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Altcoin Explorer: Kava (KAVA), the Cross-Chain DeFi Platform

The DeFi space is growing at an alarming pace which has put the spotlight on some of the most innovative projects in the landscape such as Aave, Synthetix, and Compound, among others. In this Altcoin Explorer, BTCManager deep dive into Kava (KAVA), a cross-chain DeFi platform that seeks to become the de-facto borrowing and lending

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The DeFi space is growing at an alarming pace which has put the spotlight on some of the most innovative projects in the landscape such as Aave, Synthetix, and Compound, among others.

In this Altcoin Explorer, BTCManager deep dive into Kava (KAVA), a cross-chain DeFi platform that seeks to become the de-facto borrowing and lending platform for theoretically all cryptocurrencies.

A Primer on Kava

The Kava (KAVA) DeFi protocol is built on the Cosmos (ATOM) network and utilizes the Tendermint-based Proof-of-Stake (PoS) consensus algorithm.

Kava successfully conducted its IEO on Binance crypto exchange in October 2019 and raised $3 million. The platform is backed by several heavyweights in the crypto industry such as Binance, Ripple, Kraken, Cosmos, and Huobi, among others.

To an extent, Kava can be compared to major DeFi platforms such as MakerDAO (MKR) that allow users to deposit crypto assets as collateral – or technically a collateral debt position (CDP) and take loans in the form of stablecoins. For Kava, the platform’s users can deposit cryptocurrencies such as BNB, BTC, ATOM, XRP, and borrow its native fiat-pegged stablecoin, USDX.

However, in terms of interoperability, Kava trumps its competition in that it supports virtually all cryptocurrencies across different networks such as Bitcoin (BTC), and Ethereum (ETH), among others. For comparison, MakerDAO currently only supports ether and ERC-20 standard tokens.

(Source: Kava)

As might be obvious from the aforementioned, Kava places great importance on the interoperability aspect of its ecosystem. Essentially, Kava aims to bring DeFi to non-Ethereum holders while at the same time rewarding those who stake their KAVA tokens in the network to ensure its smooth functioning.

Tokens in the Kava Ecosystem

Digging into the platform’s tokens, Kava’s ecosystem fundamentally utilizes two tokens, KAVA and USDX. Both these tokens play very different but crucial roles for the Kava protocol, as we will discuss next.

KAVA Token

KAVA is a BEP-3 token and functions as the governance and staking token for the Kava platform. This token primarily has three main functions – security, governance, and lender of the last resort.

KAVA works in pretty much the same manner as the MKR token works for MakerDAO in terms of governance.

In essence, KAVA holders own a set percentage of stake in the KAVA ecosystem and are thereby entitled to participate in the governance of the protocol. In that regard, KAVA holders can vote on proposals seeking to make changes to the protocol and other parameters such as the total amount of the USDX stablecoin, accepted collateral assets, preferred collateral to debt ratios, etc.

As alluded to earlier, KAVA uses the Tendermint PoS consensus algorithm which means it is a staking blockchain protocol. To that effect, KAVA token holders can delegate their voting rights to validators who will verify the transactions and play their part in securing the network. In exchange for their services, they will not only earn fees from the transactions but also stability fees by platform users who close their CDPs.

As is the case with virtually all staking protocols, there is an inverse relationship between the amount of KAVA tokens staked and the APR for a validator. If there are a few number of tokens staked on the network, the validators would enjoy a high APR and vice-versa.

At present, there are multiple options for KAVA holders to stake their coins at for decent returns. For instance, the staking pool setup by crypto exchange Binance offers 5-8% APY on KAVA deposits.

Finally, KAVA can also be used as a “lender of the last resort” should a situation arise where the protocol is deemed undercollateralized. In these circumstances, the protocol mints new KAVA to purchase USDX off the market until the stablecoin becomes safely overcollateralized.

USDX

Kava’s stablecoin USDX has its own set of functions for the DeFi protocol, primarily for trading and collateral purposes.

Users can use USDX for margin/leverage trading or to purchase additional cryptoassets on the platform, thereby leveraging their exposure. Further, as USDX is a stablecoin, it can be used to hedge against the volatility in the wider cryptocurrency market. For instance, traders can hold and bond their tokens to receive accumulate interest equal to the current USDX savings rate.

Last but not least, USDX can also be used as a medium of payment due to its negligible price volatility. Kava’s quick block time and fast finality make it possible for users to use USDX for general payment use cases.

The KAVA CDP Platform

Kava’s primary product is the Kava collateralized debt position (CDP) platform where users can deposit their collateral in exchange for loans disbursed in the USDX token. The following infographic from Binance does a good job at explaining the nitty-gritty of the CDP platform.

(Source: Binance Research)

As mentioned earlier, Kava differs from competition such as MakerDAO in that rather than Ethereum, it seeks to allow users to deposit pretty much any cryptocurrency as collateral.

Here are the steps to be followed to procure a USDX loan from Kava’s CDP platform.

1) Joe deposits any of the supported cryptocurrencies by sending it to the Kava platform

2) The Kava CDP platform accepts the cryptocurrency deposited by Joe and locks it in a smart contract as collateral

3) Subsequently, the smart contract issues the USDX stablecoin as loan in proportion to the collateral desposited by Joe

4) Joe can later repay the debt, along with a minuscule stability fee, at any time, and unlock their collateral from the smart contracts

5) Once the collateral has been returned to Joe, the Kava CDP platform automatically burns the USDX tokens

Roadmap and Ecosystem Updates

Kava has a healthy score when it comes to sharing periodical ecosystem updates with the community.

According to the latest update on Medium, the Kava engineering team is making steady progress toward the Kava-4 (Gateway) release.

For the uninitiated, Kava-4 is a significant milestone for the project’s journey as it will update the BEP-3 module with multi-asset support and introduce the issuance of coins on Kava by verified entities via a new issuance model. In essence, Kava-4 holds the potential to cement Kava as the go-to cross-chain DeFi platform.

Further, following the successful launch of the Kava app, the team is now looking to expand wallet support based on community feedback. In the latest update, Kava mentioned they have extended support for Trust Wallet. This means that users can now deposit funds with Kava, open a CDP, and earn rewards all from their Trust Wallet App.

All in all, it can be stated that the Gateway launch would be the next logical milestone for the Kava ecosystem which could open the floodgates for the injection of new capital in the project.

Final Thoughts

While there’s a swathe of DeFi projects popping up every day, Kava is one of the few with sound fundamentals, legitimate backing, a talented team, and an engaging community.

While price movements are from a dependable metric to value an asset’s worth, KAVA has been one of the best performing digital assets in the crypto industry for the past few months. KAVA has recorded an almost 10x surge in its price from the infamous “Black Thursday” caused during the onset of the COVID-19 pandemic.

(Source: CoinGecko)

Further, the project is also piquing interest from all around the world as was evident from a recent Coinbase announcement.

As Q4 2020 draws closer, the anticipation for Kava-4 is only getting higher. The project has several more milestones left to conquer in the coming times, such as introducing incentivized adoption programs, integration with dApps, and the addition of new synthetic assets into its CDP platform.

With the DeFi niche still in its infant stage, one can expect the early leaders in the space to do exceptionally well in the long-run, with Kava being one of them.

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Source: https://btcmanager.com/altcoin-explorer-kava-kava-the-cross-chain-defi-platform/

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Opimas estimates that over US$190 billion worth of Bitcoin is currently at risk due to subpar safekeeping

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May 2021. Safekeeping of cryptocurrencies presents a challenge for institutions holding cryptocurrencies on their clients’ behalf. Cryptocurrency transactions are irreversible and anyone with full access to a wallet’s private key controls the cryptocurrencies that reside within it. Frighteningly, a number of institutional participants and even some large cryptocurrency exchanges rely on subpar custody approaches, leading Opimas to estimate that over US$190 billion worth of Bitcoin is currently at risk due to subpar safekeeping.

Luckily, a number of companies have emerged to address this problem. A new research report from Opimas—Crypto Custody: No More Excuses, authored by analysts Suzannah Balluffi and Anne-Laure Foubert—looks at the landscape of cryptocurrency custody-enabling technology providers and institutional-grade cryptocurrency custodians as well as the size of the market for cryptocurrency custody and brokerage services.

Some key findings in the report include:

Many of even the largest holders of Bitcoin and other digital assets continue to rely on storage devices meant for individual investors. Although some of these self-custody devices and wallets are secure and reputable, the operational risk posed by this approach is significant for institutional investors. Furthermore, a chunk of institutionals’ cryptocurrency holdings sit in hot wallets on exchanges. In total, about 22% of institutional cryptocurrency holdings are safeguarded in these relatively risky manners (Figure 1).

Figure 1. CUSTODY METHODS UTILIZED BY INSTITUTIONAL INVESTORS 

 

Source: Opimas analysis.

There are no more excuses for lackadaisical safekeeping – institutions can now choose from several reputable cryptocurrency custody-enabling technology providers and institutional-grade cryptocurrency custodians. Yet no custody solution is equal – there is still no best practice when it comes to security and governance relating to private keys. For example, some providers may rely on time-tested Hardware Security Modules (HSMs), while others use a newer technology known as Multi-Party Computation (MPC) – see Figure 2.

Figure 2. A COMPARISON OF HSM AND MPC TECHNOLOGY PROVIDERS

Source: Ledger, Fireblocks, Opimas analysis.

Some cryptocurrency custodians have followed in the footsteps of traditional capital markets by adding prime brokerage services to their offerings, including trading and settlement, lending, margin finance, staking, reporting, and capital introduction services. Opimas estimates that the current annual revenues generated by the institutional crypto brokerage and custody market are roughly US$2 billion and will grow to nearly US$8 billion by 2026 – a sizeable portion of this coming from brokerage services (Figure 3).

FIGURE 3. THE MARKET FOR CRYPTO CUSTODY & PRIME BROKERAGE SERVICES IS GROWING 

Source:  Opimas analysis. 

  • Regulations surrounding institutions’ ability to store cryptocurrency have become clearer (and in some cases more favorable) in numerous jurisdictions. Notably, the Office of the Comptroller of the Currency (OCC) ruling in the US has allowed banks to store cryptocurrencies for their customers. This regulatory clarity has led a number of financial institutions around the world to provide trading and custody for digital assets. With the advances in brokerage and custody solutions, Opimas expects institutional cryptocurrency holdings to grow from 20% of the cryptocurrency market cap to over 50% by 2026 (Figure 4).

FIGURE 4. INstitutional cryptocurrency holdings over time 

Source:  Opimas analysis.

Source: PlatoData Intelligence

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Bitcoin (BTC) Price Prediction: BTC/USD Faces Rejection Thrice at the $60,000 Resistance Zone, Resumes Downward Correction

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Bitcoin (BTC) Price Prediction – May 9, 2021
Bitcoin bulls have broken above the $58,000 resistance but the bullish momentum could not be sustained. Today, BTC/USD traded as price reached the high of $59,450. The king coin is likely to retrace to $57,000 low if the bulls fail to break the $60,000 psychological price level.

Resistance Levels: $65,000, $70,000, $75,000
Support Levels: $50,000, $45,000, $40,000

BTC/USD – Daily Chart

Bitcoin price was rejected thrice at the $60,000 resistance level. Buyers made frantic efforts to sustain the bullish momentum above the recent high but were repelled by overwhelming selling pressure. Consequently, Bitcoin has resumed a downward move as a result of a strong rejection at the resistance of $59,200. The current retracement will extend to the low of $57,000. Nevertheless, if price breaks below the $57,000 support, the market will continue the downward move. That is, the selling pressure will extend to the low of $53,000. On the upside, if price retraces and finds support above $58,000, the upside momentum will resume.

Bank of England Governor Warns on Crypto Investment
Andrew Bailey is the governor of the Bank of England who has warned crypto investors of the inherent dangers of cryptocurrency investment. The governor argued that cryptocurrencies lacked intrinsic value. According to him, “I would only emphasize what I’ve said quite a few times in recent years, [and] I’m afraid they have no intrinsic value. I’m sorry; I’m going to say this very bluntly again: Buy them only if you’re prepared to lose all your money.” Bailey’s comments are coming at a time when crypto markets are characterized by a huge spike in crypto prices. Major altcoins such as Polkadot, Chainlink, and XRP have also seen vertical price actions.

BTC/USD – 4 Hour Chart

Bitcoin risks another downward correction as the king coin faces stiff rejection at the $59,450 resistance. The Fibonacci tool has already indicated a marginal upward move of Bitcoin and a possible reversal. On May 1 uptrend; a retraced candle body tested the 78.6% Fibonacci retracement level. The retracement indicates that Bitcoin will rise to level 1. 272 Fibonacci extension or the high of $59,819.90. From the price action, BTC price has reached a high of $59,450 and has commenced a downward move.

Coinsmart. Beste Bitcoin-Börse in Europa
Source: https://insidebitcoins.com/news/bitcoin-btc-price-prediction-btc-usd-faces-rejection-thrice-at-the-60000-resistance-zone-resumes-downward-correction

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Blockchain

Dogecoin dumps following mention from Elon Musk on Saturday Night Live

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Meme cryptocurrency Dogecoin finally got its long-awaited shoutout on Saturday Night Live — but despite hodler hopes, the immediate result has been a violent dump.

First teased by entrepreneur and DOGE cheerleader Elon Musk in late April, the Tesla CEO finally mentioned the digital asset on live television tonight in his opening monologue of the sketch comedy show. The reference was a throwaway line from Musk’s mother, who joined him onstage and asked if her Mother’s Day gift would be Dogecoin; Musk replied that it would be. 

In the minutes afterwards, $DOGE dumped upwards of 25%, falling as low as $.50 from $.66 highs at the start of the show. It has since partially recovered, trading at $.52 at the time of publication.

An hour before the episode began, the price of DOGE sat at $.66, down from an all-time high of $.72. A pair of bearish headwinds may have shared responsibility for the pullback: Musk himself seemed to try and get ahead of the hype, urging followers in a Tweet to “invest with caution,” and a host of new data indicates that many investors may be rolling their DOGE profits into other, largecap digital assets

Additionally, Barry Silbert — the founder and CEO of Digital Currency Group, the parent company of crypto investment vehicle company Grayscale — announced a public short on DOGE via the FTX exchange. In a series of follow-up Tweets, he revealed that the position was $1 million in size, and that any proceeds or remaining funds after closing the short would be donated to charity. 

(It’s unclear if Silbert was is using “we” in reference to Digital Currency Group, one of its portfolio companies, or is simply and bizarrely using a plural pronoun in reference to himself). 

Many DOGE investors were nonetheless holding out hope for a high-profile shoutout on what looked to be a major pop culture event. NBC, the studio behind SNL, chose for the first time ever to live-stream the episode on Youtube, per the Wall Street Journal.

Even a mention could have significant impact on the price of DOGE as well: the meme currency has proven to be susceptible to price movements based on positive social media volume, and multiple studies have shown that Tweets from Musk often lead to price appreciation. A mention on an even bigger platform was thought to potentially lead to even greater gains. 

Leading into the premier of the episode, Alameda Research trader Sam Trabucco (who said in a previous Tweet that he was “studying the typical SNL episode structure to try and understand when a DOGE mention would be the most natural”) speculated that if a joke or mention didn’t come in Musk’s opening monologue, it would be “all over.”

Despite arriving during the monologue, traders nonetheless responded negatively. It remains to be seen if a DOGE-centric skit later in the show can perhaps turn the speculative asset’s fortunes around.

Coinsmart. Beste Bitcoin-Börse in Europa
Source: https://cointelegraph.com/news/dogecoin-dumps-following-mention-from-elon-musk-on-saturday-night-live

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