Aiming to become the mainstream DeFi platform when it comes to providing decentralized loans and stablecoins, Kava is one of the pioneers in this niche to operate out of the Ethereum blockchain.
This unique platform uses Cosmos blockchain as its base of operations, operating with a Tendermint-like PoS (Proof-of-Stake) consensus mechanism.
Some specialists and investors already spotted some practices similar to MakerDAO’s CDP, however, Kava acts by leveraging several Cosmo’s zones, to add up more cryptocurrency options outside of the Ethereum mainstream, such as Ripple (XRP) and Bitcoin (BTC) for example.
About the Cosmos Ecosystem
As Bitcoin and Ethereum keep “competing” between each other as the main blockchain ecosystems, some projects are straying further from the mainstream to find effective solutions for issues such as scalability and interoperability.
And that’s where the Cosmos blockchain steps into the game. This unique ecosystem consists of several independent parallel blockchains, called zones. All these different zones are connected by the Cosmos Hub.
Kava is a project that offers its’ user collateralized decentralized loans, by covering a range of crypto assets such as Bitcoin (BTC), Cosmo’s Atomic Coin (ATOM), Binance Coin (BNB) and Ripple (XRP).
By using Kava, crypto traders can leverage assets with Kava’s CDP (Collateralized Debt Position) system.
According to their word, the team behind Kava intends it to be the “de facto DeFi platform by providing a decentralized lending platform and stablecoins compatible with major crypto assets”.
Kava has three main use cases for potential users, which are decentralized loans (plus leverage), stablecoin hedging with interest, and extensive support for new synthetics and derivatives.
The platform provides any user with access to loans, enriching the experience with a profitable leverage system, and stablecoins to provide hedging over gains.
Speaking of hedging, Kava puts a lot of effort to protect investors against risks and potential losses. It has a native stablecoin called USDX, which can be bonded to provide holders with yield.
The project has strong plans to increase the coverage of supported cryptocurrencies, offering new possibilities of synthetic assets trading and derivative products as well.
Kava employs two types of tokens into its’ ecosystem, the KAVA token, and the USDX stablecoin.
The first is the native token of the Kava Blockchain, being an essential piece for security, mechanical functions, and governance purposes.
This token is used to give voting and proposing power to holders, as KAVA holders can decide over critical parameters concerning the CDP (Collateralized Debt Position) system, including types of supporting collateral, debt limits, collateral ratio, fee policy, USDX’s saving rates and other aspects.
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The KAVA token has a strategic position in the system also, acting as a reserve currency for the situation of under collateralization within the system. If such a situation starts showing, the system automatically mints new KAVA tokens to buy USDX off the market, until USDX collateralization rates return to an ideal metric.
On the other hand, USDX is the stablecoin of use within the Kava ecosystem. It has three main use cases, which are margin trading (plus leverage), hedging with interest, and stablecoin payments.
Team and Partnerships
The idea is backed by two official partners who represent the quintessential functionality of the platform, Ripple, and Tendermint. Other important partners are Binance, Huobi, and Delchain, just to name a few.
Ripple’s ecosystem division called Xpring, started investing in Kava Labs back in March 2019. As the Ripple (XRP) cryptocurrency is one of the main choices within Kava, the partnership was nothing to be surprised about.
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As stated before, Kava uses the Cosmos blockchain as the foundational structure for their platform. Tendermint is the creator behind the Cosmos Hub, widely known amid the crypto industry for building innovative tools for distributed networks. Hence, their Atomic Coin (ATOM) is also between the four crypto-asset options for usage within Kava.
The co-founders of the project are Ruaridh O’Donnell (former engineer and data analyst at Level works) and Scott Stuart (former CEO of Level works and Pro-level poker player). Kava’s current CEO is Brian Kerr, which served as an advisor to Snowball and DMarket.io.
Kava is a Ripple-backed platform that innovates by straying further from the Ethereum mainstream, using Cosmos blockchain as the core of the idea. The platform offers collateralized loans using four main options of crypto assets outside the ERC20 pattern, such as BTC, XRP, ATOM, and BNB.
It also has two main native tokens, KAVA and USDX (which is the platform’s stablecoin). Kava can be used in several ways, so users can opt for drawing USDX by locking collateral into a smart contract, use it for yield or even take out a set of collateralized loans purposely to create synthetic leverage for crypto assets.