In addition to crypto asset derivatives trading, Kine also hopes to achieve “transaction everything” and bring mainstream traders into the DeFi world on a large scale through a more flexible and pragmatic method.
Written by: Wang Lvjie
The scale of digital asset transactions is growing exponentially, and the scale of derivatives transactions on centralized trading platforms has already greatly surpassed spot transactions. On the decentralized trading platform, when will derivatives trading complete a similar breakthrough and give birth to a new unicorn? This is full of imagination, and many emerging on-chain derivatives trading platforms are eager to try. Kine, an on-chain derivatives trading platform on Ethereum, which has just completed USD 7 million in financing, has become the latest player to watch.
Kine just announced that it has completed two rounds of financing totaling 7 million US dollars, and the investor lineup is eye-catching. Its investors include Huobi DeFi Lab, OKEx’s Block Dream Fund, Blockchain Capital, Spartan Group, Divergence Capital, CMS Holdings, Ascensive Assets, Bixin Ventures, DeFi Alliance, Origin Capital, Hypersphere, NGC, SevenX, Red Chain Capital, And famous Silicon Valley angel investors Naval Ravikant, Alex Pack, etc.
As an on-chain trading platform, Kine’s long list of investors includes investors from two large centralized exchanges, Huobi and OKEx, and it has also won the support of top Silicon Valley angel investors such as Naval Ravikant and Alex Pack . Who is the new player in this chain of derivatives trading? What are the characteristics?
What is Kine?
Simply put, Kine is a decentralized derivatives trading platform, but it is not satisfied with the realization of “monotonous” crypto asset derivatives trading.
Generally speaking, derivatives can better meet market participants’ needs for advanced asset allocation such as higher volatility or risk hedging. Although spot risk management can also be carried out through combination, from the perspective of the entire capital market, the basis for continuous capital valuation and capital conversion is lost, and the efficiency of capital circulation will be significantly reduced. From the perspective of financial laws, both liquidity and transaction scale of derivatives transactions are higher than spot transactions.
Kine, who is not satisfied with the trading of crypto-asset derivatives, hopes to achieve “trading everything”, and hopes to bring mainstream traders into the decentralized finance (DeFi) world on a large scale through a more flexible and pragmatic method.
In terms of product design, Kine’s goal of “transaction everything” is very similar to the attempts already made by popular DeFi protocols Synthetix, Mirror, and UMA, that is, to establish some financial assets that already have a sufficiently broad consensus in the blockchain world. “Image” and more openly available to every market participant.
Compared with the consensus on which cryptocurrency relies, U.S. stocks, gold and a series of other commodities are more likely to be seen by participants in the traditional financial market and investors who are not yet familiar with the cryptocurrency world after a long period of verification. accept. In addition, this kind of on-chain synthetic assets can lower the barriers to entry that Robinhood has succumbed to Wall Street, and it also brings unlimited possibilities for participants in the cryptocurrency world.
It can be seen from the product design plan disclosed by Kine that Kine will use Synthetix as a teacher, adopt a “peer-to-pool” model, and provide “unlimited liquidity” for derivatives through DeFi. In addition, Kine also optimized the high pledge rate on the basis of the attempts of Synthetix and Mirror, and further improved the capital utilization rate.
Reject “decentralization for decentralization”
On the realization path, Kine hopes to adopt flexible and pragmatic strategies to bring mainstream traders into the decentralized finance (DeFi) world on a large scale.
Kine founder Wang Lei pointed out that in the current crypto asset trading field, most people are extremely on one end of CeFi (centralized finance) or DeFi (decentralized finance), but the financial world is not black and white. DeFi is still It needs to learn from the efficiency of CeFi, and CeFi needs to learn the security and decentralized governance of DeFi. Therefore, he plans to start with an intermediate route, first adopting the method of “on-chain pledge + off-chain transaction” to improve the transaction experience while protecting asset security; then, evaluate various on-chain scalability solutions, select and adopt security Reliable Layer 2 solution realizes completely decentralized transactions.
The core goal of this path is to allow the widest range of cryptocurrency users to enter the world of decentralized trading from centralized exchanges.
In the first version of the product launched by Kine, users can pledge ETH, WBTC, mainstream stablecoins, Kine (KINE’s platform token) and other major ERC20 format tokens in smart contracts, mint kUSD, and then in the platform Transactions are carried out through off-chain matching.
The advantage of this approach is that the security of funds is placed on the smart contract, rather than the ethics of the platform. Another advantage of the online pledge method is the transparency of the data. The online pledge data is actually placed on the ground, and there will be no serious exaggeration of the transaction data.
At the same time, Kine also promised that when the Layer 2 solution is proven to be a safe and reliable choice by time, Kine will not hesitate to adopt it.
“Like everyone, I am looking forward to the implementation of Layer 2 technology, but as of now, no one knows when Layer 2 can be effectively implemented on the basis of ensuring safety. At present, Layer 2 solutions are all experimental solutions; this kind of experimental solution is also This means greater uncertainty and security risks, so it is not a practical choice for large-scale applications until the layer 2 solution is mature.” Wang Lei said, “but Kine will eventually choose a Layer 2 solution that has been proven to be feasible. Our first step is to use DeFi to transform CeFi and make an on-chain product that does not lose CeFi experience. In a pragmatic way, we will bring users of traditional centralized exchanges into the world of DeFi.”
How to ensure transaction liquidity and improve the efficiency of capital use?
To gain large-scale user adoption, the liquidity and capital efficiency of derivatives trading platforms are also key.
In order to solve the liquidity problem and the related serious slippage problems, Kine draws on the Peer-to-Pool liquidity pool transaction model promoted by Synthetix to provide users with advantages such as unlimited liquidity and zero slippage, greatly improving user transactions Experience. The so-called Peer-to-Pool is the creation of a liquidity pool (Pool) by the platform, but most of the liquidity in the pool is added by DeFi users and becomes the ultimate counterparty of transaction users through over-collateralization.
In order to encourage DeFi users to provide liquidity and reduce their troubles with impermanent losses, KINE has designed a complete set of incentive mechanisms for pledge users, including fee dividends and platform token (KINE) rewards. In the system designed by KINE, the provider of liquidity in the Pool is not KINE itself, but KINE users, a group of DeFi players who provide liquidity, earn income and tokens. KINE earns mainly transaction fees. Wang Lei said that 70% of the processing fees will be used to buy back platform coins and distribute them to pledge users to incentivize liquidity providers.
When users are trading, the transaction price is a combination of real-time price indices from large platforms such as Coinbase, Bitstamp, Kraken, etc., so as to avoid as much as possible the situation of platform supervisors manipulating prices and pins.
He hopes that through the design of “unlimited liquidity + real-time price index”, the trading experience of contract investors on the Kine platform will be better than the experience of most centralized and decentralized derivatives platforms currently on the market. It is also easier to use.
In addition, in terms of leverage (efficiency of capital use), handling fees, transaction gas fees, and cross-platform transactions, Wang Lei also hopes that the design can be compared with core centralized exchanges and decentralized exchanges. Certain advantages.
Team and financing
Kine founder Wang Lei has more than 15 years of experience in traditional investment banking, including well-known financial institutions such as Merrill Lynch, HSBC, Standard Chartered, and Citi, and he is also a CFA holder. After entering the blockchain world, he served as the head of the Huobi Institutional Department and has sufficient experience in the digital currency market.
According to Wang Lei, Kine’s founding team mostly comes from a traditional investment bank or technology company background, with an average of 7 years of R&D experience and more than 5 years of core team collaboration.
At present, Kine has received support from top eastern and western investment institutions, and has completed two rounds of financing totaling USD 7 million.
It is worth mentioning that Kine has won the support of two famous angel investors, Naval Ravikant and Alex Pack.
Naval Ravikant is the co-founder and former CEO of Angellist. Not only did he founded Angellist in 2010, he is also one of the most well-known investors in the financial technology field. He has invested in many well-known companies and projects including Uber, Twitter, Notion, Clubhouse, and more than 10 unicorn companies (companies with a valuation/market value of more than US$1 billion) among the companies he invested in.
And Alex Pack is one of the earliest institutional investors in the crypto field. He has worked at Bain Capital Ventures and the crypto investment fund Dragonfly Capital. He is an early investor in many leading teams in the crypto field, including Compound Finance, MakerDAO, UMA Protocol, Amber Group, MatrixPort, Polychain Capital, Ethereum and Cosmos. In October 2020, Alex Pack joined the Huobi Strategic Investment Department as an investment consultant.
Development route
Kine plans to complete the development and launch of the first version within the first quarter of this year, and start a large-scale public beta. The Kine mainnet built on Ethereum is expected to go live in March; in the second quarter, Kine plans to complete the migration of Layer 2 and fully decentralized deployment, and will gradually support the trading of derivatives of a variety of traditional assets in the future.
Before Synthetix and Uniswap as pioneers explored a practical and collaborative Layer 2 solution, Kine proposed a set of derivatives trading solutions that integrated centralized trading and decentralized pledges, and made full use of the DeFi approach to The derivatives exchange is completely open to DeFi players.
In Kine’s plan, it is hoped that it will be safer and fairer than traditional centralized exchanges, and will have a better experience than existing decentralized derivatives exchanges. In the future, there will be more options for trading targets, and the leverage ratio ( The advantages of multiple levels such as capital use efficiency), handling fees, transaction gas fees, and cross-platform transactions, from paving a practical highway for investors in the DeFi world.
