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DeFi platforms allow traders to freely operate their digital assets in a decentralized market. Until recently, one of the best and most sought-after tools for connecting users with products like stablecoins, loans, and interest-bearing accounts has been MakerDAO. However, with the launch of Kava's new-generation decentralized bank which Forbes magazine describes as “the hidden gem of the decade”, traders have much more room to maneuver.
Taking the principles of MakerDAO as a basis, Kava.io has become its main alternative and according to analysts at QDAO DeFi, it is going to demonstrate steady rapid growth.
What is Kava?
Kava.io is a multi-chain DeFi platform for collateralized decentralized loans. It allows users to operate digital assets outside the Ethereum blockchain in order to mint Kava's own stablecoin - USDX.
The scheme is quite transparent. The user signs a smart contract (a CDP) by depositing some amount of currency into Kava as collateral.
Thus, the user then has the opportunity to mint a fixed amount of USDX, depending on the size of the collateral, for further usage. The Kava stablecoin can be operated on various blockchain networks, leveraged, hedged with interest or just held as a stable asset.
The collateral is held by the platform until the USDX loan is paid off. All transactions on the platform are conducted in BNB but the developers are planning to integrate BTC, XRP, ATOM and other major cryptocurrencies.
- It is fully interoperable with CosmosCDK. It means that, unlike MakerDAO, this platform provides the opportunity to operate different cryptocurrencies via different services.
- Kava.io doesn't oblige traders to conduct KYC verification or provide credit history.
- Traders using Kava.io can get USDX minting rewards. In order to qualify for KAVA distributed from the rewards pool (74,000 per week), the user has to generate a USDX loan. The amount of reward depends on the loan size.
The main risk of such loans is connected with the collateral price. If the BNB rate goes down, the platform will ask the trader to deposit extra currency. Otherwise, the collateral is liquidated.
How to use the platform
As mentioned above, Kava.io supports different blockchain systems. There are 2 ways to deposit digital assets and start minting USDX. You can access the platform by creating a CDP via Kava-supporting wallets: Cosmostation, Frontier etc. or directly through Kava's Web App.
The built-in interface shows all the information about your digital assets: the amount of collateralized (locked) and available BNB, borrowed USDX, borrowing limit, and wallet balance. At the very top you can find the collateral liquidation price and the current market price of your locked assets.
Kava's Web App is intuitive and allows you to stay on top of the needed parameters, so let's suppose that we picked it to start minting stablecoin.
Here's a step-by-step guide on how to use the Kava developers' software.
First of all, you need to attach your wallet to the platform. Click on “Start Earning” on Kava's official site.
Now you should choose a wallet to connect. We are going to pick Trust Wallet. If you don't have one, you can download it from the App Store (IOS) or Play Store (Android).
Make sure that Kava is enabled in your Trust Wallet. Search for “Kava” and turn it ON.
You need some BNB to make a transaction, so send the currency to your Trust Wallet. Copy your Binance Chain address and use it as the transfer recipient.
Now you can attach your wallet. Go to Kava's Web App, press “Trust Wallet” and scan the QR-code provided by Kava's Web App.
To do this, you need to open Trust Wallet on your phone and press the Gear (Settings) button in the bottom right corner of the screen. Then choose “WalletConnect” and scan the code using the camera. Then press “Connect”.
Now you need to transfer your BNB to the Trust Wallet Kava address. Once you've attached your wallet, the platform recommends that you make a transaction. Enter the amount of currency you want to deposit or press the “MAX” button to automatically fund all your balance. Then you need to confirm the transaction in the pop-up on your Trust Wallet app and press “Done” once the transaction is complete.
Voila! Now you can take out a loan. Although you’ve transferred 1 BNB, the amount shown is a bit less due to transaction fees.
Press the “Borrow” button in the “USDX Borrowed” window on the main page of Kava's Web App. Enter the amount of BNB to lock and the amount of USDX to borrow. You can see the information about your balance, the current market price of BNB, and liquidation price as well.
Confirm the transaction in the Trust Wallet App.
Now you are the holder of USDX stablecoins.
Our team recommends that you regularly check the BNB rate in order to avoid collateral liquidation. Lock more BNB or repay USDX in order to protect your borrowing and be especially careful when leveraging the assets received.
Dear reader, we hope you liked the article! Thanks for joining us and welcome on board the NOAH’s ARK!
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