DeFi
Bybit Learn
Bybit Learn
Intermediate
8 июня 2022 г.

Kava Network (KAVA): Flexible & Seamless DeFi

Traditional banks are not necessarily the most favorable to individuals. The low-interest rates compounded by inflation devalue the money you save in them. And getting a loan is a cumbersome process that can end in failure. Decentralized finance (DeFi) seeks to upend traditional finance by changing the game's rules. One of the DeFi platforms that have come to do that is the Kava Network.

Developed to allow users to lend and borrow multiple cryptocurrencies within its network, Kava not only seeks to revolutionize the traditional finance industry, but also to improve the services of the current DeFi world.

What Is Kava Network?

Kava Network is a Cosmos SDK Layer 1 blockchain that enables lightning-fast permissionless borrowing and lending by users with seamless interoperability. Kava Labs developed it as an open bank that allows users to earn more with their crypto assets holdings while providing capital to those who need it. Users are offered new ways of making a profit by receiving rewards when they move their assets to the platform.

Unlike Layer 2 protocols that are built on existing blockchains, Layer 1 is the core platform of the blockchain. Layer 1 blockchains typically face the problem of limited scalability. Kava Labs seeks to resolve this issue with its unique Co-Chain architecture.

The Kava ecosystem is the first DeFi platform built on Cosmos SDK that functions as an open-source, decentralized network. The Kava platform uniquely combines the strengths of two Co-Chain protocols: The power of the Ethereum Co-Chain and the seamless interoperability, speed, and low transaction fees of the Cosmos Co-Chain. This ensures that any decentralized finance application can integrate the Kava network into its system to allow its users access to the platform's services.

Kava Network: How It Works

As a decentralized financial service hub, Kava aims to help users maximize profit on their crypto assets by providing multiple services offering profit opportunities.

Kava Network has three protocols that offer different permissionless services to achieve its aim.

Kava Mint

The first is Kava Mint (formerly Kava CDP). The platform mints a stablecoin for users who want to borrow. With Kava Mint, you can deposit your major crypto assets as collateral to borrow the stablecoin minted by the platform, USDX.

This is ideal for coins that you wish to HODL. When you mint USDX, you can hold on to your long-term crypto investments and profit without letting out of your assets. However, you have to ensure that the underlying asset's price is more than that of what you’ve borrowed to avoid liquidation, lest your locked assets be sold.

Kava Lend

The next service is Kava Lend (previously HARD Protocol). This yield farming service allows users and investors to supply funds to the network to receive a yield on their investments. General market conditions determine current yield rates. For example, if there’s a low supply of Ethereum, the rate of yield of that investment on Kava Lend will be high, and vice versa.

When you supply your crypto to Kava’s borrowing pools, you can earn more APY while simultaneously collecting more rewards. Thereafter, you can borrow any coin against your collateral and re-supply, thus increasing your rewards.

Kava Swap

The third service that the platform offers is Kava Swap. It allows Kava users to swap tokens at fees lower than those of centralized crypto exchanges. Kava Swap uses an automated market maker (AMM) to facilitate trades. Unlike an order book, which requires a seller for a trade before a person can purchase a cryptocurrency, the AMM allows a trade to be carried out as the trade occurs between a smart contract — which has a stable supply of cryptocurrencies — and a buyer. This is made possible because the Kava Swap connects liquidity from other blockchains.

For instance, if you want to make a hotel booking with your hotel DApp using Fantom (FTM), but the service provider only accepts Litecoin (LTC), with Kava Swap you can swiftly convert your token to LTC at a low fee.

Key Features of Kava Network

Ethereum Co-Chain

This protocol enables the Ethereum ecosystem to effectively merge with the Kava Network. The Ethereum Co-Chain is an Ethereum virtual machine (EVM)-compatible program execution environment.

This means that the Co-Chain allows developers to write the code for DApps using the programming language of the Ethereum EVM, Solidity. When these codes are written, the EVM can compile them even though they run on Kava. The EVM-compatible DApps can then benefit from the scalability of Kava, which is lacking on the current Ethereum chain.

Cosmos Co-Chain

Kava was built using a blockchain development framework: Cosmos SDK, a scalable blockchain. Its integration of the Cosmos Co-Chain connects the Kava network to the Cosmos ecosystem, which consists of several other blockchains built with the Cosmos SDK.

Kava DAO

Kava DAO is the decentralized management team that governs the Kava network's robust Co-Chain architecture. It’s a fully decentralized autonomous organization (DAO) which is responsible for the smooth operation of the network.

Kava DAO consists of those who stake the KAVA token, and the network's validators.

As a truly decentralized organization, it makes various decisions on the network — including the distribution of on-chain incentives updates, etc. — without the arbitrary control of a single entity.

What Are KAVA Crypto Coins?

As mentioned above, Kava features a crypto-backed stablecoin called USDX. Besides its stablecoin, it has three native tokens — KAVA, HARD and SWP.

The KAVA token is the governance token of the Kava network. Holders use it to secure the platform, vet governmental decisions and represent a share of the network. The KAVA token also governs the Kava Mint protocol. This means that KAVA token holders can vote for all developments on Kava Mint.

Meanwhile, the Kava Lend protocol is governed by the HARD token, while SWP is Kava Swap’s governance token. The Kava Lend protocol rewards both lenders and borrowers with HARD tokens. Liquidity providers can earn SWP tokens in Kava Swap.

KAVA Tokenomics

1 month pricing chart of Kava crypto coin from 10 May to 9 June 2022

Source - CoinMarketCap

Note: Figures below are accurate as of this writing (9/6/2022) and are approximated up to two decimal places.

Total Supply — 210.54 million KAVA

Circulating Supply205.58 million KAVA

Market Value — $2.58

Market Cap$528.76 million

24-Hour Trading Volume — $43.10 million

Pros of the Kava Ecosystem

Seamless Scalability

The Tendermint Core consensus engine of the Cosmos network was developed to support proof-of-stake systems like Kava so that it can provide seamless scalability.

The engine's impressive speed means it can process an unrivaled amount of transactions in minutes. Moreover, the lightning-fast speed doesn’t weaken its decentralized feature or the security of the network, offering a viable solution to the blockchain trilemma. This gives Kava an edge over DeFi competitors like MakerDAO, which are built primarily on the Ethereum network.

Cross-chain Interoperability

Kava's incorporation of the two Co-Chains enables developers to seamlessly connect their projects with a wide variety of assets, and millions of users within a single network.

Fast Ecosystem Growth Rate

On-chain incentives for developers will attract the best hands in the Ethereum and Cosmos ecosystems to build projects and DApps on the existing Kava blockchain.

Inter-Blockchain Communication (IBC)

The Inter-Blockchain Communication feature of the Cosmos ecosystem enables blockchains built on the same network to communicate. The Cosmos SDK has been used to develop over 30 blockchains specialized for various purposes.

This means Kava can implement favorable features from other open-source networks, thus increasing its growth.

Cons of the Kava Ecosystem

USDX Stability

Though termed a stablecoin, USDX may not be as stable as this category implies. It de-pegged in early May 2022, sinking as low as $0.55. While not an algorithmic stablecoin like TerraUSD (UST), USDX is a stablecoin backed by a variety of crypto assets as collateral reserves, so the collapse of a single crypto asset could greatly affect the stability of the coin. Before the collapse of UST, USDX had included UST in its collateral loan; hence, when UST lost its value, USDX was implicated.

Time

Kava is a relative newcomer to the major Layer 1 networks that lead the crypto market today, so it has to compete for relevance with the older networks. For example, Bitcoin is about ten years older than Kava, and the major smart contract network, Ethereum, is also much older. Since they came on the scene first, they’ve attracted larger market shares. Therefore, Kava will have to do more to gain prominence.

Is Kava Network (KAVA) a Good Investment?

Kava's network has broken the deadlock by virtue of its cross-chain functionality within a single network. Although it wasn't the first blockchain to achieve this, combined with its other features it’s undoubtedly a major addition to DeFi.

With its scalability ensured by the Tendermint Core consensus engine, DeFi is now sure to be able to serve very large and complicated economies, which are accompanied by millions of transactions.

The range of services that Kava provides is wide-reaching, with Kava Labs branching out into GameFi and NFTs in May 2022. And as mentioned, the recent launch of the Kava network mainnet also fully allows for cross-chain services to truly interoperate seamlessly. While the first quarter of 2022 signals a crypto bear market, when the crypto market rebounds, it can be expected that more investors will be bullish on this investment which is set to grow.

Who Is Kava Network (KAVA) For?

The three types of individuals who will find Kava an attractive investment include:

  • Traders who want to make their yield-farming activities more profitable
  • Investors who want to use various cryptocurrencies for different purposes without reducing their crypto holdings
  • Everyday users who want to minimize the fees paid to exchanges

Where to Buy KAVA

KAVA tokens can be traded as a derivative asset on a few popular exchanges, including Bybit. Derivatives are contracts where you bet on the asset’s future price, rather than its current price. At Bybit, it’s easy to trade derivatives, as altcoins are paired with USDT.

All the USDT perpetual contracts on the Bybit exchange are settled in USDT, and the account P&L and contract margins are also calculated in USDT. The steps for trading the KAVAUSDT perpetual contract on Bybit are listed below.

Step 1

To begin trading assets on the exchange, you must be a registered Bybit user. It takes just a few minutes to register for an account. Visit the Bybit website and click on Sign Up to register. Enter your phone number or email address and set up your account. You can start trading immediately after your account is verified.

Step 2

To begin trading KAVAUSDT, you must first deposit USDT. First, go to the Bybit Fiat page to purchase USDT. To deposit USDT, start by clicking on Assets → Derivatives, search for USDT, and then click on the Deposit button.

Step 3

Click on DerivativesUSDT PerpetualKAVAUSDT. You’ll be directed to the trading terminal.

Choosing a KAVAUSDT Order

The order zone is on the right. To trade the KAVAUSDT pair, you can use a limit, market or conditional order. To reduce slippage and trade the asset class at your preferred price, we recommend placing a limit order as opposed to a market order. A limit order also requires lower fees than a market order.

Enter the price at which you wish to buy the KAVA token, as well as the number of KAVA tokens you’d like to buy. (Editor’s note: Before making a trade, please ensure you’re well-informed on the risks of margin trading.)

Step 4

You can open long or short trades with a single click. Select Long if you believe that the price will go upside, and Short if you think the price will move downside. To manage your risks, make sure to include both take-profit and stop-loss orders in your trades. You can choose from the available percentages, or key in your own preferred figure.

Step 5

Finally, you can keep track of your transactions in the Order Status section that’s located at the bottom of the trading terminal. To close your trade, choosing to close by limit will also help ensure that you close at your preferred price.

Closing Thoughts On Kava

The Kava platform has bright prospects of changing the lending and borrowing niche in the DeFi ecosystem. With not just one but three protocols, Kava diversifies its financial services, allowing people to not just lend and borrow, but mint and swap tokens as well.

In addition, the unique Co-Chain architecture of the network allows major blockchains to participate and encourages scalability. This sets the stage for DeFi to be more widely adopted in the world economy.

The cross-chain framework is still in its early stages of development, so we can expect even more exciting updates that will take Kava to the next level.