Indeed, as the crypto industry continues to wax stronger, the number of crypto assets keeps increasing. Notably, the sphere has, since its 2013 boom, witnessed thousands of crypto innovations and projects. Despite the prevailing market conditions of these assets, their level of adoption still grows every day. Today, cryptocurrencies have began to relegate the traditional method of paying, storing, and trading value. This thus illustrates cryptocurrencies as utility-oriented. Over time, some of these crypto assets run to serve as native tokens to numerous virtual protocols, serving as instruments through which their users make payments for transactions fees. Worth noting that the kava crypto is one of such crypto.
Worthy of note, readers are enjoined to embrace and comprehend this article without misrepresenting its intent. Notably, this piece is not developed to promote the crypto asset, but only to make investors understand the background, potential and peculiarity of nano crypto in a bid to enable them make an informed decision. Therefore, every consequential decision lies solely on the investor and not the responsibility of the author.
Kava crypto: A General Overview
Worth noting that Kava crypto is the native token of Kava, a lending protocol. First, the token helps to secure, run and strengthen the platform. Further, it is used to reward borrowing and supplying on the protocol. Just like other native cryptocurrencies, the Kava crypto serves as governance token, allowing its holders to participate in the administration of the project. This thus means by holding and staking Kava crypto, they are eligible to vote to change certain techniques of the project. For the purpose of emphasis, holders decide the kinds of assets the protocol accepts as collateral, the collateralization ratio required and the fees paid by borrowers.
Additionally, the KAVA crypto serves as an instrument to rewarding early adopters. This thus enable them to participate and contribute to the administration and management of the Kava platform. More so, its holders usually have their own staking nodes. Notably, the token cannot be mined. It depends on staking in its validation process.
Meanwhile, the value of the crypto usually respond to the realities in the market. Although, other factors including new features, upgrades, mergers, partnerships conducted by its protocol usually impact its value too. Worthy of note that Kava crypto, just like others, have limited tokens. According to its whitepaper, there will only be 100 million KAVA tokens. However, currently, there are only 345,943,389 Kava crypto in circulation.
Kava lending protocol
The native protocol of Kava crypto emerged as a DeFi lending platform. Built on Kava’s blockchain, the platform enables users to borrow and lend multiple cryptocurrencies seamlessly. According to its whitepaper, Kava aims to become an autonomous market-making service. It enables users to enjoy easy cross-chain lending and staking. Currently, the project is being supported by Cosmos. Notably, its choice for Cosmos manifested owing to the effective interoperability and customization features of the blockchain.
Through Cosmos, the protocol usually mint a stablecoin, identified as USDX. The stablecoin represents the same value with the US dollar. The minting of USDX is usually done when users deposit any supported asset as collateral. The minted USDX is however, usually given as loans to intending borrowers. However, these users who deposit their fund get rewards with Kava crypto every week.
To achieve its motive, Kava lending platform relies on the smart contracts enveloped in Cosmos. Through this contracts, it is able to carry out its peer-to-peer lending effectively. What defines the uniqueness of the platform is because of its ability to accept varieties of cryptocurrencies, including BTC, ETH and others as collateral deposits by users. However, it mandates users to ensure that these cryptocurrencies run in BEP-2 Binance Chain standard before they become accepted as collaterals.
Determining crypto borrow limit ratio on Kava
Notably, the amount that any user can borrow is usually determined by the value of their collateral. Immediately, a user deposits a supported asset as collateral, the borrow limit ratio mechanism is expected to display the amount that such user can borrow. For instance, if a user supply $600 worth of ETH, the highest such user seems likely to get is $250 worth of another asset. However, whenever the value of the supplied ETH drops to perhaps, $500, the highest the user can get is $250.
In cases whereby the value of the supplied token falls after borrowing, the user risk liquidation of his or her asset. Although, this only happens when the drop in the value of the supplied asset resulted into a new borrowed limit from the one displayed at the time of borrowing. As earlier asserted, this consequently lead to liquidation of the collateral. With liquidation, a portion of the supplied token becomes sold at auction to harmonize the difference in the value of borrowed vs collateral assets plus a 7.5 liquidation penalty. Usually, auctions always unfold within eight to twenty four hours. When this becomes done, the user consequently get 1/3 of the collateral back. Worth noting that users must avoid this situation by ensuring that they over-collateralize their loan. This thus means that they maintain a borrow limit ratio of 50% or less.
Security of Kava protocol
Notably, the native protocol of Kava crypto enjoys adequate security. As its host, the cosmos platform aids the security of the lending protocol with its tendermint proof-of-stake mechanism. Occasioned by this development, the entire system banks on best 100 nodes acting as validators to verify and authenticate the legitimacy of every operations and transactions carried out on the lending platform. These validator secures rewards for participating in securing the platform. But, if they fail to prevent malicious activities, they become punished too. Additionally, the Kava crypto platform usually initiates a regular security audits. These audits assist the platform to check the smart contracts, ensuring they work as expected.
Remarkably, Brian Kerr, Ruaridh O’Donnell and Scott Stuart co-founded Kava crypto and its protocol in 2018. The establishment of the project started with the creation of Kava labs, a for-profit making company. As revealed, this company runs the affairs of the platform , developing and driving it to the taste of its users. A year after its launch, the team initiated a sale of Kava crypto on popular crypto exchange, Binance. Through this, the team sold 6.5% of the total supply and made about $3 million. In 2020, Kava crypto and its decentralized lending protocol launched on Cosmos.
Future of Kava crypto and its protocol
Likewise, investors can purchase the token and hold it to grow it. Considering the previous market performance of Kava crypto, investors can take a calculated risk on it. Though, they must carry out independent market research before committing their funds. Notably, Kava crypto has a 92.90% return on investment.
The technicality behind the value of Kava crypto is based on its strength, relevance, mainstream and adoption. In the past, the token has shown a high degree of volatility owing to the general nature of the crypto market. Notably, Kava crypto looks likely to enjoy more growth as collaborations, new features, roadmap updates, mergers and addition of support for more tokens. Also, like what we witnessed in 2021, a positive market atmosphere can as well, birth a good market position for the Kava crypto.
However, the future of the project can come under threat owing to the unclear regulation of the industry globally. Similarly, the collapse of projects in the cryptocurrency space can also affect the growth of Kava crypto. Lately, investors are skeptical about venturing into the crypto market as regulations are unclear and firms demise. They are reluctant to commit their funds to project in the fear of losing their money. These are possible threats to the future of the Kava crypto.
Kava crypto has been integral towards the expansion and global acceptance of the industry. To a reasonable extent, Kava crypto is currently relevant in the sector due to the increasing popularity of the DeFi projects. More so, the user-friendly interface and the unambiguous use cases of the project have aided its acceptance.
Nevertheless, the token is struggling lately as the downturn of the cryptocurrency market continues to hit hard. While the sector is shedding heavy losses, Kava crypto hasn’t been spared. Just like others, the crypto has been responding to the prevailing market indices of the sphere.
While the development team are doing everything possible to rescue the situation of Kava crypto, the bear market hasn’t helped things. The development team of Kava crypto runs a burning program capable of pushing the value of the token upward. As revealed, this program started as part of the measures to aid the value of the crypto. With that, investors remained assured about the authenticity of the project. More so, its team promised to be transparent with all its dealing to enhance the project. However, investors must still remain careful about their investment decision on Kava crypto as well.
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