What Is Kava Lend?
Kava is a software protocol that uses multiple Cryptocurrencies to allow its users to borrow and lend assets without the need for a traditional financial intermediary. In this way, Kava is considered one of a number of emerging decentralized finance (DeFi) projects. However, whereas most DeFi projects run on Ethereum, Kava is instead built on Cosmos, a design decision its team argues adds additional functionality. Users of its platform lock cryptocurrencies into smart contracts on Cosmos so that they can borrow loans denominated in USDX, a cryptocurrency pegged to the value of the U.S. dollar.
Kava leverages a feature in Cosmos called zones to manage the crypto assets it accepts, which then run in programs on independent networks. This allows the project to broaden the number of crypto assets borrowers can use to include XRP, BNB and BTC, among others.By collateralizing cryptocurrencies to mint USDX, users receive weekly rewards in the form of KAVA, Kava’s cryptocurrency. The total amount of KAVA users receive is dependent on the type of collateral used and how much USDX a user mints. As an example, minters using BNB as collateral receive a share of the 74,000 KAVA that the platform issues weekly. If you wish to receive regular updates from the Kava team, including announcements on newly listed assets, you can bookmark the Kava Blog.
Who Created Kava?
Kava was co-founded by Brian Kerr, Ruaridh O’Donnell and Scott Stuart in 2018. That’s when the founders established Kava Labs, a for-profit company whose goal is to develop and drive the creation of the Kava platform. The Kava team next held a token sale on the cryptocurrency exchange Binance in 2019, at the time raising $3 million through the sale of 6.5% of the total KAVA supply. Kava’s decentralized lending platform officially went live in June 2020 at which time BNB could be used as collateral for borrowing USDX. As of August 2020, $24 million worth of BNB were locked into contracts, with 8 million USDX borrowed.
How Does Kava Work?
Kava allows users to lock assets in special smart contracts and borrow USDX.On the back-end, this creates what is called a collateralized debt position (CDP), a contract designed to ensure the value of USDX remains pegged to the U.S. dollar.
To set up a CDP, users:
- Deposit crypto – Users can connect their wallets to deposit cryptocurrencies.
- Withdraw crypto - Once the crypto is returned to the user, Kava burns the USDX.
- Create a CDP – Kava locks the deposited cryptocurrency in a smart contract.
- Create USDX – Users are issued USDX loans based on the value of the CDP.
- Close a CDP - Users repay the debt plus a fee to unlock their collateralized crypto.
Why Does KAVA Have Value?
