Undoubtedly, 2020 has been the year of decentralized finance, or simply DeFi.
It has grown by leaps and bounds, and the foundation set by platforms like the Kava blockchain is readying the crypto sphere for even more growth beyond bitcoin and Ethereum, building the new internet of money.
Genesis: The Rise of DeFi
In 2017, ICOs were the talk of town, and that helped to drive Ethereum prices to an all-time high, so this was the year that the concept of decentralized applications started to take root.
Few protocols were specifically inclined to revolutionize finance through decentralized, secure, and open applications that mimic instruments in the traditional sector.
Over the years, and in the hopes of democratizing finance and seamlessly driving financial inclusion by excluding the middle man, creators seeded the idea of DeFi.
Three years later, and by the end of 2020, DeFi in Ethereum currently locks up over $13.5 billion in digital assets. Nevertheless, the potential of this sub sector–despite its exponential growth in 2020, ought to be in hundreds of billions in the future according to industry experts.
A DeFi system connecting all smart contracting platforms with active open finance dApp could catalyze this rise. As a result the demand for cross chain decentralized financial services and products has increased. Users want better services so they can lock up their Bitcoin and XRP to name a few.
Is Kava the King of Cross-Chain DeFi?
If DeFi interoperability is the name, the Kava protocol is by far the leader.
Together with applications depending on its scalable layer to flourish, it is no doubt that 2021–a year where the focus will be creating a vibrant DeFi ecosystem connecting all popular applications, will be a year where Kava’s main value proposition will be visible for all and sundry.
For the uninitiated, the Kava blockchain is the world’s first cross-chain DeFi hub. According to Scott Stuart the cofounder and Chief Product Officer of Kava, they aim to “create a decentralized financial services platform that applications and developers can leverage with ease, indefinitely.”
Through this Kava hub, users can leverage some of the leading cryptocurrencies like Bitcoin to not only lend at an attractive annual yield but also borrow loans in USDX—a stablecoin inherent to the Kava blockchain– with their assets as collateral.
Interestingly, there is also a chance for borrowers to hypothecate their loans in USDX.
For instance, once they borrow, they can use the same funds to supply in the Hard Protocol, earn rewards in HARD—the governance token, and concurrently earn interest rates that are dynamically set by the Hard protocol.
Besides, borrowers can access synthetic leverage. In this arrangement, they can swap USDX for even more collateral and take out even more loans. By repeating this process, any borrower can create a synthetic leverage, effectively creating a leveraged long position.
Further, under the early adopter program announced on June 9, users are encouraged to take out loans in USDX using their crypto assets. The Kava liquidity bootstrapping program will distribute over 80 million worth of KAVA in four years—through to 2024, as an incentive.
Instead of paperwork and going through a middleman–like is usually the case with banks, Kava acts like a decentralized bank effectively connecting users to interesting products like stablecoins, loans, and interest-bearing accounts as aforementioned.
Rather than just holding their assets, users can earn more without the need for tokenizing their assets to participate in DeFi through platforms like Ethereum.
To further bootstrap more demand for Kava, allowing users to take advantage of the high throughput and scalable environment of Kava, the launch of the Hard Protocol is a game-changer.
The Hard Protocol
Better than Ethereum’s Maker, the Hard protocol is a cross-chain money market that supplements the Kava blockchain, allowing users to earn more from their digital assets.
Through the dApp, users can lend, borrow, and earn with assets like BTC, XRP, BNB, BUSD, KAVA, and USDX.
The dApp is anchored on Kava, relying on the base layer for security, oracles for price feeds, and cross-chain functionality. Presently, Version-1 supports supply-side deposits and HARD incentives for BTC, BNB, BUSD, USDX, XRP, and HARD. By supplying any of these digital assets, users receive rewards in HARD.
The second version will launch on Dec 30, 2020. It will support the borrow-side and HARD incentives for BTC, BNB, BUSD, LINK, USDX, and XRP.
Following this launch, the Hard protocol will be fully functional; reasons enough for KAVA and HARD tokens to gain.
Over and above this, the Kava platform is scalable with higher throughput.
Earlier on, Kava noted that for their ecosystem to grow and for DeFi to be vibrant, it must have rails to ensure smooth on-boarding to assets.
As of the end of December 2020, there were more than five digital assets supported by the protocol including BTC, XRP, BNB, HARD, and BUSD—a stablecoin. The launch of the Hard Protocol is another reason that will see the ecosystem further flourish in 2021.
With the elimination of the need for tokenizing XRP or BTC, for instance, it becomes easier for ordinary users to supply liquidity or take out USDX loans.
The more coins are supported, the more USDX becomes liquid, therefore not only supporting the price of KAVA but also of protocols built on Kava like HARD.