Hello, everyone. I am Bi Xiaobao. Today I will introduce you a cross-chain project-KAVA.
KAVA introduction
Kava is the first cross-chain lending platform based on Cosmos, similar to MakerDao of the Ethereum network. Generally speaking, Kava is an automated mortgage lending platform. Investors can use Kava to realize leveraged hedging and hedging of assets held in unstable market conditions.
We can use an example to illustrate the entire operating mechanism of Kava CDP.
Assuming that you are currently bullish , you can use Kava’s CDP mortgage to generate stablecoin USDX, and then use other trading platforms to exchange USDX for BTC. After the BTC rises, sell it, repay Kava’s USDX and pay interest. This realizes the operation of leveraging more.
Staking BNB to mint USDX
In June 2020, Kava officially launched Defi lending, mortgage BNB can generate USDX, thereby obtaining KAVA rewards. According to official estimates, the annualized return rate of BNB in the early stage was as high as 308%. Later, as the number of participants increased, the return gradually decreased, and it is currently about 20%.
According to kava’s plan, KAVA will issue 74,000 KAVA to BNB holders every week. The reward lasts for 52 weeks. Before the end of the whole cycle, the rewarded KAVA cannot be withdrawn, but the reward can be obtained by staking.
In addition, KAVA also supports mortgage lending of other mainstream cryptocurrencies.
There are two kinds of tokens in the Kava ecosystem. One is the stable currency USDX, which is anchored to the U.S. dollar, which is mainly generated by collateralizing digital currency in Kava CDP. The generation principle is similar to DAI; the other is the platform governance tool KAVA with a total issuance of 100 million . It is mainly used as an incentive and management tool for the entire Kava network.
USDX is a stable currency anchored 1:1 with the US dollar. It is automatically generated by collateralizing BTC, XRP, ATOM or BNB, and users can freely set the mortgage rate. Through the price prediction machine of kava ecology, once there is insufficient mortgage, the system will automatically liquidate.
What is the role of KAVA?
KAVA token is the original token of KAVA ecology. The specific functions are as follows:
- Pay the CDP fee. The user first generates USDX through mainstream cryptocurrency mortgages. After the user returns the USDX, he needs to close the CDP manually, and the fee for closing the CDP is paid through KAVA.
- Pay the transfer fee. Transfers between KAVA ecological users need to consume KAVA as a handling fee.
- Verify node commission. KAVA holders can also entrust KAVA to validators to staking (stake) to obtain revenue. This delegation mechanism is the same as Cosmos, all for maintaining network security. The greater the percentage of KAVA participating in the pledge, the safer the Kava network. Only participating in the pledge of KAVA will receive the rewards generated by the new block. In Kava, each region will be verified by the block top node 100 of the pledge. These verification nodes can get transaction fees as an incentive, and this commission is also paid in KAVA. In other words, whoever pledges more KAVA will get the commission reward; and whoever has the most computing power in Bitcoin will get the reward. The former is a POS consensus mechanism, and the latter is a POW consensus mechanism.
- Community governance. Coin holders can also obtain voting rights by staking their KAVA, and then participate in on-chain governance and make various suggestions for the future development of the community.
KAVA inflation and deflation
Unlike common tokens, the total amount of KAVA is not constant, and there are mechanisms of inflation and deflation.
(1) Inflation mechanism
Kava will inflate KAVA according to the pledge ratio of the whole network (the purpose is to incentivize the supply of KAVA ⅔ for staking lock-up, the target inflation rate is 7% ), and the inflation ratio varies between 7% and 20%: if the system Only a few KAVA are used as pledges, and the inflation rate is as high as 20%. When the system pledge ratio exceeds ⅔, the inflation ratio will gradually decrease to 3%. The number of Kava tokens generated by each new block is floating, and the quantity depends on the ratio of the amount of tokens that have entered the Kava network for stake lock in the total supply of Kava tokens .
Bi Xiaobao believes that compared with Bitcoin’s inflation rate, KAVA’s inflation rate is a bit high, which is not conducive to the price of kava in the secondary market. Fortunately, KAVA has a deflation mechanism.
(2) Deflation mechanism
As mentioned earlier, KAVA needs to be paid when CDP is closed, and the paid KAVA will be automatically destroyed, so the total amount of KAVA is gradually decreasing.
Therefore, the total amount of KAVA depends on the intensity of inflation and deflation. If the number of locked positions increases, KAVA inflation will decrease, and the number of people using CPD will increase accordingly. At the same time, it will further stimulate deflation, which will further benefit KAVA prices, and KAVA ecology will enter an upward spiral, otherwise, it will enter a downward spiral.
KAVA market capitalization
According to the big data of BiXiaobao blockchain, KAVA currently has a circulating market value of about 470 million yuan, which is a bit high. KAVA is the 10th project of Binance Launchpad and has not yet been listed on other leading exchanges. Up to now, KAVA has risen about 4 times since the bottom in March, and its performance is quite satisfactory.
According to BiXiaobao, Harvest will launch Defi mining based on the KAVA ecosystem in the near future. Harvest is the world’s first cross-chain currency market. But in the current environment, it remains to be seen whether it can make waves. Part of the data in the article comes from https://www.bixiaobao.com/cn/defi/kava, please indicate the source for reprinting.
The analysis in this article is for reference only and does not constitute investment advice or opinions.
