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.
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 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.
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.
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.
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.
Bank of Korea Head Says Cryptocurrencies Have No Intrinsic Value
The head of the Bank of Korea, Lee Ju-yeol, said that Bitcoin and other major cryptocurrencies lack intrinsic value. However, he believes that all assets will continue to experience significant price fluctuations.
Price Surge Because of Pro-BTC Institutional Investors?
The chief of the Bank of Korea said cryptocurrencies, including Bitcoin, do not possess inherent value. In a recent news report, Lee Ju-yeol blasted the highly volatile nature of the digital asset industry.
“There is no intrinsic value in crypto assets,” said BOK Gov. Lee Ju-yeol at a parliamentary session on 23 February.
The news report quoted lawmakers asking BOK’s chief if the recent surge in the price of BTC is temporary or not.
“It is very difficult to predict the price, but its price will be extremely volatile,” Ju-yeol added.
The bank executive has also said that the recent rally in Bitcoin’s price followed by other significant digital assets may be led by multiple factors. Among them, Elon Musk’s Tesla – investing $1.5 billion. He highlighted that the latest price surge might be a continuation of institutional investors using Bitcoin as a hedge.
Ju-yeol also emphasized that BOK shouldn’t buy bonds issued by the country’s government directly. Otherwise, this would raise worries about fiscal stability and undermine the central bank’s trust.
Bitcoin Volatility Bringing Some More Hard Times For Investors?
The primary cryptocurrency’s volatility has been causing quite some troubles for both retail and institutional investors. This particular character of the digital assets has been a stumbling point for many, thus, causing some hesitations in whether to allocate funds in it or not.
BTC’s price managed to initiate another notable surge during the last couple of months, marking a consequent all-time high. Just a few days ago, it skyrocketed above $58,000, dragging other altcoins like Ethereum behind it for a while.
However, almost immediately after its upgrowth, BTC suffered a significant correction, settling unsteadily around $50K as per the time of the writing. As a result, the cryptocurrency market capitalization lost more than $300 billion in two days.
Interestingly, JPMorgan strategists said recently that Bitcoin’s illiquidity could bring more problems. Analysts from the US multinational banking institution argued that BTC is in a liquidity shortage, warning investors that the primary crypto-asset could suffer another price drop.
Featured Image Courtesy of WSJ.
Cross-chain bridges and DeFi integration are pushing these 3 altcoins higher
The cryptocurrency market is showing signs of progress following a multiday sell-off that saw the total market capitalization drop by more than $400 billion as Bitcoin’s (BTC) price briefly fell below $46,000.
While the majority of altcoins have entered a consolidation phase that includes a retest of underlying support levels, several projects have started to regain lost ground after new developments reignited investors’ optimism.
Cardano’s ADA started the year with a bullish spark that saw its price increase 624% from $0.165 on Jan. 2 to a high of $1.20 on Feb. 20. This week’s sharp correction pulled the price to a swing low at $0.80, but it is clear that traders bought the dip.
Since hitting a swing low at $0.80, ADA’s price rallied 30% to $1.05 following the news that community members at Venus Protocol had approved a proposal to bring ADA to the Venus mainnet.
— Venus (@VenusProtocol) February 23, 2021
VORTECS™ data from Cointelegraph Markets Pro began to detect a bullish outlook for ADA on Feb. 14, prior to the recent price rise.
The VORTECS™ score, exclusive to Cointelegraph, is an algorithmic comparison of historic and current market conditions derived from a combination of data points including market sentiment, trading volume, recent price movements and Twitter activity.
As the chart above shows, Binance introduced staking on Feb 10., and the VORTECS™ score for ADA rose to a high at 88 on Feb. 14
On Feb. 9 the Matic network rebranded to become “Polygon” as part of a strategic change to become a layer-two aggregator. The move was done in response to the growing momentum of Polkadot and a desire to build an interoperability protocol on top of Ethereum.
High gas fees on the Ethereum network have increased the need for layer-two solutions, and Polygon has emerged as one of the top solutions with projects like Aavegochi and Golem already operating on the protocol.
The rebrand helped lift the price of MATIC from $0.07 on Feb. 9 to an all-time high of $0.197 on Feb. 20 before the market downturn pushed it back down to $0.111 on Feb. 23.
Since that time the MATIC has recovered 62% to trade at $0.16 as the community and total value locked on Polygon continue to grow.
Stacks (STX) was the breakout star on Feb. 24 as the layer-one blockchain solution designed to bring smart contracts and decentralized applications to Bitcoin saw a record $166 million in trading volume that elevated STX to a new all-time high of $1.17.
Excitement for the project comes after the Feb. 23 announcement that STX holders can now participate in delegated staking from the Stacks wallet, allowing them to earn BTC rewards.
According to data from Cointelegraph Markets Pro, market conditions for STX have been favorable for some time.
As seen in the chart above, the VORTECS™ score for STX hit a high of 87 on Feb. 23, around 30 hours before the price increased 75% to its new high of $1.17.
Interoperability, cross-bridge solutions and staking have emerged as drivers of growth that help incentivize investors to hold their tokens and also attract new participants to old and new blockchain projects.
Following the recent market downturn, it’s clear that projects that offer tokenholders multiple ways to earn a yield and operate across separate blockchain networks are beginning to stand out from the rest of the field.
Former London Stock Exchange Group CEO Urges UK Government to Explore Cryptocurrencies
The former CEO of the London Stock Exchange Group, Xavier Rolet, has advised the UK government to look into cryptocurrencies and SPACs to minimize the adverse impact of Brexit. In a recent report, Rolet claimed that the UK has trailed behind other countries in both aspects.
The UK Should Turn To Crypto And SPACs?
Born in France, Rolet is a businessman and the Chief Executive Officer of the London-based credit-focused asset management firm CQS. Before assuming this position, though, he served as the CEO of the London Stock Exchange Group and was named as one of the 100 best CEOs in the world in 2017 by the Harvard Business Review.
In a report cited by Bloomberg, Rolet touched upon the potential consequences to the UK economy following the withdrawal from the European Union and the European Atomic Energy Community, better known as Brexit.
The executive believes that the UK has two viable options to consider if it wants to minimize the risks and help the nation flourish.
In the first one, he urged the government to “promptly consider the SPAC revolution.” Also referred to as “blank check companies,” these special purpose acquisition companies (SPAC) operate as shell corporations listed on a stock exchange with the idea of buying out a private company, thus making it public. Ultimately, this strategy eliminates the need to go through a traditional initial public offering (IPO).
While the US has seen significant adoption in the past year with a 10x increase in the raised funds compared to 2019’s results, the UK regulators have halted their progress on the London markets.
Rolet’s second advice involved digital assets as he noted that “all relevant UK government agencies should be resourced to thoroughly understand cryptocurrencies.”
With proper regulations, the crypto ecosystem could “place London and the UK at the center of a reputable and safe financial market.”
The UK’s Regulatory Approach To Cryptocurrencies
While UK’s regulators have hindered SPACs’ progress within the country, the nation’s financial watchdog, the FCA, has also been rather harsh against the cryptocurrency industry.
As of the start of this year, the Financial Conduct Authority banned crypto derivatives and exchange-traded notes (ETNs) to retail customers.
Additionally, the watchdog has issued several warnings to investors that they could lose all their funds if allocated in digital assets.
The regulator also announced that all UK-based digital asset businesses need to be registered with it but extended the deadline for applications to July 9th, 2021.
Featured Image Courtesy of TheGuardian
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