Kava: between fiat and DeFi

On July 12, the Kava Project will launch its next testnet. While not exactly a large-scale event, it is still a good reason to take a closer look at this project.

The mission of the Kava Project is to become a universal intermediary between various DeFi networks, as well as between the world of decentralized finance and fiat money. The Kava Platform is a decentralized hub for DeFi cross-network applications and services. In its conception, the Kava Platform should work as a decentralized bank of digital assets, connecting users with products such as stablecoins, loans and interest-bearing accounts.

At this point, the Kava Platform allows users to borrow USDX stablecoins (USDX’s own stablecoin pegged to the US dollar) and deposit various cryptocurrencies to start generating income. Also, the Kava DeFi hub gives users access to a range of decentralized financial services, including synthetic and derivative financial instruments. With Cosmos Zones technology, Kava users will be able to deposit a wide range of their own assets, including Bitcoin (BTC), XRP, Binance Coin (BNB), and Binance USD (BUSD).

The Kava Platform is based on the Cosmos blockchain and uses a Tendermint-based Proof-of-Stake (POS) consensus mechanism to ensure network integrity. The platform employs a collateralized debt obligations (CDP) system to ensure that stablecoin loans are always adequately secured. If the borrower is unable to maintain its collateral above the required threshold, the Kava liquidator module withdraws collateral from the failed CDPs and sends it to the auction module for sale.

The Kava Project allows users to generate income by mining their USDX stablecoins. Once minted, these USDX tokens can be deposited into the Kava money market – HARD Protocol. Kava continues to take care of providing them.

In addition to the Kava USDX stablecoin, the Kava blockchain also includes its own KAVA token. It is a service token used to vote on management proposals, that also serves as a reserve currency in cases when the system is insufficiently secured.

Purchasers of the KAVA token receive block rewards and user-paid fees, but run the risk of dropping and acting as lender of last resort if the system is not properly supported. The system also uses several mechanisms to burn the KAVA tokens.

The KAVA token was first launched in 2019 after several private sales and an initial exchange offering (IEO) on Binance Launchpad. A total of 40% of KAVA tokens were sold to private investors, while 6.52% were sold on Binance Launchpad for about $ 3 million. Of the remaining KAVA tokens, 25% was allocated to Kava Labs shareholders, and the last 28.48% – to the Kava Treasury for the purpose of developing the Kava ecosystem.

At the time of this writing, there are almost 70.7 million KAVA tokens in circulation out of a maximum 111.5 million tokens. Since the KAVA token is inflationary, the maximum supply increases over time – from 3% to 20% per year, depending on the share of the KAVA tokens supplied. The maximum supply could also increase if KAVA needs to be minted to keep the market sufficiently collateralized.

At the moment, the cost of one KAVA token is $ 4.63. Market capitalization of the project is $ 318.67 million

The parent company of the project, Kava Labs, Inc., was founded by Brian Kerr, Ruarid O’Donnell and Scott Stewart. Brian Kerr, now the CEO of the project, previously worked as an advisor on several blockchain and crypto platforms, including Snowball and DMarket. He also has a business administration degree.

Ruarid O’Donnell, a Physics master, is the second co-founder of Kava and a former data engineer and data analyst at Levelworks. Another co-founder of Kava is Scott Stewart, a former professional poker player. He is currently a product manager at Kava Labs.

It is difficult to say at the moment, just how far the Kava Project will advance with its goal of becoming a universal intermediary in the DeFi world. On the one hand, a number of analysts believe that Kava is a powerful but underrated DeFi protocol, which could already reach a capitalization of $ 1 billion this year.

Observers like that Kava DeFi operates as a decentralized bank of digital assets, allowing users to access a range of decentralized financial services, including its own USDX stablecoin pegged to the US dollar, as well as synthetic and derivative financial instruments.

However, there are also doubts about the prospects of the project. It is developing rather slowly, with a team with very few known and proven developers. There is too little technical and financial information about the project on the website and in the white paper, and the roadmap ends in 2020.

Such a project, of course, will find its fans in the crypto community, but the Kava Platform is still far from mass adoption by a wide range of users.