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Kava blockchain (KAVA)

One of the main problems in the blockchain industry has been the fragmentation of networks. Each blockchain operates according to its own rules and provides developers with tools often incompatible with each other.

As a result, developers of Web3 applications have to choose a specific blockchain network for each of them separately. This is the problem the Kava team aims to solve.

What is Kava?

Kava is a Tier 1 blockchain network designed to eliminate the scalability and interoperability issues of decentralized applications (DApps) such as Uniswap, Aave, OpenSea and many others.

In other words, Kava is a kind of cross-chain hub for the decentralized finance (DeFi) sector that enables easy integration of applications with the most well-known digital assets.

The Kava Labs team founded the project in 2018, but the blockchain network itself was only launched in November 2019.

How does the Kava network work?

The Kava blockchain is built on a cochain architecture based on the technologies of two networks at once — Ethereum and Cosmos. On the one hand, Cosmos provides compatibility with dozens of networks in its ecosystem, and Ethereum, on the other hand, has a development environment compatible with its virtual machine (EVM).

The Kava network is based on the Proof-of-Stake consensus mechanism and uses Cosmos' Tendermint engine based on Byzantine-Fault Tolerance (BFT). This fault-tolerant algorithm allows transactions to be completed even if some nodes in the network are down or attempting malicious actions. To achieve a block, it is sufficient that at least ⅔ of the validators agree on its authenticity.

According to the Kava authors, this approach aims to allow developers to build decentralized applications without worrying about scalability and compatibility issues with other networks and protocols.

Kava ecosystem

The Kava protocol has a relatively well-developed ecosystem of over 130 decentralized applications, including DEX exchanges Curve and WAGMI, cross-chain bridge Stargate, Yield aggregator Beefy and many other lesser-known ones.

Kava ranks 14th among all blockchains regarding blockchain assets locked in protocols (TVL), which exceeds $229 million, surpassing THORChain, MultiversX, zkSync Era, Sui and Klaytn. The project team has also developed its own DeFi protocols for crypto asset transactions — another distinctive feature of Kava. Let's list them.

Kava Mint

The first application of the Kava ecosystem was designed to issue its own USDX stablecoin pegged to the dollar exchange rate, which we'll discuss in the next section. Various digital assets can be used as collateral to issue USDX.

Kava Swap

A decentralized exchange for digital asset exchanges, launching in the third quarter of 2022. Kava Swap users can not only exchange cryptocurrency but also provide liquidity themselves. However, the DEX exchange only operates on the Kava network. In addition to income from trading commissions, liquidity providers receive SWP tokens, which we will discuss in the next section.

Kava Lend

A lending or lending protocol for cryptocurrency deposits and loans. Users can borrow digital assets such as BTC, XRP, BNB, KAVA, USDX and others by pledging their cryptocurrency as collateral. For deposits, liquidity providers still receive rewards in HARD tokens and interest income.

Kava Liquid

A recently launched liquid steaking protocol. Users can deposit KAVA tokens into the steaking and receive bKAVA liquidity tokens, which can then be used as regular digital assets.

Kava token

KAVA is the primary native token of the ecosystem. KAVAs were initially issued on the Binance Chain blockchain in 2019 based on the BEP-2 standard. The token launch was supported by well-known players in the crypto industry, such as Binance, Ripple and Cosmos. KAVA tokens migrated to their blockchain after launching their mainnet (mainnet) in November 2019.

Initially, 100 million tokens were issued, and 964 million KAVA are circulating on the market. The token has no-issuance limit: their number will continue to grow unabated until the developers change the protocol algorithm. The target inflation rate of KAVA tokens is about 7% per annum.

KAVA is a utility token and can be used for many different transactions:

  • staking rewards,
  • payment of network fees,
  • payments to liquidity providers,
  • pledging collateral for a loan, issuing USDX stablecoin, and so on.

The price of KAVA reached an all-time high of $9.19 in September 2021. Since then, the exchange rate has collapsed by more than 91%, and at the time of writing, it stands at $0.79, and the token's capitalization is over $770 million. KAVA is traded on many major exchanges such as Binance, Coinbase, Kraken, Crypto.com, ByBit, Bitfinex, Bitget, Coinone, HTX and others.

In addition to KAVA, there are three other native tokens in the ecosystem:

  • USDX is a stablecoin backed by volatile digital assets, with a capitalization of $103 million. USDX is an algorithmic stablecoin, just like the failed UST and USDN. The price of USDX has repeatedly deviated significantly from the dollar and was $0.92 at the time of writing;
  • HARD is a token for borrowing, depositing, and rewarding liquidity providers of the Kava Lend credit protocol. The HARD token has a capitalisation of only $20.3 million, and its exchange rate is $0.15. HARD is traded on Binance, Coinone, KuCoin, Gate.io and other lesser-known exchanges;
  • SWP is a token for managing and rewarding DEX exchange Kava Swap liquidity providers. The token has a capitalization of only $181,500 and a price of $0.005. SPW is only traded on Kava Swap and two other little-known centralized exchanges.

Outlook

The Kava project has potential, but it cannot be said that its solution is revolutionary. In addition, the team never presented a roadmap for 2023, and there have not been any significant releases after the Kava 9 update. Still, all this does not yet prevent Kava from being among the top 20 DeFi ecosystems.

© BestChange.com – , updated 11/28/2023
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