Understanding Kyber Network: a review

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Understanding Kyber Network: a review

TL;DR: You can get a summary of this Thread at the last section of this document

The Kyber Network is a decentralized liquidity protocol that works fully on-chain to enable “atom swaps” across several token protocols. In other words, the problem the Kyber Network was created to solve is that of insufficient liquidity as an increasing number of tokens compete for access to market makers.

By making a token exchange possible without an order book, the Kyber Network allows any token connected to its decentralized liquidity pool to have access to a wide range of reserves.

I will divide this review into 5 sections covering the Kyber Network’s most salient features: KyberSwap potential and use cases KNC token KyberDAO summary.

KyberSwap

KyberSwap is one of the core services of the Kyber Network. KyberSwap is a retail platform that allows for swapping tokens running on Ethereum . KyberSwap does not hold funds at any time, and in fact, powers swaps already in MetaMask . Connect your MetaMask , or a Ledger , Trezor , Coinbase , LINK , WalletConnect , or other Web3 wallet; or open a wallet on the spot with KyberSwap’s Torus integration — and start swapping without deposits, on competitive spreads. KyberSwap is available on Web , Android , and iOS . Their Web app has a Fiat on-ramp integration with MoonPay and Wyre , so you can use credit cards, ApplePay, and wire transfers to buy ETH . The fees are around 2% (vs typical 5%). Another great feature is KyberSwap’s support of Limit Orders, which allow you to set a price to buy/sell in advance instead of monitoring the market — again, these are unlike the exchange version of limit orders: no deposits, no fund lockup, and the low fee of 0.1% is only charged on execution.

Screenshot of KyberSwap web app

Besides ETH , KyberSwap supports over 70+ Crypto tokens including stablecoins like DAI , USDC , TUSD , USDT , DGX — digital gold, MKR , LINK , KNC , SNX , and WBTC — wrapped Bitcoin!

Potential and Use Cases

Through KyberSwap, the Kyber Network is open to any app to integrate the protocol and access its atomic swap capabilities. This means, for example, that a project that normally works exclusively with a certain token can now accept any Ethereum token from its users because those tokens will be swapped instantly into the desired token. A merchant can thus accept various cryptocurrencies while receiving in its funds wallet their desired Crypto. A dApp can function with its native utility token without users having to acquire it in an exchange to use the dApp.

Kyber itself is a marketplace, with liquidity providers or market makers on the other side of users in need of swaps. Although beyond the scope of this article, a user can contribute funds to the Network, becoming part of the Kyber Reserves and making money off the spread from every transaction involving their liquidity pool. The process is technical — something Kyber may be willing to facilitate further down the road.

Diagram of Kyber Network’s business logic

Kyber lends itself well to being an infrastructure for decentralized exchanges and DeFi apps. Liquidity is extremely important for markets, and decentralized liquidity is the backbone of decentralized finance. Without liquidity, markets, particularly in Crypto, suffer from shocks and instability, which prevents true price discovery from happening. Given the daunting task of preventing competition between projects and exchanges from balkanizing the liquidity in the Crypto sector, it is refreshing to see the Kyber Network being extremely developer-friendly. If your protocol is easy to integrate, its chances of getting to solve the problem it is designed to solve are exponentially better. From the project’s side, listing a token on the Kyber Network involves no fees and allows the token to be traded on KyberSwap.

KNC token

The Star Wars-inspired Kyber Network Crystal (KNC) is the utility token of the Kyber Network. Kyber Reserves are required to pay their network maintenance fees with KNC, an ERC-20 token. KNC tokens also give governance rights in the KyberDAO. They can be purchased through KyberSwap and are traded in Binance , Huobi , and OKEx , among others.

KyberDAO

Ever since the DAO, decentralized autonomous organizations have been an aspiration for the Crypto community as they so perfectly embody the Blockchain ethos: immutable code and no central authorities running what would otherwise be considered a “corporation”. Recently, while upgrading its protocol (a release appropriately called Katalyst), Kyber launched its own cybernetic collective, the KyberDAO.

Diagram of KyberDAO’s business logic

The idea behind the KyberDAO is to empower the KNC community to stake its KNC for an incentive (a % of network fees), while deciding on the KNC burning model and rewards structure for Kyber Reserve managers as a community. The KNC community will also decide on the staking incentive itself. The ultimate goal of this governance setup is to move more decisions regarding the technological roadmap of the Kyber Network itself to the KyberDAO as its governance procedures mature. For the time being, the exact allocation of resources is being discussed by KNC holders, more details on the KyberDAO website .

In Summary

The Kyber Network is a transformative protocol that is already an important part of the DeFi ecosystem. It was created by a Team of true luminaries in the Crypto space, and just this March it was breaking volume records ($33.7M in 24H and $200M monthly) in the midst of a bear market, a proof of its utility. The recent upgrade of the protocol and the creation of the KyberDAO offer a powerful model of governance for other projects with infrastructure quality. Moreover, the accessibility of the project to the everyday Crypto user through KyberSwap direct-to-user portals provide a model for other platforms and marketplaces in the Crypto space.

I wish nothing but the best for the Kyber Network and hope for great things to continue to be brought to Crypto by the success of this protocol.

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