One of the most striking projects within the Cosmos (ATOM) ecosystem is Kava Chain (KAVA), a decentralized blockchain built using Cosmos development tools.
BBasically, this means that Kava is a blockchain that works laterally (sidechain) with the Cosmos ecosystem. This allows Kava to be a project designed for high speed, programmability and native cross-chain operation capacity, which offers enormous possibilities.
On this sidechain lives the native KAVA token, together with a series of extremely powerful tools designed for the world of decentralized finance (DeFi). Consequently, Kava is a pioneer in the DeFi sector that has currently become one of its great exponents in the blockchain ecosystem.
History and beginnings of Kava
Kava's story began in June 2019, when its developers Brian Kerr (CEO), Ruaridh O'Donnell (Former Engineer), Scott Stuart (Co-founder, Head of Product) and Kevin Davis (Lead Engineer), decided to make their work public about Kava on Medium. The choice of Cosmos as the base for the construction of this project was a "clear choice" according to its developers, in order to have the necessary tools to build a project of the magnitude they were planning.
A couple of days later, Kevin Davis announced the Kava testnet launch. This makes it very clear that the project was already a palpable reality, and the community begins to take an interest in it. Here the development of Kava was already accelerated, to the point that, on November 15, 2019, the official launch of the Kava mainnet was announced. Thus began the official operation of the platform, something that was announced on Twitter.
However, this first version of Kava was only a starter of everything that was to come to the project. In fact, basic functions such as KAVA's CDPs were not yet up and running, only being able to perform certain operations on the network. Despite this, the launch was a success, because in just under 1 hour the network managed to have more than 25 million dollars blocked in its Proof of Stake (PoS) system and more than 50 nodes were enabled.
Since then, the evolution of the network and its development has been very active, becoming a benchmark in the world of decentralized finance.
How does kava work?
As we discussed at the beginning, Kava is built on top of the Cosmos blockchain development SDK. Let us remember that Cosmos is a blockchain and a development platform for interoperable sidechains and that they communicate with each other thanks to the IBC (Inter Blockchain Communication) protocol. The idea behind this design in Cosmos is to allow developers to create blockchains tailored to their needs, with their own infrastructures, all tied together by Cosmos and its IBC protocol. In this way, all these blockchains can share information, send value and even perform swaps natively between them.
In that sense, Kava is built on all this Cosmos technology, and that means great advantages for Kava, advantages and technologies that we review below.
Tendermint, the secret to Kava's speed and low cost
One of the fundamental pieces of blockchain technology is the consensus protocol, and in the case of Kava that protocol is Tendermint. Tendermint is the consensus protocol within Cosmos and is a spin-off development of Proof of Stake (PoS). This protocol has several improvements, all of them designed to provide high scalability and speed.
Choosing Tendermint for Kava is easy to understand, Kava uses Cosmos SDK, and the tools in that framework natively integrate that protocol. This way, all the sidechains within Cosmos use the same protocol, and can better understand each other when operating with each other. Of course, this is not the only reason for its choice, since Kava is intended to be a massive DeFi platform and in this case the choice of this protocol is more than justified. This is because Tendermint can easily handle up to 10 transactions per second (100.000 TPS) and that is a scenario few protocols can handle.
Modularity, extending the functionality of Kava
One of the great advantages of developing on Cosmos SDK is that it is easy to extend Kava's functionalities. This is possible because the Cosmos SDK is built on a modular basis, and that design is easily ported to projects that use it. In this way, Kava allows its community to develop applications or extensions that can join the Kava ecosystem to exploit its functionalities.
Therefore, the Kava developers have made the decision to build their platform around modules, which can be easily extended or upgraded. Among these models we can mention:
price feeder
The price feeder or price feeder is the first module that was designed for Kava. Its function is to serve as a price feeding mechanism through a smart contract that makes oracle for the network. In this way, the Kava price feed is responsible for keeping the network updated with the prices of the assets that are listed on it. For example, if there is an exchange where the price of ETH is listed, the price feed will look for information about the price of the ETH token in various spaces. Thus, after verifying the accuracy of this data, it will be offered to the network so that they have secure data on the price of that token, which can be used in platform operations.
For the operation of this system, the infrastructure of ChainLink (LINK), which offers native oracles within the Cosmos platform.
Auctions
The auction module allows Kava users to use two types of auction protocols within the system. The first option is the term auction. This is a traditional auction model in which the buyer requests that the bids for a certain token or item be raised. This strategy is employed whenever the platform sees a surplus in fees collected. This mechanism allows the system to convert the surplus into more stablecoins or stablecoins.
The next type of auction that the network allows is the reverse auction. As its name suggests, this auction consists of lowering the bids for a specific item or batch of items. In this way, this protocol seeks to sell governance tokens in order to mint new stable coins. This is a strategy used to make up the difference between failed collateral auctions and debt.
KAVA CDP (KAVA Collateralized Debt Position)
If you have read our article on DAI y MakerDAO surely you will have recognized the name of Collateralized Debt Position or Collateralized Debt Position (CDP). To clarify the term, A CDP is a new type of automated loan contract controlled by a smart contract. This system allows the use of different tokens accepted by the smart contract to be used as reserves and thus issue a "stablecoin" anchored to a specific fiat currency, generally the US dollar. In this way, the lender puts a cryptoactive as collateral to "mint" or create new stablecoins and when the user withdraws, they can recover their tokens along with the interest generated by the platform. This system is what allows, for example, MakerDAO to use its CDP to generate DAI with one of the multi-collaterals accepted by the platform.
In Kava this same system is used so that the users can create, modify and close CDP for any type of guarantee. Also, it is the encoding used to set global system parameters. These adjustments cover things like debt limits and the total circulation of stablecoins in the market.
The use of KAVA CDP is very important for the platform since, for example, a user may wish to use their ETH tokens as collateral to mint USDX (Kava's stablecoin). Thus, the ETH tokens placed in the CDP contract will be the guarantee of the issuance of that stablecoin while the position is open. If the user wishes to recover his ETH tokens, he must close the position and consequently he will recover his guarantee and the accumulated interest. Of course, this system depends on the price of the collateral token, so the fall in its price will affect the CDP reserve and in case of falling below a threshold, the system can liquidate and close the position to avoid permanent losses in the platform.
Sentinel or Liquidator
The Sentinel or Liquidator module is in charge of maintaining healthy liquidity within the network. This system has the capacity to close, liquidate and seize CDP guarantees whose collateralization ratio is below the threshold established for that type of guarantee. This module automatically tracks the status of the CDPs to make determinations. The module's final decision is based on the prices received by the price feed.
HARD Protocol, expanding the capabilities of Kava
One of the more recent additions to Kava is known as HARD Protocol, a market protocol designed for cross-chain operations. HARD enables Kava to lend, borrow and earn on assets like BTC, XRP, BNB, BUSD, KAVA and USDX. Basically, HARD Protocol is a complementary platform to Kava that uses all of its infrastructure to make it work.
HARD Protocol offers its users three options:
- Become a lender by supplying tokens on the platform generating interest for each loan.
- Request a loan using your assets and cryptocurrencies as collateral.
- Earn HARD governance tokens that they can then use to participate in the governance of the protocol or exchange them for other tokens.
KAVA Tokens
Kava currently has three tokens on its platform: KAVA, HARD and USDX. The KAVA token is the native token of the platform and its operation is vital for the maintenance of its main network. This token is used in the staking system, as a guarantee for CDP, rewards, fees or network commissions, as well as for its governance. For its part, the HARD token is a secondary token that is mainly used for governance over the HARD Protocol. And for its part, the USDX token is a stablecoin or stable coin slightly pegged to the US dollar. It is minted when a KAVA CDP is opened and only 2/3 of the collateral entered is released in the form of USDX.
In any case, the KAVA and HARD tokens are of the inflationary issue type, with no issue limit. Meanwhile, the USDX token can only be issued according to the collateral placed on the CDPs, which are then burned when the CDPs are released. However, Kava also allows non-native assets, such as tokenizing other tokens like BNB, Bitcoin, or Ethereum.
KAVA Use Cases
blurring
The Kava and Hard protocols allow users to request loans in a decentralized way. This democratizes finance by removing the barrier to entry, reducing friction and removing gatekeepers.
lending
The Kava and Hard protocols allow users to convert their idle cryptocurrencies into interest-bearing assets in a safe and transparent way.
Rewards
As the protocols scale, there are numerous rewards available to early adopters. For example, developers are encouraged to build new DeFi applications, integrations, and protocols into the Kava ecosystem for new business use cases.
Author
