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A Cross-Chain Platform for Decentralized Finance.
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Kava aims to become the defaultDeFi platform by providing stablecoins and decentralized lending against all major crypto assets.
Kava utilizes Cosmos and operates with a Tendermint-based Proof-of-Stake (PoS) consensus mechanism. At its core, Kava relies on a system similar to MakerDAO with CDPs but leverages the zones from Cosmos to add cryptocurrencies running on independent networks (e.g., XRP, Bitcoin).
Kava relies on two main tokens: KAVA and USDX (Kava's stablecoin). Besides its stablecoin USDX, Kava features a governance token, KAVA, that is further staked in bonding curves of network validators. It is also used when Kava acts as a lender of last resort.
The platform has three primary use-cases:
Users can draw USDX, Kava's stablecoin, by locking collateral in a smart contract.
They may stake USDX for a yield.
Users may take out a series of collateralized loans to create synthetic leverage for any supported crypto asset. For instance, it is possible to lock XRP and mint USDX to buy XRP, hence creating a leveraged long position on XRP.
1. What is Kava (KAVA)?
Kava is a cross-chain DeFi platform offering collateralized loans and stablecoins to users of major crypto assets, including BTC, XRP, BNB, ATOM, and others. Users can collateralize their crypto assets in exchange for USDX, Kava's stablecoin.
KAVA is the governance and staking asset responsible for securing the network and voting on critical parameters.
Kava aims to become the "de facto DeFi platform by providing a decentralized lending platform and stablecoins compatible with major crypto assets".
Specifically, Kava allows:
Decentralized loans and leverage: Kava provides the users of major cryptocurrencies with open access to loans, leverage, and stablecoins for hedging.
Stablecoin hedging with interest: Kava's USDX stablecoin can be bonded, providing holders of USDX with a yield.
Extensible synthetics and derivatives: Kava is capable of growing to support a wide range of new cryptoassets and offering new synthetics and derivative products.
The Kava platform has two types of tokens: the KAVA token and the USDX stablecoin. The KAVA token is the native token of the KAVA blockchain: it is integral in the security, governance, and the mechanical functions of the platform.
There are three main use cases for the KAVA token:
Security: the top 100 nodes validate blocks by weighted bonded stake in KAVA tokens. Economic incentives for validators come in the form of earning KAVA as block rewards, in transaction fees, and face losing KAVA. This is based on strict slashing conditions such as failing to ensure high uptime and double signing transactions.
Governance: KAVA is used for proposals and voting on critical parameters of the collateralized debt position (CDP) system. This includes but is not limited to the global debt limit of the system, types of supported collateral, their debt limits, collateral ratio, fees, and the savings rate for USDX.
Lender of last resort: KAVA functions as a reserve currency in situations where the system is undercollateralized. In such cases, new KAVA is minted and used to buy USDX off the market until USDX becomes safely overcollateralized.
Similarly, there are three core use cases for the USDX stablecoin:
Margin trading/leverage: users that receive USDX from the platform primarily use it to purchase additional cryptoassets, effectively leveraging their exposure.
Hedging with interest: traders can hold USDX as a stable asset when seeking to limit exposure to volatile crypto assets. Holders can bond their tokens and receive accumulate interest equal to the current USDX savings rate.
Stablecoin payments: the quick block-times and fast finality of the Kava blockchain enable USDX to be used for general payment use cases.
2. Products and key features
2.1 Kava CDP platform
The main product for Kava is the Kava CDP Platform, where users can collateralize their crypto assets to take a loan in USDX, the stablecoin unit in the Kava ecosystem. The following diagram shows how the system will function once Kava's mainnet goes live.
For instance, the on-chain activity can be monitored here.
2.2 Cosmos SDK and Tendermint Core
Kava is built using Cosmos-SDK, an open-source framework for building public Proof-of-Stake blockchains. Core features of Cosmos-SDK include:
Tendermint Core consensus engine: Kava relies on a Byzantine Fault Tolerant consensus engine designed to support Proof-of-Stake systems.
Cosmos modularity: as new open-source modules are developed for the Cosmos ecosystem, Kava can quickly implement desirable modules. For instance, the Inter Blockchain Communication (IBC) (from Cosmos) module enables all Cosmos-SDK blockchains to communicate.
The following table shows the performance benchmarks of Tendermint Core.
2.3 A 4-module architecture
There are four modules that make up the Kava platform's core architecture: Price-feed, Auction, CDP, and Liquidator.
The Price-feed module implements a simple price oracle where a group of white-listed oracles posts prices for various assets in the system. Standard oracle software are operated by Kava validators. The median price of all valid oracle prices is taken as the current price in the system, and any validator found reporting prices outside of two standard deviations from the median price can be slashed. The addition and removal of assets and oracles are controlled by governance proposals.
The Auction module implements three distinct auction types that control the supply of bad debt and surplus in the CDP system.
Forward Auction: a standard auction where a seller takes increasing bids for an item. Each bid increases the price, as well as the duration of the auction. This auction type is used when there is a surplus of collected fees in the system. The surplus is converted to stablecoins and sold for governance tokens.
Reverse Auction: an auction where a buyer solicits decreasing bids for a particular item or lot of items. This auction type is used when governance tokens are sold (minted) in exchange for stablecoins, to cover shortfalls after failed collateral auctions.
Forward Reverse Auction: an auction where a buyer solicits increasing bids for a lot of goods, up to some ceiling. After the ceiling is reached, each bid lowers the number of goods being sold for the ceiling price. This type of auction is used when collateral is seized from a risky CDP and sold for stablecoins to cover the debt.
The CDP module is a factory for creating CDPs and storing the global state of the debt system. It allows users to create, modify, and close CDPs for any collateral type in the Price-feed module. It also sets the global parameters of the system, which can be altered by governance proposals. These parameters include the global debt limit (the total amount of stablecoins that can be in circulation), the debt limit for each collateral type, and the collateralization ratio for each collateral type.
The Liquidator module tracks the status of CDPs based on prices in the Price-feed module. It is responsible for seizing collateral from CDPs whose collateralization ratio is below the threshold set for that collateral type. Collateral seized will then be sent to the Auction module.
In the event of a CDP falling below the required collateral ratio, that CDP will be seized by the Liquidator module. When a lot of collateral has been seized due to liquidations, that collateral is auctioned by the Auction module for stablecoins using a forward-reverse auction. In normal times, this auction is expected to raise sufficient stablecoins to wipe out the debt held initially by the CDP owners, along with a small liquidation penalty.
In the event where collateral auctions fail to raise the requisite amount of stablecoins, KAVA tokens are auctioned by the Auction module for stablecoins using a reverse auction until the global collateral ratio is reached. In this way, the KAVA token would serve as a lender of last resort in times of under-collateralization.
3. Economics and supply
Private Sale 1 Allocation
30.05% of tokens
Private Sale 1 Token Price
$0.075 / KAVA
Private Sale 1 Amount Raised
Private Sale 2 Allocation
5.02% of tokens
Private Sale 2 Token Price
$0.25 / KAVA
Private Sale 2 Amount Raised
Private Sale 3 Allocation
4.93% of tokens
Private Sale 3 Token Price
$0.40 / KAVA
Private Sale 3 Amount Raised
Binance Launchpad Sale Allocation
6.52% of Tokens
Binance Launchpad Sale Price
$0.46 / KAVA
Amount to be Raised in Binance Launchpad Sale
The token supply distribution is as follows:
Private Sale 1 tokens comprise of 30.05% of the total token supply. It was conducted from June 15th to June 30th 2019.
Private Sale 2 tokens comprise of 5.02% of the total token supply. It was conducted from July 15th to July 31st 2019.
Private Sale 3 tokens comprise of 4.93% of the total token supply. It was conducted from August 15th to August 31st 2019.
Binance Launchpad Sale tokens comprise of 6.52% of the total token supply. It was conducted in October 2019 for a total raise of ~$3MM worth of BNB at ~$0.46 per token for 6.52% of the total token supply.
Kava Labs shareholders tokens comprise of 25.00% of the total token supply.
Token Treasury tokens comprise of 28.48% of the total token supply.
Token governance and use of funds
All funds raised in crypto are either self-custodied and stored in multi-sig wallets, requiring at least 2 out of 3 signatures from the management team or are stored with a qualified custodian. Funds raised in fiat currency are stored in USD bank accounts. The spending of the funds needs the approval of the Kava Labs' board of directors.
As of October 2019, Kava Labs has used approximately 15% of TGE funds according to the allocations below:
45% Platform Development.
25% Business Development & Marketing.
10% Legal & Accounting.
KAVA token distribution (%)
KAVA token release schedule
The following chart represents the number and breakdown of all KAVA that are to be released into circulation on a monthly basis. In addition, block rewards are distributed to validators according to how many tokens are staked by the current set of validators.
If the overall staked token amount is low, the APR for a KAVA validator will rise to a maximum of 20.00%; if the whole staked token amount is high, the APR for a KAVA validator will drop to a minimum of 3.00%.
Public testnet 4000 with Beta CDP system and Bug Bounty Program
First cross-chain assets integrated into CDP system on testnet
Cross-chain assets in CDP system on mainnet
Integrate custodial BTC Peg into CDP system testnet
Integrate both custodial and non-custodial BTC Peg into CDP system mainnet
4.2 Commercial partnerships and business development progress
Ripple: Ripple is a company that enables banks, payment providers, and exchanges to send money globally conveniently using blockchain technology. Xpring, Ripple's ecosystem division invested in Kava Labs in March 2019. Kava intends support XRP as one of the first assets supported on the Kava platform.
Tendermint: Tendermint is the creator of the Cosmos Hub and Cosmos SDK. Kava is an official partner of Tendermint and aims to make ATOM one of the first assets supported on the Kava platform.
Validators: Kava has built a global network of validators that are dedicated to securing and governing the Kava platform. Many of these validators are public Kava partners and can be found on Kava's website.
5. Project team
Advisor to Snowball and DMarket.io
Former Engineer & Data Analyst at Levelworks, Deep Learning Specialist
Co-founder, Head of Product
Former CEO of Levelworks, Professional Poker Player.
Former Software Developer & Data Analyst at the USDA
Head of Marketing
Former Head of Partnerships at VY Esports, Managing Director of Gaming & Digital Strategy at Magid
Head of Business Development, Asia
Former CEO of GJ Exchange, VP of Global Partnerships at Chinapex, VP International Exchange BTCC
6. Kava's activity and community overview
6.1 Development activity
6.2 Social and community data
Kava's community mainly consists of:
Stakers and validators: they are responsible for the security and governance of the platform.
Crypto investors and traders: it represents the Kava platform's user base.
Application developers: the Kava platform's functionality can be extended into existing platforms such as dApps, wallets with in-app staking, exchanges, and more.
Currently, Kava's community growth strategies are mainly be focused on China, Asia Pacific, and the global English-speaking audience.
Current community strategies include:
Expanding ecosystem advocates: Kava continues to grow a robust developer and validator community while enabling its key members to serve as Kava ambassadors to their local communities.
Increasing collateral types supported: it integrates new cryptocurrencies to the platform encouraging new investors and traders to use the platform and join the Kava community.
Future community growth strategies of Kava include:
Incentivized adoption programs: offer financial incentives for applications, exchanges, and other platforms to integrate the Kava platform's services and tokens.
Integration partnerships: integrate with dApps, wallets, and exchanges with large customer bases to gain distribution of KAVA to wide audiences.
The addition of new synthetic assets: EUR, JPY, CNH, synthetic BTC, etc.