The goal of the Kava Network in merging the Ethereum and Cosmos ecosystems is to drive massive growth by making it seamless and rewarding for hundreds of the most innovative blockchain developers to onboard in the coming years.
To do this successfully, Kava will need to properly incentivize developers to build and deploy on the Kava Network. There are a number of other Layer-1 networks that have offered large incentive campaigns to onboard developers, such as Avalanche, Hedera, Osmosis, EVMOS, and many more. Kava will need to offer similar value to developers in order to compete as a top-tier Layer-1.
Digging into some of these other programs, while the top-line numbers are big, they often lack transparency, are preferential, and are not done in a programmatic way that equally directly rewards developers proportionally for their contribution to the network.
Kava sees an opportunity to go beyond what other networks have implemented and create a more equitable and open model for developer incentives that truly reward those that drive the most value for the Kava Network.
Incentives in the Layer-1 space need to support innovation and be aligned with the mission of decentralization. This is why Kava plans to implement the first fully transparent, fair, and programmatic incentive structure in the space.
Kava is confident that through an open and well-funded incentive program, it will succeed in onboarding the best developers across the DeFi, GameFi, and NFT verticals. These developers will, in turn, bring rapid growth to the network through their incentives, protocols, and users.
The existing Kava incentive structure was established by the Kava DAO in the past to target growth for the Kava Mint protocol. Last year, it distributed approximately 15M KAVA to users of DeFi protocols on the Kava blockchain.
For Kava to drive growth for the new Ethereum Co-Chain and compete in the Layer-1 space, radically different incentives will be needed to attract the best developers. This is why Kava plans to roll out a new incentive program aimed at delivering Kava’s goal in 2022 of becoming a top-tier Layer-1 blockchain.
The proposed new incentive allocation will be fixed over the next 4 years as follows:
- 30M KAVA annualized to the Ethereum Co-Chain.
- 15M KAVA annualized to the Cosmos Co-Chain.
- 5M KAVA annualized for incentivizing Web3 growth.
Because the annual token allocation for developer incentives on the Kava Network is fixed over the next four years, the percentage allocation will decrease year over year.
The distribution of incentives between the Ethereum and Cosmos co-chains can be adjusted depending on usage. This would happen via a Kava DAO vote.
Inspired by the incredibly popular incentive mechanism widely used by protocols themselves, the proposed KAVA Ethereum Co-Chain incentives will be distributed to DeFi protocols fairly based on usage.
The initial structure will be as follows:
- Monthly distributions will be issued on-chain in a pro-rata manner to the top 100 DeFi protocols based on usage.
- Usage will be calculated by the time-weighted total value locked (TVL) of the protocol. If needed, this can be updated later via governance.
- Monthly distributions will be sent to the official protocol address on a 1-yr vest with monthly unlocks.
- KAVA distributions are encouraged to be used as protocol incentives for users of the protocols on Kava, which should increase relative TVL and garner more KAVA rewards in the next cycle.
- TVL will be calculated by official measurements from Kava ecosystem partner and leading aggregator DeFiLlama.com.
The 15M KAVA per year of Cosmos Co-Chain incentives will continue to be distributed programmatically directly to protocols on the Cosmos Co-Chain in a similar structure as described above. Protocols will be rewarded a share of the 15M KAVA based on their TVL.
Following the launch of CosmWasm support, the Kava DAO can explore an increase or restructuring of the incentives in the future to support any growth in developers building on the Cosmos Co-Chain.
The additional 5M KAVA set aside for Web3 incentives will be distributed in a similar programmatic, usage-based model to developers of GameFi, NFTs, and other Web3 verticals. While the focus of the Kava Network is initially on growth in the DeFi sector, it recognizes the emerging value and opportunity of the broader Web3 space.
How usage is calculated and the exact structure of the distributions to Web3 developers will be voted on by the Kava DAO at a later date. The amount allocated to this pool may also be adjusted by the DAO if the vertical drives significant usage for the network.
In 2022, Kava is launching its Ethereum Co-Chain, establishing the Kava Network with its unique Ethereum and Cosmos co-chain architecture. This will allow protocol developers from the two most popular blockchain ecosystems to build and deploy on a single network while benefiting from seamless interoperability with one another.
In order to realize the potential of the Kava Network and onboard hundreds of the most innovative developers from both ecosystems, Kava plans to expand its developer incentive program and restructure it to be the most transparent and fair on-chain incentive program in the Layer-1 space.
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