CEX.IO Spotlight: Kava (KAVA)

Key Information: (July 15, 2022)

• Circulating Supply — 227,322,667 KAVA
• Total Supply — 232,291,416 KAVA 
• Sector — DeFi lending
• Token Type — Native token
• Token Usage — Staking and governance
• Consensus Algorithm — Proof of Stake (PoS)
• Launch Date — October 2019 
• All-Time High — $9.19
• All-Time High Date — September 9, 2021

What is Kava (KAVA)?

Kava (KAVA) is a DeFi software that enables users to lend or borrow several cryptocurrencies without middlemen such as banks, financial institutions, or other third parties. Increasing demand for DeFi services makes KAVA a significant project with outstanding technology and a simple use case.

Being decentralized, Kava is among the most prominent projects in the DeFi sector. As opposed to numerous comparable protocols and DeFi platforms, Kava isn’t built on the Ethereum network. Instead, it implements Cosmos as a fundamental platform that backs up the lending protocol. This network was chosen as it relies upon customization and interoperability, giving more functionality to the protocol. Ethereum, on the other hand, encounters problems with scaling dApps and hosted protocols if network congestion happens.

The Kava system employs Cosmos in order to mint a stablecoin called USDX that is pinned to the U.S. Dollar. Every time a user deposits a cryptocurrency as collateral, USDX is made so other users are able to take loans in the shape of USDX. Those who deposit their funds back to the lending system are given KAVA coins every week as a reward for their participation. 

Kava merges with other protocols and platforms via app-specific blockchain called zones, which are hosted on Cosmos. This way, users are able to add multiple tokens to the Kava protocol that can be used for lending or borrowing.

A brief history of Kava

Kava was designed in 2018 by Kava Labs, a profitable foundation co-founded by Scott Stuart, Brian Kerr, and Ruaridh O’Donnell. The team threw a public sale for 6.5% of the entire supply of KAVA, having raised about $3 million. 

In August 2020, the Kava protocol was officially launched on the Cosmos platform, granting BNB as collateral for USDX loans. Ever since, Kava has documented more than $8 million worth of USDX loans, as well as around $24 million in BNB locked as collateral. 

What makes Kava unique?

Kava isn’t a single lending protocol in the DeFi sector. However, its uniqueness is due to cross-chain operations and interoperability simplified via the Cosmos network on which the protocol is hosted. Owing to zones, a feature of Cosmos, Kava lending protocol users are able to deposit an extensive range of non-native cryptocurrencies like bitcoin (BTC), BNB, Ethereum (ETH), and other cryptocurrencies.

Another feature that makes KAVA unique is enabling users to reap a percentage yield on the basis of the system by which new USDX is minted. Users are able to earn interest while Kava secures crypto they have deposited. Also, those deposited funds contribute to the Kava market called HARD Protocol.

What gives KAVA value?

The value of Kava is established by the stability and relevance of its use case, general use, technology, and technical capacity. The fundamental value of Kava directly depends on its technology and service. 

Since KAVA’s price is directly impacted by the volatility of the crypto market, it can oscillate considerably within short periods of time. The price can be influenced by the development team, updates and upgrades, new features, mergers and partnerships. In the case of KAVA, the price can be also affected by adding backup for more cryptocurrencies. 

How many KAVA are in circulation?

At the time of writing, there are 227,322,667 KAVA coins in circulation. The total number of KAVA isn’t capped in order to pay for staking rewards. For that reason, KAVA is said to be an inflationary cryptocurrency, meaning that its supply grows with time. 

The annual inflation rate varies from the bottom of 3%, when a lot of KAVA are staked, to the top rate of 20% when a small number of coins are staked.

What is KAVA used for?

KAVA is the native token of the platform with a dual purpose. It’s implemented as a governance token for voting on the network and for staking. Thus, KAVA holders own the Kava protocol, together with voting rights on the system. Expectedly, their voting power depends on the number of KAVA coins they possess. 

The holders also have a chance to possess their own staking nodes; however, only 100 nodes are able to reap rewards as validators directly from the protocol. 

Being an inflationary token, KAVA’s total supply is unlimited. However, the system regulates it by the occasional burning of KAVA. 

How does Kava work?

The Kava lending protocol depends on the performance of the smart contract employed by the protocol to make a P2P lending system simpler. Users are able to lock their funds in smart contracts. As a result, new USDX tokens are minted, which can be further used for collateral loans. 

Next, a special smart contract is automatically created. It pins the value of USDX to that of the U.S. Dollar to compensate for volatility typical for the crypto market. This is known as a collateralized debt position (CDP).

Users have the opportunity to create CDPs by depositing crypto into smart contracts by implementing digital wallets which can be linked with the system. As soon as the funds are deposited, Kava will immediately lock them in a smart contract. New USDX stablecoins are then minted on the basis of the deposited funds, allowing users to take out loans in USDX. 

To end the CDP and reclaim the collateralized token, users have to pay their debt back along with a lending fee. When the CDP is finalized, the original collateral is deposited back to the user’s wallet and Kava “burns”, that is, destroys the lent USDX. 

In order to protect the protocol from crypto volatility, the Kava system leans on the collateralization ratio. This way, it also makes sure that USDX is over-collateralized to fight the devaluation of the collateral. 

Source: Medium

What technology does Kava use?

Kava is built around the Cosmos SDK, which is a modular blockchain development framework. It implements the Tendermint-based proof of stake (PoS) consensus mechanism that provides Byzantine Fault Tolerance, safety, security, and immediate finality. 

Kava’s PoS consensus mechanism employs a network of validator nodes to confirm transactions. These nodes have to provide collateral to start validating transactions. In case a validator misbehaves or doesn’t manage to meet strict minimum requirements, their stake will be punished. This way, validators are motivated to stay honest and efficient. 

KAVA holders are able to run a staking node directly from the protocol and thus reap staking rewards. Only validators (the top 100 nodes) can earn these rewards. Other KAVA holders are able to stake their coins on various platforms, CEX.IO being one of them. 

The platform’s smart contracts have been checked and audited by several independent crypto and blockchain security companies. No vulnerabilities have been discovered up to date. 

Kava governance

The Kava DAO is a decentralized autonomous organization (DAO) controlling the Kava network. KAVA validators and stakers help secure and run the network. Thus, they’re responsible for proposing and voting on proposals regarding the network. 

Kava Competitors

The Kava network undoubtedly offers high-quality lending services, however, it isn’t the only crypto lending platform. These are some of Kava’s main competitors.

mStable

mStable is an open-source decentralized protocol that merges stablecoins, lending, and swapping into a single standard. With its autonomous and non-custodial stablecoin infrastructure, mStable blends lending revenue with trading fees to come up with greater yield assets. The protocol is controlled by MTA holders who stake their coins in order to vote on proposals. 

Yearn

Yearn Finance is a series of DeFi products that offers lending aggregation, yield generation, and insurance on the Ethereum network. The protocol is managed by different independent developers and controlled by YFI holders. The initial Yearn product was a lending aggregator. Users are able to deposit to loans aggregator smart contracts through the Earn page. 

SushiSwap

SushiSwap is a decentralized crypto exchange platform that enables users to swap, stack yields, earn, lend, and borrow on a single community-driven platform. Sushi holders can take part in community governance and stake their tokens to get a part of SushiSwap transaction fees.

Where to learn about KAVA

To learn more about the Kava network, you can visit:

• Official website
• Code review
• Whitepaper

KAVA updates

Kava sticks to keeping its users up to date with all essential events. These are some of the latest updates:

• Kava Rise implementation — Kava Rise is a $750 million motivation program created to keep onboarding the most innovative developers.
• Kava Earn introduction — Kava Earn was created with the aim of simplifying complex DeFi features.
• Kava 10 mainnet launch introduces Kava’s EVM, a huge advancement of Kava’s Ethereum and Cosmos co-chains, connecting two large ecosystems in one network.

To experience KAVA, buy or deposit it on the CEX.IO web or mobile platform. 

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