Whether it is cross-chain, pledge, or the development of hot DeFi and NFT, Kira’s purpose is to further improve the liquidity of various assets.
Written by: Wang Lujie
The boom in liquid mining has ended, and whether DeFi is a short-lived has become a question in the minds of many investors. More people are curious, what will be the hot spot in the next wave?
The popularity of the Polkadot ecology has convinced many people that cross-chain asset transactions may become the next explosive point in the blockchain field.
In the wave of Polkadot, do you remember another member of the “cross-chain duo”-Cosmos?
The protagonist of today’s article, Kira Network, hopes to absorb more assets on the basis of Cosmos and Polkadot, especially traditional financial assets into the open cross-chain system created by them, and break the circle. .
So does Cosmos have the possibility of combining with Polkadot? Are there other options for cross-chain? What is the real meaning of cross-chain?
Kira gave the answer to the above question.
First acquaintance
“When you see an airplane for the first time, you can’t drive it until you spend a lot of time learning to drive it.”
Mateusz Grzelak, CTO of Kira Network, explained his relationship with virtual currencies.
As early as the second half of 2011, Mateusz, who was still in school, came into contact with Bitcoin on reddit. At that time, Bitcoin was still a toy for a few people, and it crashed from $31 to $0.01 because of the Mt.Gox hack. However, Mateusz did not pay too much attention to the rise and fall of prices. He was immediately shocked by Satoshi Nakamoto’s idea of virtual currency, and quickly accepted the concept of Bitcoin as digital gold.
But for a long time afterwards, Mateusz put his main research experience on mining and automated trading, which was a stage of “learning to fly an airplane” for him when he was still young. In Mateusz’s mind, Virtual currency is the plane that can take him off.
In 2017, with the entry of virtual currencies into an unprecedented bull market, public chains have emerged. Whether it is Ethereum, EOS, NEO, QTUM, etc., it has achieved jaw-dropping increases or financing.
The rapid increase in the number of public chains, as well as the non-circulation of mutual information between public chains, is a huge impact on Mateusz, who advocates the spirit of Satoshi Nakamoto’s blockchain. In Mateusz’s view, if the public chains do not communicate with each other, the interconnected blockchain world envisioned by Satoshi Nakamoto will become an island of information. At that time, he fully realized the importance of cross-chain to an ideal blockchain world; therefore, in 2017, he chose to leave the post of R&D engineer at Barclays Bank and took cross-chain as his future entrepreneurial direction.
Also in 2017, Milana Valmont, who was still working in a financial institution in New York, was exposed to virtual currency investment for the first time and became a community volunteer on Binance Exchange that summer. At this time, Binance has just been founded, and is trying to get a share of the traditional exchanges. The rapid development of Binance since then provided an excellent opportunity for Milana to get in touch with the blockchain. She was deeply attracted by the rapid development of new technologies and the endless new things in the blockchain field, and she quickly decided to invest in it full-time. For Milana, blockchain is a new way of life.
In 2017, Mateusz and Milana worked in the same blockchain investment institution and got acquainted. In 2018, Mateusz and Milana became the consultants of Sentinel, the Cosmos ecological dVPN project. The so-called dVPN is a decentralized VPN that uses blockchain technology. It cannot record user privacy and cannot be blocked. At the same time, due to economic incentives and the ability to participate without permission, the bandwidth of the dVPN network can grow with the growth of user needs. In many dVPN projects (including Mysterium, Orchid, Lethean, VPN0), Sentinel is the first SOCK5 proxy server network to use blockchain technology, and once ranked first in dVPN in Google PlayStore, and was once the entire encryption The dApp with the most users in the industry.
The cooperation on the Sentinel project not only gave Milana and Mateusz a deeper understanding of the Cosmos ecosystem, and strengthened their choice of cross-chain, but also facilitated their cooperation on Kira.
Milana and Mateusz both agree that there will not be a single main chain that can satisfy all people’s imaginations; in the long run, the blockchain world will be the same as the real world, with thousands or even more projects woven together. Then the link between chain and chain, project and project, asset and asset is particularly important. The importance of cross-chain will be as important as any main chain.
In 2019, Kira network was officially launched.
Cross-chain-Kira does not belong to any single ecosystem
Cosmos is a heterogeneous network that supports cross-chain interaction launched by the Tendermint team. Its ultimate goal is to create a blockchain Internet that allows a large number of autonomous and easy-to-develop blockchains to extend and interact with each other. As early as 2015, the Cosmos team began to explore cross-chain, and it is one of the pioneers in the industry to study cross-chain.
The Cosmos network is composed of many independent parallel blockchains. The first blockchain in the network is the Cosmos Hub, and the other parallel chains are called Zones, and they perform cross-chain operations with the Hub through the Inter-Chain Communication Protocol (IBC).
So far, the three core modules of the Cosmos ecosystem are Tendermint Core, Cosmos SDK, and IBC. Among them, Tendermint Core is the underlying consensus engine based on the Tendermint consensus algorithm, responsible for data transmission between nodes and Byzantine consensus.
Cosmos-sdk not only contains the program code of Cosmos Hub, but also a blockchain development framework, providing developers with a series of common functional modules including consensus, P2P network, IBC, account, governance, and authentication.
IBC is mainly used for information transfer between Hub and Zone. Although this sentence seems simple, it is the core and most difficult part of Cosmos to realize its value.
From 15 years to the present, although Cosmos has raised a lot of funds under the aura of star projects, its development has not been smooth. In March 2019, the Cosmos mainnet was finally launched after two years of delay. However, the development of IBC is still not smooth. The latest news shows that IBC 1.0 will not be officially developed until October 11, 2020.
Coupled with the internal conflicts of the Cosmos team, the outside world has never stopped questioning Cosmos.
But after intensive cultivation in the Cosmos ecology in 2017 and 2018, Cosmos has naturally become the first choice for Milana and Mateusz to try to cross-chain.
Milana and Mateusz also have a clear understanding of the advantages and disadvantages of Cosmos. The foundation of Kira development is the Cosmos SDK. From the perspective of Kira’s development team, the Cosmos SDK is more flexible, friendly, and easier to modify in terms of function module calls.
However, Cosmos cannot meet all the needs of the Kira team. Therefore, the Kira team has set its sights on Polkadot, another project with cross-chain as the main feature, which is also called the “cross-chain duo” with Cosmos.
There is no essential difference between Polkadot and Cosmos in cross-chain principles, and both adopt the Spoke-Hub model. Cosmos Spoke is called Zone, and the zones are connected to the Cosmos Hub through the IBC protocol. Polkadot is similar, except that Hub is renamed Relay Chain, and the connected independent blockchain is called Parachain.
However, there are also many differences between Cosmos and Polkadot. One of the core is the difference in design philosophy between the two. Cosmos advocates decentralization. Hub, as an architecture center, only acts as an interactive coordination to record and transmit data. Each zone needs to independently complete ecological governance and corresponding security verification.
Polkadot advocates centralization, and the ecological verification, calculation and security of the side chain will be provided by Relaychain, and the side chain does not need to recruit validators by itself.
Therefore, many analysts believe that Cosmos will pay more attention to the transmission of prices in actual use, and Polkadot can better realize the all-round transmission of information. Cosmos is more practical and more grounded, while Polkadot has a more ambitious technological vision.
Coupled with Polkadot founders Gavin Wood and Parity’s huge investment in technology, the outside world is more confident about Polkadot’s prospects, although Polkadot’s technology is more difficult to implement than Cosmos.
For the ambitious Kira, Cosmos is the foundation, but not all. In order to better achieve cross-chain, based on Cosmos’ IBC agreement, Kira will also focus on Polkadot’s XCMP cross-chain agreement to learn from each other.
“Kira does not belong to any single ecosystem.” Milana and Mateusz told Lianwen in an interview.
Multiple pledge mechanism (MBPoS)
Kira Network uses MBPoS as its consensus mechanism. MBPoS allows users to generate income by collateralizing traditional financial assets such as digital assets and legal assets.
However, to better understand MBPoS, we still have to trace the development history of the consensus mechanism.
Starting from Satoshi Nakamoto, the essence of the blockchain is an open ledger. In order to maintain the ledger and also drive the update of the ledger, it is necessary to have a generally accepted reward mechanism for the recorder of the ledger, and this is the core part of the consensus mechanism.
The earliest commonly accepted consensus mechanism is PoW, Proof of Work, which is the proof of work consensus mechanism. PoW, born out of the HashCash method of anti-spam, requires node participants to perform intensive calculations. The advantage of this mechanism is that it is easy to verify and it is also widely used. Most early blockchain projects including BTC use this mechanism. However, PoW has been criticized by many people for meaningless calculations, which not only consumes a lot of electricity, but also its low transaction throughput is also criticized. BTC transaction confirmation time was once unacceptably long.
After PoW, another consensus mechanism emerged: PoS (Proof of Stake). According to the proportion and time of tokens occupied by each node, PoS reduces the difficulty of mining in an equal proportion, thereby speeding up the speed of finding random numbers, and obtaining rewards through the corresponding weight of the wallet.
Since the earliest Peercoin in 2012, PoS has been supported by many projects due to its advantages of not requiring a large amount of computing power, low resource consumption, and short confirmation time. Many well-known projects including EOS, Stellar, Tron, Dash, Neo, Binance Chain, Ontology, Tezos use PoS or PoS-like mechanisms. And ETH, Cardano and OmiseGO are gradually using PoS mechanism.
The Tendermint team introduced BFT on the basis of PoS and launched the Tendermint consensus algorithm. The Tendermint consensus algorithm uses a very typical Byzantine fault-tolerant scheme, which is a PBFT+Bonded PoS (Pledged Proof of Stake) hybrid consensus. Cosmos Hub is also the first public blockchain to adopt this algorithm.
Regarding the characteristics of Cosmos, as mentioned above, it makes cross-chain possible.
In the Cosmos system, the Cosmos Hub is the core Hub, and most of the value of the ecology will be gathered in the Cosmos Hub. The role of ATOM, the native token of Cosmos Hub, in Cosmos Hub includes voting, verification or entrusted pledge to other validators, participation in governance, etc.
But in other Hubs and Zones in the Cosmos system, ATOM is not required.
So you can see that on the one hand, ATOM plays a huge role in the Cosmos Hub, but on the other hand it cannot play a role in other Hubs. There are some inconveniences.
However, in Kira’s view, apart from inconvenience, the traditional PoS model also has bigger problems. Most PoS systems only allow the pledge of one token, and voting rights are also distributed in proportion to the number of tokens held. This makes it easy for governance rights to be concentrated in the hands of a few large token holders, and these large holders may not do it every time With reasonable choices, similar incidents are not uncommon in the history of blockchain development.
MBPoS is the first consensus model that allows the decentralized processing of pledged assets without assuming that large currency holders are rational economic people.
In Kira Network, each validator node has the same voting rights and the same opportunity to create new blocks. To become a validator node, you first need to become an active figure in the community and follow the rules of node entry and exit in the decentralized governance model. This can not only avoid sybil attacks, but also avoid the monopoly of large currency holders and the pure pursuit of currency price gains.
In the MBPoS framework, users can obtain corresponding derivative tokens while staking various types of assets. Users can release the liquidity of their pledged assets by transferring and trading derivative tokens, and at the same time can obtain pledge income. At the same time, MBPoS can further protect the security of pledged assets by setting the node income distribution mechanism.
Decentralized governance mechanism
When DeFi (Decentralize Finance) emerged, many supporters listed security as an important advantage when analyzing its advantages over CeFi (centralized finance). Many people believe that the DeFi project is driven by smart contracts and that human greed can be greatly curbed.
But the reality is not so. Although code can restrain humanity, under the temptation of huge wealth, people can always find loopholes in the code.
In September, several DeFi project runaways occurred consecutively, including the mining project Emerald EMD on EOS, the DeFi project justfolio (JFT) and Penguin on TRON, and the project LV Finance on Ethereum. Investors have suffered huge losses as a result.
Milana also pointed out that those relatively traditional projects that adopt the PoS consensus model, because the governance rights are distributed by currency, it is very easy to form a cartel monopoly. If the value of pledged assets becomes higher and higher, the temptation to those behind the verifier node will also increase, and the greed in human nature will bring no small hidden dangers to the security of pledged assets. Cartel organizations can reject certain transactions when they produce blocks, or even stop producing blocks, causing real damage to the network. This hidden danger has been looming in many PoS projects. In the face of such threats, many project parties are at a loss, and some even pessimistically stated in the article, “At present, this kind of attack cannot be solved. Intelligence believes that most of us are honest.”
Milana and Mateusz believe that this does not mean that the validator node is a gunman, ready to attack. In their view, it is necessary to have reasonable constraints and punishment mechanisms for nodes, as well as appropriate incentive mechanisms to avoid cartels and other types of attacks. And all of this will be determined by a decentralized governance system to formulate corresponding rules and implement them in detail.
Kira has designed a multi-level pledge reward system and commission system, which will encourage delegators to pledge to nodes with less pledge binding with economic benefits, ensuring that small nodes can also receive sufficient fee income, thereby allowing large and small nodes. Nodes can survive and avoid the excessive concentration of pledged tokens and the situation of “the strong are always strong”.
This kind of policy of “protecting the weak and small” not only protects the interests and enthusiasm of community participants, especially the majority of small and medium-sized participants, but also allows participants to better participate in community activities in addition to economic interests. Governance, formulate and continuously improve the rules, remove those nodes that implement evil deeds, and promote the continuous development of the project ecology.
However, in the interview, Matuesz was also frank, that human issues are always the most difficult to deal with. Kira’s team is trying to achieve a “multi-campus” model in the community to achieve checks and balances between powers and the balance of power in the community, and to achieve self-drive and improvement in the community.
IXP and Super DEX
Up to now, the history of the development of virtual currency is actually the history of the development of an exchange. From Mt.Gox to the three major centralized exchanges, to DEX in the previous DeFi boom, exchanges are the focus of every bull and bear market.
In fact, the centralized exchange (CEX) realized cross-chain a long time ago, and the assets of each main chain can be traded on the centralized exchange. However, the cross-chain of a centralized exchange is a pseudo concept. When various types of assets enter a centralized exchange, it is as if they have entered a black hole, and investors cannot understand the real situation. And this is the core reason why centralized exchanges have repeatedly encountered problems in the past decade.
The decentralized exchange (DEX), through cooperation with decentralized wallets, has retracted its hands on user assets, which has improved the security of user assets to a certain extent. However, the DEX currently on the market can basically only provide certain types of assets, such as ERC20. This greatly reduces the convenience of transactions.
Although the problems of centralized exchanges are well known, Milana is also frank, but for most investors, centralized exchanges will not be replaced for a long time. It is for most investors. It is more convenient and more efficient. Especially in OTC and other fields, it has advantages that DEX can’t match.
Therefore, for Kira, they have no intention of replacing CEX; what they want to do more is to make up for the shortcomings of DEX in asset types, so that more users and more assets can be traded conveniently on the same platform.
Whether it is Cosmos’ IBC or Polkadot’s XCMP, Kira is just a starting point. On the basis of IBC and XCMP, Kira developed the IXP protocol (Interchain Exchange Protocol); IXP is a decentralized transaction protocol that allows users to directly call various blockchain applications in the browser or client without Realize cross-chain asset transfer and lossless transactions under the premise of interacting with various centralized backends.
IXP architecture diagram
According to the description of its white paper, users pledge their assets in the Kira system to obtain corresponding derivative tokens one-to-one. For example, users pledge one BTC and obtain one sBTC. When BTC is in pledge state, sBTC Can freely transfer and trade; at the same time, users can also obtain pledge income. This is exactly how Kira releases the liquidity of pledged assets in the form of derivatives transactions, which will greatly improve the liquidity and utilization of the PoS model.
And not only common virtual currencies such as BTC can be pledged in the Kira network, various types of assets can be created or found in the Kira Network corresponding Zone or Bridge, obtain derivative tokens while pledged, and regain liquidity .
In the author’s opinion, Kira’s approach is not logically complicated. As long as Kira Zone and Kira Bridge can handle the difficulties of various types of assets, then Kira will be able to make up for the limitations of DEX in the types of assets.
If you think about it further, Kira’s approach is logically similar to CEX. After users deposit legal currency, USDT, and other tradable assets in CEX, they obtain book assets “issued” by a centralized exchange. Users can use these book assets to conduct transactions or other activities, but these book assets are opaque. Whether it corresponds to real assets one-to-one depends entirely on the integrity of the CEX team.
On the other hand, Kira obtains derivatives through pledges. On the one hand, it unifies various assets at the transaction level. On the other hand, it will break the opacity of CEX book assets, because in Kira Network, even for derivatives, its The transaction is also completely on-chain, open and transparent.
It is still too early to say that Kira will replace CEX, but Kira Network will greatly improve the convenience of DEX transactions and is infinitely close to CEX.
In addition, the IXP protocol has many advantages, such as an almost unlimited order book model, which is more compliant and safer. And with the continuous increase in the types and quantities of pledged and transactional assets, Kira Network will likely form a positive cycle: transaction security and convenience-increased pledged assets-active trading activities-transaction fees and pledge income Increase-more pledged assets enter Kira Network.
IVO
ICO (Initial Coin Offering) once led the virtual currency world, and it also created wealth myths one after another, as well as numerous bubbles, so that relevant departments had to strictly ban them.
The logic of ICO is relatively simple, that is, more consensus assets in the hands of investors, such as BTC, ETH, USDT, etc., to replace the tokens initially issued by the project party.
In the 2017 bull market, ICOs went into a frenzied state. According to the summary of the Crypto Valley Association and PricewaterhouseCoopers, as of the end of November 2017, 430 ICO projects had been launched this year, raising a total of US$4.6 billion. This ICO boom has produced a lot of Hundred-fold and Thousand-fold coins, casting a lot of wealth myths.
But this craze is also under the mud and sand, and the user’s assets are completely owned by the project party. There are countless cases where the project team took money to run away.
When the investor’s funds are completely entrusted to the project party and the project party lacks sufficient supervision over the use of the funds, the safety of the funds will not be guaranteed, and the chaos of ICO cannot be avoided.
Similar chaos is a huge hidden danger to the property security of ordinary investors, and it led to the joint suspension of ICO financing in September 2017 by seven Chinese ministries and commissions.
But for entrepreneurs, the need for financing always exists. Especially for blockchain projects, due to the lack of support from traditional investment institutions, financing in the form of tokens has become an inevitable choice.
Kira believes that the effective way to solve the shortcomings of ICO is to maintain users’ ownership of their assets, that is, users do not need to give up ownership of assets to obtain tokens from the project. Kira defines this token issuance model as IVO (Initial Validator Offering).
The project party needs to pledge certain external assets, create new nodes in the Kira Network, attract investors to pledge assets, and obtain asset-backed project development by charging transaction fees and node rewards.
Due to Kira Network’s innovative approach, there are not too many restrictions on the types of assets pledged by the project party. Most types of assets can be pledged as underlying assets. This guarantees that the project party does not have “empty gloves and white wolves”, and it is not excessive. Raise the threshold of financing.
Investors obtain new tokens issued by the project party in the form of pledged mining by staking assets in the nodes set up by the project party they support. The economic model of the token is separately set by the project party.
Therefore, if the project party succeeds in starting a business, the price of its issued tokens will also rise. On the one hand, it is possible for investors to accumulate wealth through new tokens. On the other hand, because they only pledge assets, they do not need to face the risk of property loss under normal circumstances.
In general, the IVO model pioneered by Kira Network greatly curbs the runaway crisis and legal risks caused by ICOs, while also providing investors with opportunities to get rich. The principle is similar to the previous popular liquid mining.
Kira’s journey to break the circle (DApp, NFT, traditional assets)
Both Milana and Mateusz have rich experience in the traditional financial field. Bringing traditional financial assets into the blockchain is their ultimate goal, as well as their original intention.
To make a simple data comparison, according to BIS statistics, as of the end of 2018, the nominal holdings of global derivatives were US$640 trillion; as of August 2020, the total market value of global stock markets exceeded US$88 trillion.
CoinGecko data shows that although virtual currency has been developed for more than ten years, its total market value is 348.8 billion U.S. dollars (including Bitcoin market value of 2012 billion U.S. dollars), which is equivalent to 1/1834 of the scale of derivatives holdings and 1/252 of the global stock market value. .
This not only means that the development of virtual currency has a long way to go, but it also means that it has unlimited prospects.
In addition to traditional financial assets, Kira also hopes to wake up those sleeping virtual assets. In fact, in the past relatively long period of time, blockchain hotspots have occurred frequently. Whether it is DeFi or NFT, they have fully stimulated the interest of investors, but many assets are in a state of sleep, including many old brands. Assets, such as BTC.
Kira hopes to integrate traditional financial assets and virtual assets in a dormant state into Kira’s system through its flexible system settings to improve its utilization efficiency.
Kira Network is composed of three core parts: Kira Hub, Kira Zones, and Kira Bridges, and is characterized by strong scalability. Not only can assets such as BTC, ETH, and DOT be able to create a separate zone and interconnect with the core Kira Hub through the IBC protocol; but those assets that are not compatible with the IBC protocol, and even traditional financial assets including legal currency, are also By creating an independent dApp, you can also pledge at the same time, and get corresponding derivatives like others, and trade with Hub and other Zone assets through Kira Bridges. According to Kira’s plan, any type of asset can create a dApp or Zone, thereby gaining a place in Kira’s overall network.
According to Milana and Mateusz, Kira’s pledged mining model is much safer than liquid mining, which was popular in previous DeFi projects. Liquidity mining may not only face impermanence losses, but also may face contract risks.
Kira’s model can provide relatively stable income while ensuring the safety of pledged assets. This is more attractive to traditional financial professionals who pay attention to risk aversion. Generally speaking, in addition to legal risks, the reasons for the difficulty of virtual currency to break the circle are more worried about the sharp rise and fall of currency prices and the risks of the project party (or contract). Kira’s solution is very attractive to outside assets.
NFT (Non-Fungible Token), which is currently gradually replacing DeFi fever, has finally begun to attract the attention of the mainstream market after more than two years of development. In the past September, the monthly trading volume of OpenSea, which is known as the largest NFT market, exceeded US$2.75 million. Although it cannot be compared with the top DEX, there has been a considerable increase.
On the basis of satisfying standardization and versatility, NFT has both uniqueness and irreplaceability. Therefore, NFT has a broad space for use in the fields of games, artwork, domain names, and membership. For example, the skins that many people buy in games can become NFT target assets.
At present, many institutions, especially art institutions and game development companies, have put their products on the blockchain in the form of NFT. Deloitte’s “2016 Art and Finance Report” pointed out that the future art financial market will reach 3 trillion US dollars, and this is only a part of the market covered by NFT. Therefore, we can think that the NFT market has huge potential and is only the starting point.
NFT can be easily incorporated into Kira’s network and linked to the main network through Kira Zone and Kira Bridges, helping NFT assets release their liquidity while being pledged. And Kira can use the decentralized model to provide an occasion for NFT to cooperate with DeFi, and to provide NFT with better liquidity support and more sufficient motivation.
By linking NFT assets and more traditional financial assets including legal currency to the cross-chain network, Kira will be able to truly break the circle of virtual currency.
Tokens and financing
In August of this year, Kira completed seed rounds and private equity financings. The seed round financing was supported by private equity companies Ascensive Asset Management and Alphabit Fund; the private equity financing amounted to US$2.2 million, led by BTC12 Capital, and NGC Ventures, TRG Capital and Origin Capital joined the investment.
Before the end of October, Kira will conduct a small-scale public offering to better expand the user base. Kira will also announce more details on fundraising in the near future.
The Kira mainnet is expected to be officially launched at the end of the fourth quarter, and the Kira mainnet token KEX will be officially issued. KEX will play an important role in Kira Network. KEX will act as a reserve asset when other types of assets are pledged, and all governance members and validator nodes will also be required to hold KEX. In addition, KEX will also be the most convenient medium for paying network fees in Kira Network.
At the same time, staking KEX will also become the most efficient way to share blocks and network fees.
to sum up
Whether it is cross-chain, pledge, or the development of hot DeFi and NFT, these are just means. Kira’s core purpose is to further improve the liquidity of various types of assets.
And this is equivalent to a key to the real world. Only by opening this door that separates the real world from the world of virtual currency can the blockchain receive a steady stream of power.
