What is Kava? All You Need to Know About KAVA

What Is Kava?

Kava is seen as one of several new decentralized finance (DeFi) initiatives. Kava, however, is built on Cosmos rather than Ethereum, which, according to its development team, gives more capabilities. Most DeFi applications utilize Ethereum.

Users of its platform can borrow loans in USDX, a cryptocurrency pegged to the value of the U.S. dollar, by locking cryptocurrency into smart contracts on Cosmos.

Kava uses Cosmos’ zones feature to manage the cryptographic assets it accepts, which are then used by programs running on separate networks. This enables the initiative to increase the range of crypto assets that borrowers can utilize, allowing them to employ XRP, BNB, and BTC, among others.

Users obtain weekly rewards in the form of KAVA, Kava’s cryptocurrency, by collateralizing coins to mint USDX.

The type of collateral utilized and the amount of USDX a user mints determine the overall amount of KAVA users receive. For instance, minters that use BNB as collateral get a portion of the 74,000 KAVA that the platform releases every week.

History

Ruaridh O’Donnell, Brian Kerr, and Scott Stuart co-founded Kava Labs, a for-profit foundation that created kava, which was introduced in 2018. Scott Stuart, a former professional poker player, and current serial entrepreneur is the CEO of Kava Labs. From 2017 until 2021, Scott worked as Kava Labs’ Head of Product before succeeding Brian Kerr as CEO.

Prior to this, Brian Kerr served as an advisor for a number of businesses with a focus on digital assets, including Snowball and DMarket. Ruaridh O’Donnell is a former Levelworks engineer and data analyst who has an MSc in physics. About 40 full-time professionals work for Kava Labs, which has offices in North America, Asia, and Europe. The company organized a public token sale for 6.5 percent of the available KAVA coins.

The Cosmos platform officially launched the Kava lending protocol in August 2020, enabling BNB to be used as collateral for crypto loans denominated in USDX. Since that time, Kava has documented loans totaling about $8 million in USDX and about $24 million in BNB that have been secured as collateral.

How Does Kava Work?

Users of Kava can borrow USDX and lock assets in unique smart contracts.

On the back end, this generates a contract known as a collateralized debt position (CDP), which is intended to guarantee that the value of USDX is kept fixed to the US dollar.

To set up a CDP, users:

1. Deposit Crypto: Users can deposit cryptocurrencies by linking their wallets.
2. Create a CDP: In a smart contract, Kava locks the deposited cryptocurrency.
3. Create USDX: Users receive USDX loans based on the CDP’s value.
4. Close a CDP: To release their collateralized cryptocurrency, users must pay back the debt plus a charge.
5. Withdraw crypto: Kava destroys the USDX after returning the cryptocurrency to the user.

Use Cases for Kava:

The platform’s security, governance, and operational features are all dependent on the KAVA token. The KAVA token has three primary applications:

Security

A weighted bonded stake in KAVA tokens is used by the top 100 nodes to validate blocks. Block rewards in the form of KAVA and a share of the network’s transaction fees are the two main sources of financial compensation for validators. Strict cutting requirements for validators include failing to guarantee high uptime and double signing transactions, which put them in danger of losing KAVA.

Governance

On crucial Kava Network aspects, voting and proposals are conducted using KAVA. This includes, but is not limited to, the kinds of supported assets and dApps, their debt ceilings, the kinds of assets that can be used as collateral for debt, the collateral ratio, the costs, and the savings rate for various financial instruments brought to the network. The Kava Network SAFU Fund and treasury allocation ideas, such as prize payments for incentive programs, are also subject to voting using the KAVA token.

Incentives

As a reward for expanding the network, a fraction of KAVA emissions is provided. To promote growth, foster competition, and enhance the health of the Kava ecosystem, these incentives are given to the best initiatives on each chain directly.

Kava’s Features

Co-Chain Architecture

The co-chain architecture of the Kava Network is its most crucial component, allowing developers to create and launch their projects with seamless interoperability utilizing either the EVM or Cosmos SDK execution environments. The system’s functionality after the Kava 10 upgrade and the Kava Network mainnet become live is depicted in the diagram below.

Source: Kava Network

The co-chains of the kava network are similar to a brain’s two hemispheres. The Cosmos Co-Chain is designed with developers of the Cosmos ecosystem in mind. For developers of the Ethereum ecosystem, the Ethereum Co-Chain is designed. The Translator Module joins the two separate Co-Chain execution environments, enabling seamless scale-up cooperation between them.

This integrates the two most popular execution environments in the market into a single network. The dependable, developer-friendly Kava Network connects Ethereum and Cosmos. Architecture at Layer 1.

The Ethereum Co-Chain

An execution environment that is EVM-compatible and allows Solidity developers and their dApps to take advantage of the Kava Network’s scalability and security.

The Cosmos Co-Chain

The Cosmos co-chain utilizes the IBC protocol to link Kava to more than 35 chains and $60 billion of the Cosmos ecosystem. It is a highly scalable and secure Cosmos SDK blockchain.

Cosmos SDK and Tendermint Core

Cosmos-SDK, an open-source platform for creating public Proof-of-Stake blockchains, is used to create the Kava Network. Cosmos-primary SDK’s attributes include:

• Tendermint Core Consensus Engine: The Byzantine Fault Tolerant consensus engine used by Kava Network is intended to support Proof-of-Stake systems.

• Cosmos Modularity: The Kava Network can swiftly implement desired open-source modules as they are created for the Cosmos environment. For instance, all Cosmos-SDK blockchains can connect thanks to the Inter Blockchain Communication (IBC) (from Cosmos) module. The IBC and Kava Network merged at 16:00 UTC on January 19, 2022.

On-Chain Incentives

The Kava Network uses a cutting-edge system of developer incentives. A part of KAVA emissions is directly awarded to protocols through an open and transparent procedure in order to encourage usage and promote the expansion of the Kava ecosystem. The incentive module will split KAVA emissions between the two chains after the Kava Network mainnet launch and Kava 10 upgrade, with the top 100 Ethereum Co-Chain protocols receiving a pro-rata allocation of incentives based on usage metrics and TVL.

The Kava DAO

The Kava DAO is the totally autonomous, decentralized organization (DAO) in charge of running the Kava Network. The DAO, comprised of the Kava stakers and validators who assist in maintaining and securing the network, decides how the network operates, what changes should be made to it, and most importantly, how the special on-chain developer incentives are split between the two chains. The DAO operates on a liquid democracy model.

The Kava DAO is a genuinely decentralized organization; it lacks a central office, a mission, and a hierarchy. Providers of guidance are also responsible for aiding the Kava Network’s security and stability. The DAO is self-governing and upholds norms consistent with those of the kava community. As a result, the Kava Network will always satisfy the needs of its users.

What Does the Kava Network Enable?

Seamless Interoperability

As a result of the perfect interoperability between the Ethereum and Cosmos Co-Chains, developers are free to create in any setting they choose while still having access to the users and resources of the other.

Optimized Scalability

Powered by the blazing-fast Tendermint Core consensus engine, the Kava Network’s distinctive design facilitates the free flow of users, assets, and projects between Kava and the most important ecosystems in the industry at scale.

Rapid Ecosystem Growth

The brightest developers in the Ethereum and Cosmos ecosystems are properly rewarded for fostering growth for the Kava Network thanks to creative and open on-chain incentive programs.

Is Kava a Good Investment?

It is important to remember that price forecasts, especially regarding something as potentially volatile as cryptocurrency, are often wrong. Also, it is worth pointing out that long-term crypto price predictions are often made using an algorithm, meaning they can change at a moment’s notice.

How Can You Own KAVA?

One way to own KAVA is to go through a centralized crypto exchange, so the first step is to create a Gate.io account and complete the KYC process. Once you have added funds to your account, check out the steps to buy KAVA on the spot or derivatives market.

News on Kava

In March 2022, Kava enabled support for Ethereum Virtual Machine (EVM) smart contracts with the alpha launch, or first version, of its Ethereum Co-Chain. Decentralized applications from the Ethereum ecosystem can now be developed and deployed on Kava thanks to the EVM introduction.

The Kava network introduced the Sushi protocol to its developer incentive program in May 2022 by providing a total of $14 million in funding. This money will take the form of daily prizes in the form of sushi and kava currency that will be distributed equally. “Sushi deploying on the Kava Network unlocks for DeFi users a new suite of DeFi products that provide high-yield farming with maximum efficiency and speed,” according to a blog post.

As part of the agreement, Sushi and the Kava Ignition Fund will contribute up to $7 million over a 90-day period for a total of $14 million.

Useful References

For the latest updates about Kava, you can visit:

• The official website
• Twitter
• Medium
• Reddit

Take Action on KAVA

Check out the KAVA price today and start trading your favorite currency pairs.

• KAVA/USDT