Kava: A quick Introduction to the Cross Chain DeFi Application

By 2sats | 2sats | 1 Oct 2021


*obligatory not financial advice*

 

What is Kava?

Kava is a DeFi application that is similar to Maker since it too allows its users to mint a stablecoin by taking crypto collateralized loans. It also supports lending and borrowing various cryptocurrencies and it has a swap function for its supported assets. The main difference between Kava and Maker or Aave, is that it is not just running on Ethereum, but on its own blockchain that can connect with different blockchains, so it can be used for coins and tokens outside of the Ethereum ecosystem.

Kava has all of the most useful DeFi tools in its arsenal, while being easy to connect to different blockchains. Lets take a look at its various apps.

 

 

Minting Stablecoins

If you need liquidity but don't want to sell your crypto because you think it will grow in value, then you can use it as collateral on Kava to mint the decentralized stablecoin USDCX. This is just like with Maker which is a DApp on Ethereum where you can mint the stablecoin DAI, the only difference is that Kava is its own blockchain and since it uses the Cosmos Hub tech, it could theoretically connect to every proof of stake blockchain and so Kava could add support to almost every coin and make it possible to use USDX on different blockchains.

The interest rates range between 0,00% and 5,00% per year and the supported cryptos are currently limited to BTC, BNB, BUSD, XRP, KAVA, HARD and HBTC. Right now you can only use BTC and XRP as wrapped Binance Chain tokens, but this will change in the future. Support for many more tokens and coins could be added soon.

You need to collateralize your loan with a value of 150%, this means that if you deposit $150 BNB then you can get $100 in USDX. Once you have your stablecoins you can use them like any other cryptocurrency, Kava itself offers some ways of earning interests with your USDX.

 

The Supported Assets for minting the stablecoin

The supported assets for minting the stablecoin USDX

 

Lending

Kava also has an application that is similar to Aave or Compound that is called KavaLend. You can deposit the supported coins to earn a small yield on them or you can borrow them if you leave a collateral. Liquidity providers are not only gaining interest on their coins but are also earning KavaLend tokens, which give their holders governance rights over the lend feature. By depositing USDX you can currently earn an APY of 78,90% in KavaLend tokens.

 

The Supported Assets for the Lend Feature

The Supported Assets for the Lend Feature

 

Trading

Kava has its own DEX, like Uniswap. However, all of the available trading pairs currently include USDX. This means that you will have to first exchange a coin into USDX and trade it for some other coins that you want. Like with any DEX, liquidity providers earn trading fees but they also earn KavaSwap tokens that give them voting rights for the decentralized exchange.

 

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The Traiding Pairs of The DEX

 

The KAVA Coin

Kava has its own native coin. Kava is a proof of stake blockchain and KAVA is used for staking. The more coins a node has the more likely they are to produce the next block and earn rewards. The more coins someone has the less likely they are to harm the network because it would harm their investment. Misbehaving nodes can also get their stake slashed.

There is no max supply and there is a yearly inflation of 3% to 20%, depending on how many people stake their coins. This is done to encourage people to stake or delegate their coins because you can only protect yourself from the inflation by earning the new coins.

The value of the coin depends on how many people use the network. The Kava network really unites mayor DeFi features in an interoperable and scalable way. All of its tools are easy to use, the network fees are low and you can earn a high APY by using it. However, the competition is tough: The Terra blockchain also offers decentralized stablecoins that are much more supported than USDX and with Cosmos and other bridges it will be possible to easily integrate foreign coins to use them on DeFi applications on Ethereum or other blockchains.

Another problem is that the launch of the coin made the network a bit centralized. It launched in 2019 and 40% of its supply was sold to private investors, 6% was sold to early investors at the Binance Launchpad, 25% are held by Kava Labs who is developing Kava further and the rest is held in a treasury for future development.

Nonetheless I think Kava has some potential and could grow in the future and by using its Lending or Swapping tool you can also earn their governance tokens. So why not try them out? Kava should definitely be on your watch list.

 

 

 

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I am just some bored guy that likes crypto


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