Kyber’s Fade and Rise
Editor's Note: This article comes fromBlue Fox Notes (ID: lanhubiji), reprinted by Odaily with authorization.
Blue Fox Notes (ID: lanhubiji)Understand Uniswap in one article, reprinted by Odaily with authorization.
In the DeFi project, the last article in Blue Fox Notes mentioned Uniswap "
", and today Blue Fox Notes introduces another DeFi project, Kyber. Kyber is an old-fashioned project in the DeFi field. It started to have transaction volume in February 2018, and it has been almost two years now. It was already a hot project in the encryption field before the bubble period in 2017, and it was also supported by V God at that time. However, with the rise of many DeFi projects, it once faded out of people's vision. In 2018, it has been tepid. However, since the second half of 2019, Kyber's development has improved, and it has once again attracted people's attention.
Trading volume
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Kyber's performance
Let's take a look at kyber's data first:
Trading volume
From the perspective of its overall progress, 2018 has been tepid. The real start was on February 24, 2019, when its trading volume exceeded $1,00,000 for the first time. Although the trading volume has fluctuated since then, its average daily trading volume It can basically be above US$500,000, and ushered in the first peak between June and July 2019. The transaction volume is basically stable at more than US$1,000,000, but has since fallen back. However, from November 2019 to the present, there has been a significant upward trend again, and the daily trading volume in the past two months has basically stabilized at around US$1,000,000.
Trading Tokens
Judging from the performance of its transaction volume, Kyber has basically gained a firm foothold. Although the scale is not large, its liquidity and network have basically completed a cold start, giving it a chance to survive and develop.
Transactions
Trading Tokens
transaction fee
Reserve
Locked assets
As of writing, there are 32 reserves in use, and 5 of them have a daily trading volume of more than $100,000, which is currently the main force for providing liquidity.
As of the time of writing, the destroyed fee is 3,559,529.14 KNC, which is worth US$709,770 according to the current price; the total fee is 4,989,983.9 KNC, which is worth US$995,002. Its current circulating tokens are 169,674,270KNC, and its total supply is 212,065,819KNC. That is to say, its burned tokens account for 1.68% of the total token supply. From the proportion of its tokens burned, it exceeds MakerDAO, and its MKR burnt The amount is 1%.
Locked assets
From the above data, its performance in the past year is not as impressive as the three small giants of Maker, Synthetix, and Compound, especially in 2018. However, with the overall development of DeFi, starting from the second half of 2019, Kyber suddenly developed Force, started the momentum. So, how to understand Kyber? Why did it suddenly gain momentum after it faded out of people's sight?
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What is Kyber?
Kyber is a purely on-chain decentralized token exchange protocol that can be executed on any blockchain that supports smart contracts. Anyone can contribute liquidity to Kyber. Token exchangers can realize instant token exchange through the front end integrated with the Kyber protocol. In order to gain competitiveness, it tries to provide the best exchange rate for exchangers. The exchange is atomic, And without permission. Additionally, it plans to enable seamless token swaps across chains.
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Kyber's decentralized token exchange model
The birth of Kyber aims to solve the security problems of centralized exchanges, as well as internal operation problems. At the same time, it is also to meet the needs of users who can exchange tokens instantly in a decentralized way, master the tokens by themselves, and do not need to register with a centralized exchange or worry about fund withdrawals. In addition, it is also the user's responsibility to obtain the best exchange rate. need.
In order to meet these needs, Kyber's solution is to build a network that can connect token changers and liquidity providers through a set of smart contracts. In this exchange network, there are three cores: exchangers, liquidity providers, and kyber core smart contracts.
token changer
Token exchangers in the kyber network include individual users or other subjects, who send requests to smart contracts through portals such as websites, dApps, or wallets, requesting instant exchange of tokens in their hands for target tokens. In addition to individuals, decentralized exchanges or any smart contract can also initiate exchange requests. It is a token transaction protocol without permission. From this perspective, kyber has the opportunity to become the basic component of token exchange in the DeFi field. At present, some wallets such as Trustwallet, and DEX such as Uniswap and Oasis are also cooperating with Kyber.
When exchanging, the exchanger needs to specify the token to be exchanged and the target token, the minimum acceptable exchange rate, and send the corresponding amount of tokens. Its transactions are atomic, either all exchanges are successful, or all are returned (if it fails), and there will be no situation where some transactions are completed and others are not. The figure below is the exchange interface of KyberSwap integrated with Kyber protocol:
Reserve
Reserves are liquidity providers in the kyber network, they provide token exchange for exchangers. Reserves can be individuals with rich tokens, professional market makers, project teams, DEXs (such as Oasis and Uniswap), etc.
However, this reserve is different from Uniswap’s token pool. The token exchange rate and token pairs of the reserve are defined by the reserve managers themselves. These reserves have great flexibility and can be defined through smart contracts, and there can even be human-managed reserves where market makers can actively participate in the management of prices and token pools manually.
Kyber Core Smart Contract
The main function of Kyber's core smart contract is to connect and connect all parties, so that token changers can instantly exchange tokens from the reserve.
Kyber's core smart contract supports the functions of listing and delisting reserve pools and trading pairs. Trading pairs include bidding tokens and corresponding tokens. For example, in the Ethereum blockchain, ETH is used as a bidding token, as a medium of exchange and as a unit of measurement . If it is the exchange between ERC20 tokens, similar to Uniswap, it is also completed through ETH as the trading medium. For example, to exchange 10MKR for DAI, first the MKR tokens of the token changer will be exchanged for ETH, and then ETH will be exchanged for DAI. DAI. Of course, each exchange contract looks for the best exchange rate.
It should be noted that this process is permissionless, and there are potential attacks, such as reserve spam attack (attacker sets up and registers many reserves), malicious reserve execution (refusal to execute bid exchange rate, etc.).
In addition, Kyber also plans to support cross-chain token exchange. It plans to use the relay method used by many projects to carry out two-way relay through the block headers of two blockchains. The block header of one blockchain is continuously submitted to the other. Blockchain smart contracts,
It executes the light client logic to verify the validity of the block header and vice versa.
In general, the core of the Kyber protocol is the exchange of tokens, which provides exchange convenience for token exchangers and liquidity providers, including instant settlement, atomicity of exchange, and public exchange rate verification ( Anyone can verify the exchange rate of the reserve), without permission, and it can also be integrated into other smart contracts to meet the needs of more scenarios.
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Kyber's token KNC, what value does it capture? From the current design of Kyber, KNC is the value carrier of its network and can play its role in security assurance, governance, and ecological development.
From the perspective of value capture, the most direct thing is the amount of its tokens destroyed. Since Kyber already has data, this is very intuitive: as mentioned earlier, as of the writing of Blue Fox Notes, the amount of destroyed KNC has reached 3,559,529.14 KNC, accounting for 1.68% of its total tokens, which means the same as the value captured by token destruction of other projects. By reducing the amount of its tokens, the value of each token is increased. The destruction of its tokens comes from its transaction fees, which currently charge 0.25% per transaction (fees can be adjusted through governance), of which 70% are used to destroy KNC. That is, the greater the transaction volume of the kyber network, the more transaction fees it captures.
In addition, the liquidity provider of the reserve needs to pledge certain KNC tokens (for security purposes), and KNC token holders can obtain governance rights and pledged benefits by pledging tokens (such as depositing tokens into KyberDAO, and then Perform various protocol-level governance, including token economic parameters, upgrade decisions, token listing, reserve management, etc.), cross-chain exchange relayers or token pledges by validators (for security purposes). All three aspects may lock some tokens, increase the demand for KNC, and thus increase its value. But from the current practice, the most direct value capture is mainly transaction costs.
The capture of transaction fees mainly comes from the expansion of Kyber's business.
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At the heart of Kyber’s expansion is its ability to become a fundamental component of the DeFi space. Whether its transaction scale can be expanded mainly depends on whether other dApps, smart contracts, wallets, DEX, DeFi projects, etc. are willing to integrate Kyber.
epilogue
So, how to make others willing to integrate the Kyber protocol? One is to bring value to users of these dApps, smart contracts, wallets, and DEXs, especially a good exchange experience, including better exchange rates, faster exchange speeds, and pure on-chain transactions. The second is to provide economic incentives for the expanders of these ecological networks. Kyber can use the tokens of its KNC treasury to encourage relevant R&D and ecological partners. At the same time, according to the degree of contribution of participants to the network, the corresponding income will be distributed, such as giving more KNC rewards to dApps that bring more transaction volume, and even consider sharing transaction fees for other dApps. This enables other collaborators to share in the success of the kyber network. Third, Kyber is easy to integrate, and it can use the Kyber protocol to serve its users without too much work.
