Katana: Polygon Labs and GSR Launch DeFi-Focused Layer-2

Announcement: On Wednesday, Polygon Labs and leading global crypto market maker GSR announced the launch of Katana, a DeFi-focused layer-2 network, which is already set to go live next month.

• Why it matters: Katana is one of the first blockchains in the so-called Agglayer — Polygon’s own ecosystem of tightly connected layer-2s. With its unique architecture, Katana is designed to become the ecosystem’s liquidity hub. Or, in the words of Polygon Labs CEO Marc Boiron, “a chain with very deep liquidity that every other chain can tap into”.

Sequencer revenue share: A key pillar of Katana’s architecture is its G2 sequencer, developed by the Rollup-as-a-Service (RaaS) provider Conduit. Unlike most networks, Katana doesn’t direct sequencer fees to the core team. Instead, the revenues flow back into the network’s liquidity pools — designed to give users deeper liquidity and better pricing.

• Native app integrations: This liquidity is concentrated in a small set of integrated protocols: Morpho for lending, SushiSwap for spot trading, and Vertex for perpetuals trading. By concentrating liquidity into a few key protocols, Katana tries to avoid the fragmentation seen on many general-purpose chains. For users, this shall translate into fewer choices competing for capital and deeper pools to trade in.

App revenue share: The value flows both ways. A portion of the fees generated by Katana’s core apps is redirected back into the ecosystem — either to grow liquidity or to fund user incentives.

Native yield: Katana’s VaultBridge offers another layer of capital efficiency, as assets like ETH, USDC, and WBTC deposited into the bridge earn yield via Morpho vaults. This yield also flows back into Katana, further strengthening the ecosystem.

What’s next: Starting now, users can pre-deposit funds into the VaultBridge and earn rewards in the form of KAT tokens. After Katana’s mainnet launch on June 23rd, funds can be withdrawn, while rewards will become transferable after up to nine months.

Katana isn’t the first blockchain to enshrine core (DeFi) primitives into its protocol. Just a few weeks ago, Initia went live with a different design, but the same goal as Polygon’s Agglayer: to re-align economic incentives and establish an economic hub at the heart of a layer-2 ecosystem.

Why? Because developers should be able to build a highly specialized appchain — say, for gaming — without dealing with the constraints of general-purpose layer-1s like Solana. At the same time, they should be able to tap into the liquidity of the broader ecosystem, without the fragmentation that comes with conventional layer-2s.

Bootstrapping liquidity and cultivating an ecosystem of chains is no small feat, though, which is why I’ll be closely watching for announcements of new projects building on Polygon’s Agglayer.

Too often, there’s a fundamental misalignment between chains and the apps building on top of them. Most teams use the fees generated to grow their own projects, leaving little behind to support the chain itself. The result? DeFi apps and chains end up competing, rather than reinforcing each other’s growth.

Katana flips the script through its built-in revenue share: revenue generated via natively integrated apps flows back to the Katana Foundation, which reinvests it into ecosystem growth — whether through liquidity rewards or other programs. This, in theory, should create a positive flywheel: DeFi activity -> more yield -> deeper liquidity -> more DeFi activity.

JJ is the Content Lead at Morpho Labs, the team behind the leading lending protocol chosen as one of Katana’s core integrations.