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Can Kava become a leading financial service provider for DeFi?



Note: The original text comes from Messari and the following is the full text compilation: Kava is a lending platform with an over-collateralized credit mechanism similar to MakerDAO, and a local cross-chain currency market called Hard Protocol. The Kava blockchain is built on top of the Cosmos SDK that focuses on cross-chain interoperability, enabling Kava to access assets from different blockchains. Kava focuses on the intersection of two important trends in DeFi today, namely lending and cross-chain interoperability. For starters, the lending protocol has exploded at the start of the year, with the top provider’s market capitalization up nearly 752%. Second, cross-chain interoperability is also an important topic. Investors recognize that in an increasingly multi-chain world, there will be an increasing need for connected blockchains. In the past few months, the market has also given a good response to this field, and leaders such as THORChain and Ren have ushered in a surge in value during this period. Source: Kava White Paper Kava operates similarly to MakerDAO, the main difference is that Kava is a blockchain built using the Cosmos SDK. Like MakerDAO, users can deposit collateral into Collateralized Debt Position (CDP) smart contracts. In return, users can mint a stablecoin, USDX, based on the value of the collateral provided. The risk is to maintain the ratio of the CDP, otherwise the mortgaged assets will be liquidated and auctioned. Once the USDX is repaid along with the stability fee, the collateral can be redeemed at any time. This is also a systematic compensation for the volatility of collateralized assets. Except that Kava reserves a small portion for emergencies, USDX will be destroyed immediately after repayment. SushiSwap joins Kava's $750 million incentive plan and will jointly launch $14 million in liquidity mining: According to official news, SushiSwap announced that it has joined Kava's $750 million incentive plan, Kava Rise, and is deploying a new set of DeFi products on Kava Network to provide users with Provide fast and efficient high-yield mining services. As part of the partnership, Sushi and Kava Ignition Fund will jointly distribute up to $14 million in liquidity mining rewards within 90 days. Rewards will be distributed equally in the form of KAVA and SUSHI. [2022/5/31 3:51:31] The purpose of the auction module is to stabilize Kava through three types of auctions. Among them, Surplus Auction is enabled when excess USDX fees are collected. At that time, USDX will be auctioned to the highest bidder in exchange for KAVA, and then destroyed. Collateral Auction is enabled when the CDP ratio falls below the liquidation threshold. At that time, the winning bidder's USDX will be used to pay CDP's outstanding debt in exchange for collateral assets. Debt Auction is enabled in emergency situations. When the collateral price of the whole system drops and there are not enough users who want to buy collateral, the available USDX surplus will be used to cover the debt within its ability. If there is not enough USDX, then newly minted Kava tokens will be auctioned off in exchange for USDX until balance is restored. Kava cooperates with Chainlink to introduce asset prices into CDP smart contracts on the Kava chain. This is critical in determining the CDP ratio for the entire contract period. MekaVerse, an imitation Gundam NFT project, was accused of fraud: Jinse Finance reported that MekaVerse, an imitation Gundam NFT project, was accused of fraud. Some community users found that when MekaVerse was minted on October 7, the new NFT owners did not immediately know that they had purchased Which NFT picture, even the secondary market buyers do not know what they are getting. In addition, every MekaVerse image on OpenSea looks the same, but the price keeps soaring, so users are like "opening a blind box" when trading, and before the release, the average selling price of the undisclosed MekaVerse NFT More than 7.1 ETH, which was about $25,000 at the time. In addition, buyers do not know what they are buying. Twitter user MOLOTOV accused MekaVerse of "manipulating" NFT releases and pointed out that there may be developers using inside information to conduct transactions. As of Thursday, the MekaVerse team, including co-creators Matt Braccini and Mattey, did not respond to requests for comment, but they later disclosed on Discord that MekaVerse used a custom Python script to achieve randomization, but they used A private server instead of on the blockchain to complete the randomization process. Due to related allegations, the floor price of MekaVerse has plummeted in recent days, and the cheapest MekaVerse NFT on OpenSea is already below 2 ETH. (decrypt) [2021/10/16 20:33:52] This module sets the parameters of the CDP smart contract and the global parameters of the Kava system. The CDP module is responsible for allowing the creation, modification, and closure of CDPs with cross-chain interoperability. Currently, users can post collateral in the form of XRP, BTC, Binance, and Atom. When a CDP is closed by a user, the standard 5% stability fee is not fully rewarded to validators. Instead, 0.5% of it will be returned to the protocol and stored for a rainy day. Huobi Global has now resumed the KAVA deposit and withdrawal business: According to official news, Huobi Global has now resumed the KAVA deposit and withdrawal service. [2021/3/16 18:49:38] In this module, the ratio of CDP is tracked using the price feed module. The value of assets used as collateral cannot be lower than 1.5 times the value of the loan being drawn. If this happens, the collateral will be automatically auctioned off. In a down market, people need to keep a close eye on the CDP ratio if they don't want their mortgage assets to be liquidated. KAVA is the token used to govern the Kava blockchain, including adjusting system parameters such as collateral ratios, addition/removal of collateral, and interest rates. Additionally, it governs blockchain parameters such as rewards and inflation levels. In addition, KAVA is also used to protect the network, and verifiers need to use KAVA to verify the blockchain. Of course, validators will also receive corresponding KAVA inflation rewards. Finally, KAVA also acts as the lender of last resort for the system. If the collateral of the entire system is insufficient, KAVA will be minted to buy back USDX until the system reaches a sufficient amount of collateral again. USDX is the stable currency of the Kava ecosystem. Users can mint USDX while staking their other assets. USDX can be used to leverage positions, earn savings rates, and stake on Hard Protocol. USDX is supposed to be pegged to the U.S. dollar, but since its launch, it hasn’t traded close to it. Currently, USDX is fluctuating around $0.65-0.90. And this has created some problems. First of all, Kava loans are denominated in USDX. If the price of USDX is lower than 1 US dollar, the user cannot get more USDX because the value of USDX is lower than 1 US dollar, because the CDP smart contract believes that 1 USDX is equal to 1 US dollar. If you stake $150 of BTC, the maximum loan you can receive is 100 USDX, not $100 worth of USDX. Another problem is that users also encounter problems when they want to exchange USDX tokens for other crypto assets. Using the above example, if the user takes the 100 USDX to BTC to leverage the position, the USDX needs to be stable. When a user tries to sell BTC for USDX to settle their loan, USDX should still hold the same value as when they bought BTC. Currently, Kava offers only volatile, low-value deposits. Kava announced the upcoming launch of the Kava 5 mainnet: According to the official announcement, Kava will soon launch the Kava 5 mainnet. The KAVA 5 mainnet will be equipped with the HARD Protocol V2 version, which supports the borrowing function of the HARD platform fund pool. Kava is a cross-chain DeFi platform that provides mortgage lending for mainstream digital currencies. HARD Protocol is a cross-chain cryptocurrency market released based on the Kava blockchain, which supports BTC, XRP, BNB, BUSD, KAVA and USDX assets such as borrowing and mining to earn income. [2021/1/20 16:34:51] Last week, the price of USDX rose from $0.67 to $0.82, while the price of KAVA dropped from $6.88 to $4.48. At the same time, the assets mortgaged on the platform Values also all fell with the downturn in the market. If the system-wide CDP ratio is too low, Kava's system stabilization plan will mint more KAVA, thereby reducing its value. Subsequently, KAVA is sold to users in exchange for USDX, which is actually appreciating under these market conditions. To address USDX's stability issues, Kava plans to increase its liquidity and use cases by listing on more exchanges, and once the lending aspect is complete, will increase its usability on the HARD protocol. Additionally, Kava plans to launch its AMM later this year. Through the design of the auction module, KAVA may experience deflation in the bull market. For example, when a CDP is opened with BTC, a 5% APR stability fee is established, then this fee must be paid in order to close the CDP and withdraw the mortgage assets. The 5% stability fee is paid in USDX tokens, and every time the stability fee is paid, 0.5% of it is stored in the Kava protocol. Once the fee amount reaches the remaining level determined by the network administration, the excess USDX will be auctioned off to the highest bidder in exchange for and burnt KAVA, thereby increasing its value. Kava has supported Trust Wallet mortgage lending: According to the official announcement, the cross-chain DeFi protocol Kava has supported Trust Wallet mortgage lending. Users can scan the QR code of Trust Wallet to access the wallet in the Kava web app web application, and complete mortgage lending and other operations. Kava is a cross-chain DeFi protocol that supports multi-asset mortgages. It supports the mortgage of mainstream digital assets and stablecoin loan services. On July 29, a one-year minting reward plan was launched, and 74,000 coins were issued to users who use the Kava lending platform every week. KAVA rewards, the total reward pool is as high as 3,848,000 KAVA (currently worth about 16.82 million US dollars). At present, the Kava lending platform has mortgaged 1.45 million BNB and lent more than 16 million USDX stable coins. [2020/8/19] In addition, KAVA also has the supply attribute of inflation. Every time a new block is created, new KAVA will be generated. These rewards will in turn be distributed to validators and delegators in return for their protection of the network. The optimal amount to stake on the Kava blockchain is to stake 2/3 of the total KAVA supply at any given time. KAVA uses an inflation rate to incentivize or disincentivize staking. If there are not enough KAVA pledges, the annual inflation rate will increase to 20%; if there are too many pledges, the inflation rate can be reduced to 3%. Currently, the platform is looking to increase incentives to induce more people to stake on the network, thereby stabilizing the network. And this also increases the supply of KAVA, so KAVA tokens are also depreciating. KAVA will be affected by a lot of inflation in a bear market because of its nature as the reserve token of the blockchain. If the mortgage assets depreciate rapidly, it is necessary to print and sell a large amount of KAVA, and maintain the CDP ratio of the platform by repurchasing USDTX from users. However, in a bear market, investors generally do not want to sell stablecoins in exchange for volatile and inflated assets. The HARD protocol is a cross-chain money market that allows borrowing and lending of crypto assets. The protocol has its own governance token HARD, which can also be supplied and borrowed in the currency market in addition to governance. In addition, HARD is also a token used to pay its users benefits. Money market users can provide USDX and other cross-chain assets to the HARD protocol and earn benefits. Currently, only the supply side of the money market is operating, while the borrowing and lending functions of the rest of the assets are being studied. BUSD is currently the only asset with lending capabilities. It is reported that the borrowing function is expected to be implemented during the release of Kava 5, but it is still not available because the quorum has not been reached in the voting to complete the HARD agreement. This progress is slow at present, but it is also a testament to Kava's democratic governance style. CEO Brian Kerr said the protocol code has been audited and is ready for completion. Currently, Kava is only waiting for the approval of the vote. Source: HARD Protocol Source: Kava According to Kava's roadmap, they are building an automated market maker (AMM), allowing users to exchange between cross-chain assets in liquidity pools. In addition, Kava is also creating KAVA pledge derivatives, which will bring greater liquidity to KAVA. At that time, users can participate in various financial services in addition to receiving rewards for ensuring network security. In addition, Kava is building a robo-advisor service that will help users implement various financial strategies based on their goals and risk tolerance. It's a tool currently used by funds like Vanguard and other traditional institutions, and it helps expand the user base to less active-zce users who don't want or have the time to develop their own financial plans. In addition to the above, other important items on the list are: building an Ethereum bridge to add ERC-20 tokens to the network; evaluating adding USDC, USDT, WBTC and HBTC to its accepted assets; building trustlessness Bitcoin bridge. For now, the token economics of KAVA and USDX are still worrisome. Due to USDX peg issues, the assets Kava lends to its users are discounted, volatile stablecoins. Users need to be confident that USDX remains pegged to the U.S. dollar, so they are free to use the lending feature in any way possible. USDX is a very emerging stable currency, and Kava does have plans to solve its pegging problem by increasing exchange listings, completing the HARD protocol and its AMM.


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Note: The original text comes from Messari and the following is the full text compilation: Kava is a lending platform with an over-collateralized credit mechanism similar to MakerDAO.

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