The Katana Foundation, a nonprofit dedicated to decentralized finance (DeFi) development, is launching its private mainnet with the goal of enhancing crypto asset productivity through deeper liquidity and higher user yields. On May 28, the Katana Foundation introduced Katana, a DeFi-optimized private blockchain incubated by GSR Markets and Polygon Labs, with a public mainnet launch planned for June. This new blockchain offers users the opportunity to earn greater yields and experience DeFi within a "unique, optimized yield environment" that unlocks hidden value by enabling every digital asset to “work harder, ” according to an announcement shared with Cointelegraph. “DeFi users deserve ecosystems that prioritize sustainable liquidity and consistent ‘real’ yields, ” stated Marc Boiron, CEO of Polygon Labs and a core contributor to Katana. He added: “Katana’s user-centric model transforms inefficiencies into advantages, creating a genuinely positive-sum environment for both builders and participants. " Katana seeks to address the crypto industry's liquidity fragmentation problem, which often leads to significant price slippage and acts as a key obstacle to institutional DeFi engagement. Related: Here’s how abstraction minimizes fragmentation in DeFi, making it more fluid To combat value slippage in DeFi, Katana’s blockchain consolidates liquidity from multiple protocols and aggregates yields from all feasible sources, establishing an ecosystem with deeper liquidity and more predictable lending and borrowing rates. Institutional involvement in DeFi is projected to triple within two years, rising from 24% to 75% among 350 surveyed institutional investors, according to consulting firm EY-Parthenon. To meet the rising institutional liquidity demand, Katana’s liquidity pool integrates several protocols, including lending protocol Morpho, decentralized exchange (DEX) Sushi, and perpetual DEX Vertex. This integration allows users to trade “blue-chip assets” without requiring cross-chain transfers. Katana has also integrated Conduit’s sequences and Chainlink’s decentralized oracle network. Related: Polygon CEO: DeFi must ditch hype for sustainable liquidity Katana to amplify DeFi yields from “Ethereum-based opportunities” Katana strives to enhance sustainable yield by fostering a unified DeFi ecosystem.

For example, VaultBridge deploys bridged assets into overcollateralized, carefully selected lending strategies on Ethereum via Morpho to earn yield, which is then routed back and compounded within Katana. The protocol plans to reinvest network fees and a portion of application revenue into its own ecosystem. “This approach reduces dependence on short-term incentives, generates steady yield, and as it expands, provides a more stable backstop during periods of volatility and liquidity shocks, ” Boiron told Cointelegraph, further explaining: “Yield is distributed pro-rata to each chain using the VaultBridge protocol based on their share of total deposits into VaultBridge. ” “So, if Katana accounts for 20% of the total vault deposits, it receives 20% of the yield back, ” he added. Katana will then allocate its portion of yield to users through enhanced DeFi incentives across “core apps” such as Sushi, Morpho, or Vertex. This yield is derived from “Ethereum-based opportunities and further boosted through Katana’s core applications, ” Boiron noted. Earlier, Polygon Labs’ CEO criticized DeFi protocols for fostering a cycle of “mercenary capital” by offering exorbitant annual percentage yields (APYs) through token emissions. In addition to infrastructure-related challenges, regulatory uncertainty remains a major hurdle to institutional DeFi adoption. Regulatory concerns were identified by 57% of institutional investors as the primary reason for their reluctance to engage in DeFi activities.