAT to influence emissions and earn protocol fees
This governance model ensures long-term alignment between the community and the protocol, reinforced by security audits and a focus on minimizing risks from market volatility.
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Implications for DeFi and Web3
Katana represents a shift toward verticalized DeFi, prioritizing liquidity depth over broad composability. By addressing fragmentation, it offers higher yields and lower risks, benefiting traders and builders in a growing multi-trillion-dollar market. For Polygon users, Katana strengthens AggLayer’s role in delivering unified blockchain experiences, potentially shaping Layer 2 innovations and sustainable DeFi growth.
In an era where DeFi continues to evolve, Katana Network demonstrates how real yield, deep liquidity, and institutional-grade infrastructure can create a positive-sum ecosystem, balancing growth with tangible economic value.
