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Kava, the DeFi beyond Ethereum
Kava, the DeFi beyond Ethereum
Defi

Kava, the DeFi beyond Ethereum

By Gianni Morselli - 19 Jan 2020

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Kava is a project that aims to create a new model of decentralized finance (DeFI) by exploiting the interoperability of blockchains, offering the possibility to open Collateral Debt Position (CDP) using Bitcoin, BNB (Binance Coin), XRP (Ripple) and ATOM (the native cryptocurrency of Cosmos).

To achieve this, Kava was created with Cosmos SDK (like Binance Chain and Loom Network) and is therefore directly compatible with the other Cosmos blockchains. Cosmos, developed by Tendermint, is a project born in 2014 with the aim of improving the interoperability between the different blockchains.

DeFi was the central theme for 2019 and will most likely be so for 2020. The novelties are continuous and the developments are relentless, for example, the flash loans of AAVE which until 1 month ago were unthinkable.

The still-nascent sector of decentralized finance has revealed a financial market that harnesses the full potential of the Ethereum blockchain. Although there is still a lot of work to be done to completely decentralize protocols and price oracles, the developers are on the right track.

It is the case, however, that all assets used in DeFi are ERC20, i.e. tokens based on Ethereum. There are also WBTC, the wrapped Bitcoins, and the pTokens by Provable ThingsTM which are trying to introduce other assets on Ethereum but the are still ERC20. 

This can be a limitation when looking at the entire cryptocurrency ecosystem. Especially since the capital and liquidity of the major blockchains are still unused in this area.

The CEO of Kava Scott Stuart said:

“Kava has admired Tendermint for a long time and believes in the importance of building a blockchain framework for mass adoption. We are thrilled to help Cosmos extend its reach to new markets, providing the ecosystem with access to new users, liquidity, and services”.

The Cosmos hub aims to connect a wide variety of different “zones” (the various blockchains) and facilitate communication between a broad spectrum of different cryptocurrencies that communicate in different languages such as Ethereum and Bitcoin.

Kava was the first to create a link between major public blockchains such as Bitcoin and Ethereum using the Interledger Protocol (ILP) of Cosmos, creating a seamless solution for interoperable payments and value transfer between any blockchain.

Very similar to Maker, users will be able to create a CDP using initially BTC, XRP, BNB and ATOM to borrow the native USDX stablecoin. This can be used for leverage or it can be locked, providing a yield like MakerDAO’s DAI Saving Rate. While Kava’s mainnet was launched in December and currently includes 86 validators (including several major exchanges), the launch of the CDP testnet is scheduled for the end of this quarter.

The economy of the KAVA token is very interesting, and besides voting on the governance of the blockchain it also serves to close the CDPs and can be staked (also through delegation) to guarantee network security.

In the past few days, Kava has published a public call for $1,158,500 to subsidize developers to create DeFi tools for their network. 

2020 will be an extremely interesting year for DeFi, so prepare some popcorn because the battle between open finance protocols promises to be interesting.

 

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