The introduction of decentralized finance has led to the invention of many alternatives to traditional finance and banking services. Some alternatives may provide lending and borrowing, while others provide payment services. There can also be entire marketplaces built using decentralized systems. One such project is the Kyber Network, which is an alternative to traditional crypto exchanges. This article will explain what the Kyber network is and how it functions.
The Kyber network
The Kyber Network is a decentralized protocol that allows users to exchange tokens without a centralized exchange. The Kyber network executes crypto trading all through code instead of relying on services from a single company. This crypto exchange is known as KyberSwap.
This exchange also gives liquidity for other Defi applications. One of the most vital components of financial services is liquidity. The exchange allows the trading of a crypto asset without substantial shifts in its price. Another feature of this exchange is that it enables users to convert assets into cash.
Kyber network technical details
The Kyber network enables users to exchange many ERC-20 tokens, including Ethereum, through liquidity pools.
Liquidity pools
Smart contracts that act as a store for tokens are known as liquidity pools. These pools are vital for the functioning of decentralized exchanges. They provide instant transactions to decentralized exchanges through the easy availability of crypto tokens.
Users known as liquidity providers (LPs) provide tokens stored in the liquidity pools. LPs stake their tokens in these pools. The rewards these LPs receive are based on the amount of liquidity they provide.
The network scans through all reserves to find the best rate for the trade a user has started.
The Kyber network uses three main types of reserves to provide liquidity.
- Automated price reserves: This reserve uses smart contracts to find the best rate for available tokens. Transactions with these reserves occur directly on the network’s blockchain.
- Price feed reserves: This type of reserve pulls data from price feeds. This data is then stored in smart contracts. This reserve is like market makers on the platform.
- Bridge reserves: This type of reserve increases the total liquidity on the network as they access liquidity available on other decentralized exchanges.
ETH is used for network fees, and a part of this fee is put back into the reserves depending on the total liquidity provided by them.
Who owns the Kyber Network?
Victor Tran, Loi Luu, and Yaron Velner created the Kyber network in 2017. The team managed to raise over 200,000 ETH, worth around $50 million in the initial coin offering.
This project was started by a team of three but is now fully decentralized. This project is not owned by any small group of companies or individuals.
What is the KyberDAO?
Users own a part of the Kyber network as long as they own the KNC crypto tokens. Users can take part in the governance of the platform through the KyberDAO by owning its native token. KyberDAO democratizes the process of managing the network; it is a decentralized autonomous organization.
Users can vote on vital issues such as the reward structure for providing liquidity and the fee model of the network once they stake their tokens. The stake rewards for users can also be in ETH.
The KyberDAO ensures the network is a fully decentralized and independent exchange and not controlled by large companies. The network users have the most control over the network’s future.
KNC ecosystem
KNC stands for the Kyber Network Crystal; the native token of the Kyber ecosystem. This ecosystem consists of three main components: the decentralized exchange, the KyberDAO, and the reserves.
Users are empowered by KyberDAO on the network. KyberDAO puts the user in control of the decision-making process. It also ensures transparency in the project.
Users and dApps do not need to worry about the token they use due to the presence of a decentralized exchange. This exchange simplifies trading and app usage and enables easy exchange between various ERC-20 tokens.
Lastly, the reserves enable the exchange to function smoothly. The Kyber network would be unable to support so many users at a time without easy access to liquidity.
Is Kyber Network a good investment?
Investing in the Kyber network means users own the KNC token. Owning KNC tokens enables users to earn staking rewards in ETH and passively grow their income. However, the KNC token has no other purpose other than governance.
Users who are part of the Kybernet ecosystem would want a say in the decision-making process of the platform, especially if they are active users.
The KNC token is trading at $0.90, and the total market capitalization is $149 million at the time of writing. The KNC token hit an all-time high of $5.72 in April 2022.
Users can now buy KNC tokens on Zebpay.
