On December 16, Kava held a testnet event for Kava 9 – testing the new mainnet’s capacity.
Since Kava previewed the first mainnet upgrade a month ago, many have been waiting for a positive impact on the KAVA price, as previous testnet events pushed the price up to $8.
Kava has also attracted interest in a range of partnerships in GameFi, cloud services, security and more.
Ultimately, Kava’s main goal is to attract more developers to its ecosystem – a sticking point for its cross-chain lending protocol whose total value is locked (TVL). covers most of its own projects.
Can the upgrade help Kava regain momentum when prices are falling?
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History of Kava
In 2019, Kava made an impressive debut by winning the Binance Launchpad Project of the Year award for its potential to shake up the blockchain industry.
While most DeFi applications are limited to the single-chain ecosystem, Kava has gained popularity as the first major platform to offer cross-chain lending.
Both the Kava protocol and its lending platform, Hard Protocol, support the sending and lending of cross-chain assets, allowing investors to lend, borrow, and deposit cross-chain assets from the Kava ecosystem .
As of 2019, Kava has been a decentralized Layer-1 hub supporting cross-chain DeFi applications and services, providing a durable and accessible financial services infrastructure for developers. develop.
Key milestones of Kava:
- June 11, 2020: Kava 3 mainnet upgrade completed and first cross-chain lending platform CDP up and running, supporting BNB staking and USDX withdrawal.
- October 15, 2020: Kava 4 gateway mainnet upgrade completed and cross-chain crypto market, HARD Protocol is live.
- April 9, 2021: Mainnet Kava 5 officially launched.
- August 30, 2021: Kava DeFi platform completes Kava 8 mainnet upgrade.
- The Kava 9 mainnet upgrade is expected to go live in Q1 2022.
In terms of total locked value, Kava’s TVL has steadily increased with each major iteration and upgrade, driving the KAVA price up in tandem. However, the price has failed to maintain the same steady uptrend as TVL, which is now down almost 60% from its peak since the last iteration.
KAVA price chart. Source: TradingView
The reason for the price slide can be found when looking at Kava’s ecosystem protocols and token economy.
Kava has two obvious problems:
- A weak ecosystem is largely supported by Kava’s own set of protocols.
- The token economy is not stable.
Lacking ecosystem breadth, TVL is supported by Kava . protocols
Kava currently includes 3 main projects:
- Kava Mint: allows users to use assets as collateral in exchange for USDX.
- Kava Lend: allows users to earn rewards by offering and borrowing assets from the crypto market.
- Kava Swap: allows users to buy and sell tokens on the Kava chain and earn rewards by providing liquidity to the mining pool.
TVL trend of the Kava ecosystem project
TVL of the Kava ecosystem project
Kava Mint accounts for nearly 70% of all Kava TVL.
There are not many assets and trading pairs available for lending in the project and there is a lack of liquidity in the ecosystem, which revolves around lending and swapping in the Kava ecosystem. For example, Kava Swap offers very high APY rewards, but its liquidity pool only supports USDX base trading pairs.
The prices of tokens in the Kava ecosystem have fluctuated wildly this year.
Let’s take a look at Kava’s stablecoin USDX and its governance token KAVA.
Limited application scenarios for USDX
USDX is a stablecoin noted for its instability, mainly due to the lack of application scenarios. Currently, its main use is committing on Kava Lending.
USDX price has stabilized following the launch of the Kava Swap cross-chain AMM app. Kava is also planning to increase liquidity and usage scenarios by listing on more exchanges.
Stablecoin price USDX
Governance token allocation poses sell-off risk
KAVA is the token used to manage the Kava blockchain, while KAVA also serves as the system’s lender of last resort. If there is not enough collateral for the entire system, KAVA is used to redeem USDX until the system reaches enough collateral again.
The allocation of KAVA is controversial. 40% of KAVA was sold in 3 large private sales, resulting in a large percentage of tokens being held in the hands of a few people.
Distribution of KAVA token tokens
Will Kava 9 fix these problems?
One of the biggest highlights of the upcoming Kava 9 upgrade is that it will officially enable the Inter-Blockchain Communication (IBC) protocol, which allows blockchains to communicate with each other.
This will have two main effects:
- More comprehensive: The upgrade will allow all IBC-enabled projects and communities to integrate their products with the Kava chain. DeFi projects will have access to many functional scenarios in the Kava DeFi cross-chain ecosystem.
- More Applications: With IBC’s cross-chain structure, USDX can be used in Ethereum DeFi projects through IBC and become the payment unit of a decentralized exchange (DEX). As a result, Kava’s token economy is expected to become more stable.
The Kava 9 upgrade also includes the completion of the Ethereum cross-chain bridge, Kava Launchpad, support for Keplr wallets, and other infrastructures, all of which set the stage for the Kava ecosystem to grow in the years to come.
Although Kava has successfully launched a cross-chain solution for DeFi lending, the projects in the Kava line are not sufficient to maintain a public chain.
The success of the Kava ecosystem will then depend on whether it succeeds in attracting developers to deploy projects on top of the protocol that the new upgrade can make possible.
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