We explore the Kava Network in detail. Despite the crypto and bitcoin markets’ struggles, KAVA seems to be doing well, even after two major and recent updates.
Everybody likes to get the best of both worlds. For example, working in the city and living in the countryside. You get all the benefits of two different worlds and none of the disadvantages.
That’s what KAVA is about. They enable many cross-chain bridges. Now they have also the best of both worlds. Kava was originally built on Cosmos. Therefore, that gives them all the advantages of the Cosmos SDK in a single network. Powered by the fast Tendermint consensus engine.
Moreover, now they added Ethereum to the equation. They now are a co-chain network. They also enjoy the flexibility and speed of Ethereum smart contracts, which let them combine this with the interoperability of Cosmos. The best of both worlds. It’s time to take a deep dive into this platform.
What is KAVA?
Kava is a lending protocol. This means that you can lend or borrow funds without an intermediary. There are plenty of protocols that offer similar services. However, most chains are built on Ethereum.
Here is where this platform is different. They built on Cosmos. As you know, this means a PoS consensus mechanism. So, staking and not mining. This also makes them fast. However, Kava also has plenty of other cross-chain bridging going on.
- The brand-new ETH bridge—Connects the Ethereum co-chain through the BNB chain with the Ethereum ecosystem.
- The BNB chain—You can send BNB tokens to Kava for collateral to generate USDX
- Celer Network—The renowned cBridge. This allows for fast and low-cost bridging of $USDC, $USDT, $WETH, $DAI, and $WBTC between ETH and Kava.
- Nervos’ Force Bridge—Bridging of liquidity between Kava and Nervos.
- Kava Multichain—Transfer five ERC-20 assets ($USDC, $USDT, $DAI, $ETH, $WBTC) between Kava and eight other chains.
- The ICB Inter-Blockchain Communication protocol on Cosmos connects all Cosmos chains.
This new ETH bridge gives access to ERC-20 and ERC-1155 tokens. Therefore, Cosmos users can now get USDT, USDC, or DAI stablecoins. But also, wETH and wBTC. In-between the two co-chains is a translator module.
As a layer 1 chain, they profit from the speed and scalability of Cosmos SDK. On the other hand, they also enjoy all benefits of the Ethereum developer support. This gives a unique co-chain architecture. In turn, developers can contribute to building Web 3. This was the Kava 10 upgrade. Aka as mainnet 1.0. It launched in May 2022. Some key points are:
- Seamless interoperability—Ethereum and Cosmos interoperate seamlessly as co-chains.
- Optimized scalability—Because of the network’s unique architecture.
- Rapid ecosystem growth—This platform offers some interesting incentive programs. This brings developers to the network.
On the other hand, the KavaDAO is responsible for the chains’ governance. KAVA stakers and validators can vote on proposals. Thus, they play an active role in the direction the chain will take.
Currently, this platform is having various giveaways on Twitter. You can follow their Twitter handle to join. Their handle is in the top-right corner of the screen. This one had 400 winners but new promotions keep coming up.
In 2018, three people co-founded Kava Labs.
- Brian Kerr—He is the CEO
- Ruaridh O’Donnell—The lead blockchain developer
- Scott Stuart—The Product manager
Among their advisors are:
- Robert Leshner—Founder and CEO of Compound.
- Sunny Aggarwal—A research scientist at Cosmos.
- Jack Zampolin—Director of product for Tendermint
Also, the decentralized lending platform went live in June 2020. In early May 2022, 2 years later, their mainnet went live. They managed to set up the co-chain architecture:
- The Ethereum co-chain
- The Cosmos co-chain
Furthermore, they set up a Kava Dao for governance purposes. These are the stakers and validators that help to secure and run the network. Moreover, Kava Rise, they have an on-chain incentive program. It’s worth $750 million in Kava. Developers can get a 200 million share.
Kava’s ecosystem brings the Ethereum and Cosmos ecosystems together. This is huge. Nowadays, the Ethereum ecosystem has around 1,360 active dApps. Add to this over 4,000 monthly active open-source ecosystem developers.
Moreover, the Cosmos ecosystem has no less than 265 apps and services up and running. This includes 33 zones that integrate with the IBC bridge. They are good for several 100k cross-chain transactions each day. That is just massive. So, how did this affect the Kava ecosystem? Let’s have a look.
Combining these two ecosystems offers the following. It allows for a free flow of users, assets, and projects into its Ecosystem. Therefore, this opens opportunities for areas like:
- Cosmos SDK
- IBC Protocol—Connecting the Cosmos ecosystem
- Kava Platform—DeFi protocol suite
Cross-chain and DeFi we discussed already. However, it’s worthwhile mentioning that they renamed the Hard Protocol and rebranded it as Kava Lend.
- Trust wallet
- Kava DAO—Governance.
- Defi Llama—DeFi TVL aggregator.
- Mint scan-Cosmos explorer.
So, we see some big names in here. The Kava ecosystem connects the two most used blockchains in the world. It’s no wonder that the Kava network and ecosystem keep growing. Various projects keep joining Kava each week. Here is an example:
On the other hand, the Kava Network itself keeps integrating bridges to other networks as well. Kava just joined the Poly Network. This offers cost-efficient bridging of assets and NFTs. Also, don’t forget to check in on Kava’s Twitter and take part in their giveaways. They are celebrating the Kava 10 mainnet upgrade.
Kava has a two-token economy. The native KAVA token and the USDX stablecoin.
The current KAVA token has a current price of $1.58. In August, that stood at $8.30. Nonetheless, it’s up 8.6% from yesterday, but down 20.6% over 30-days and 34% over a year. That is actually not too bad, looking at how other coins are currently holding out.
Also, KAVA reached its ATH in late August 2021 with $9.12. The current market cap is $332.7 million. There are 212 million KAVA tokens in circulation and the total circulation stands just short of 217 million. That’s almost 100%. The token vesting ends in October 2022. This means that although it’s a fairly high number, Kava is still an undervalued project or token. And Kava has grown a lot in this last year yet this important metric is basically the same as a year ago.
On the other hand, the USDX stablecoin pegs more or less to the USD. It derives its stability from market flows. Kava governance decisions influence the price as well. It held its peg for a while, but in mid-May, it de-pegged slightly. The current price is $0.9198.
Kava backs USDX with large cryptocurrencies. You can mint this stablecoin when you deposit collateral. It’s important to say that USDX uses an over-collateralization protocol. This means that you need to deposit more in value than what you mint. For example, with a $150 BNB deposit, you can mint $100 in USDX.
Therefore, when you mint USDX, you receive rewards in KAVA. Each week, Kava has 74,000 KAVA to distribute between USDX minters if they use BNB as collateral.
Kava has many competitors. The DeFi lending space is busy. Every L1 ecosystem has at least one or more DeFi lending platforms. Here’s a short list of them:
- Curve and Bancor on Ethereum
- 1SOL protocol on Solana
- ADA Finance on Cardano and Avalanche
- Atlantis Loans on BNB and Polygon
- Elk Finance on 14 blockchains
- Acala on Polkadot
Now, some other protocols have also impressive features. Cross-chain is one of them. However, Kava is one of only a few chains like Avalanche and Cardano that have their EVM on a separate chain. We think this is a smart design to do it this way. None other can match the massive access to the two biggest crypto ecosystems in the world.
Kava has some standard DeFi lending protocol risks. These are more or less standard risks, and they include:
- Smart contract bugs—If a bad actor can exploit a bug, they may be able to hack the platform and drain tokens. This is a common risk. Kava knows about this risk and already has had more than 5 Certik audits. The last one we are aware of was in March 2022.
- Liquidation—When your collateral falls below the threshold. As a result, your position might get liquidated. An alternative is to add collateral.
- Impermanent loss—We wrote an article, explaining impermanent loss. It’s a risk you have when you take part in a liquidity pool. If the price of one of the pool assets changes, you may have IL.
- Rug pull—It is unlikely that Kava Labs at this stage will perform a rug pull. They already had measures in place to avoid this. For example, their token vesting schedule.
- Flash loan attacks—These can be nasty and lucrative for the person who executes them. We would think that Certik audited the protocol for this.
- USDX de-peg—That is actually happening. This stablecoin currently is almost 14% below the USD price. However, Kava Labs claims that USDX is not hard pegged to the USD.
In general, Kava has a low-risk rank. Nonetheless, it’s best to do your own research in case you’re worried about any aspect of the project.
The team behind Kava has consistently built. They met almost all previous roadmap targets. Even now, they have some exciting new updates and features scheduled. Therefore, during Q2-2022, they reached all targets:
- Ethereum Co-Chain Public Beta Launch
- ETH Bridge Beta Launch
- 1.0 Mainnet Launch
- ETH Bridge Launch
- Liquid Staking Goes Live
- GameFi + NFT Incentive Program
- 2nd DeFi Incentive Program
This includes at least two big updates. The ETH bridge and the mainnet going live. Let’s see what is cooking during Q3:
- Kava Foundation Launch—A non-profit advisory body of industry leaders. It will provide strategic input to the Kava DAO and its community.
- CosmWasm Support—This allows for the rapid deployment of smart contract dApps to the Cosmos Co-Chain.
- BNB Bridge Launch—This unlocks over 300 BNB assets for potential use in the Kava ecosystem.
And for Q4 they currently plan on two updates:
- BTC Native Bridge Launch on the Cosmos co-chain
- MINT Token Launch—The MINT token will serve as the governance token for the Kava Mint CDP protocol. It’s the official governance token of the Kava DAO.
So plenty of work at hand for the team. It’s also another clear sample of how hard the team keeps working. More importantly, remember how we called this project undervalued?
As you can see, the team has not been sitting still since August 2021. Many big and important updates have taken place. This network is moving forward and upward. In the current market conditions, maybe the price development is not what we hope for. On the other hand, it is much better when we compare it to other projects.
We also see that the team behind Kava keeps busy. There are some more interesting and valuable updates coming our way. They may keep surprising you
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