Trying to wrap my head around Karura. Would appreciate some help and any extra insight.

I’m trying to wrap my head around Karura and how it works because this is the first time I have touched a Defi platform. The first section is my notes of the app.

The main thing that boggles me as a new person is that there seems to be a lot of complexity with lots of different tokens. I’m sure there is a reason and trying to grasp how Karura works.

1. Mint kUSD

1. Convert your KAR or KSM into kUSD which is a peg to $1 USD
2. Swap

1. Convert your KSM to KAR or vice-versa
3. Add Liquidity option

1. Provide KAR + KSM to get LP token
2. Requires a certain ratio of KSM and token
4. Liquid Staking

1. Stake your KSM and receive L-KSM
2. L-KSM receives a portion of fees from transactions
5. Earn

1. Deposit an LP token and receive KAR from transactions

* What is the purpose of the LP token? Is it just a token saying that you own XXX amount in each pool of the pair?
* Do you have to deposit the LP token in the Earn tab to earn the KAR rewards or does simply holding it allow the account owner of the LP token passively receive the rewards?
* Where does the KAR come from that is paid to the LP token holders?
* What is the purpose of L-KSM if KSM exists? Why not just use KSM in the ecosystem?
* Where is the L-KSM stakers getting paid from?
* Is the KSM being staked for L-KSM being staked on Kusama, allowing users to reap the benefit of staking while also being able to trade? If so, why not build that into KSM in the first place?
* When you have LP tokens, do you essentially lose out on the opportunity to make profit of price increases of the assets they represent in exchange for a portion of fees generated? In theory, as value of KSM or KAR goes up, you want to be holding those assets and if the value starts going down, you want to have the LP token?
* With Ethereum, you have to have ETH as a gas for interacting with dapps, is it true that chains on Polkadot/Kusama don’t need gas (KSM or DOT) and you theoretically can move tokens around and interact for free?

What do you think?

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