What Is Kava, And Why You Better Pay Attention

But what is it?

Kavais a DeFi Platform that provides lending services to holders of major cryptocurrencies. Think of it as a decentralized bank. With $2.1 billion in assets on-chain, a fully diluted market cap of close to $700 million, over 280k users, and $1.8 billion in cross-chain transactions and counting, Kava has a promising future.

You may want to think of Kava as a “MakerDao” for the protocols that are not on the Ethereum Blockchain. However, one of the benefits that Kava offers is interoperability. MakerDao can only accept Ethereumor ERC 20 tokens. That’s limiting and ties the future of the project to the growth of the Ethereum ecosystem. But with Kava, you don’t have to rely on one ecosystem.

Kava aims to extend many current DeFi capabilities used by Ethereum, bringing these functions to other blockchains. Basically, Kava provides access to loans in the form of a stable coin, USDX, which is pegged to the US dollar.

Why use USDX given that there are literally dozens of stable coins out there?

For one, it’s fully collateralized, and 100% transparent. No need for trust, you can instantly verify. Another benefit is that Kava is decentralized–it can never be shut down. That’s not the case for other stable coins that are supported by a centralized infrastructure. In addition, the Kava token earns holders interest through staking. Staking rates range from 3% to 20% depending on different variables.

In early 2022, Kava launched its Kava 9 update which extended its interoperability capabilities. You may be asking yourself: what is the big deal with this update? Remember when we mentioned interoperability? The Kava 9 upgrade enables the Inter-Blockchain Communication protocol (IBC). This expands Kava’s ability to operate as a decentralized Layer 1 token.

What is the IBC Protocol? IBC is the backbone of Cosmos and allows for blockchains to communicate with each other. It provides a layer that enables them to exchange information on their respective blockchain state. This creates trust between all chains within the network.

IBC also facilitates cross-chain transactions without the need for a third party or centralized authority such as exchanges like Binanceor Coinbase. This is where interoperability becomes a big deal. Each channel between Kava and IBC can easily become a major trade route bringing new users and use-cases to the Kava Network. For example, users will be able to bring IBC-enabled assets over to Kava while also seamlessly transferring $KAVA, $HARD, and $SWP to other chains connected via the IBC protocol.

Kava aims to be the top L-1 chain for collateralized loans in the Cosmos ecosystem. This may soon come to fruition. MakerDao and AAVEhave done well on the Ethereum blockchain. By providing an interoperable, cross-chain solution, Kava could replicate that success.

Being able to offer comparable functionality for top crypto assets outside of the Ethereum ecosystem is an important function for wide-scale adoption.

Kava is making major moves to do just that.

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