Investors and the media have focused on selected DeFi projects because of their volatile rise in valuation. The likes of Compound are expected to remain at the center of discussion.
Decentralization has always stood as one of the most compelling narratives in the crypto industry. Combine this feature with broader financial systems, then you have an inherently disruptive innovation driving the crypto movement into mainstream consciousness.
The goal is to detach financial services from the auspices of cumbersome and expensive legacy systems with the help of blockchain technology. Already, this framework has birthed financial tools that are slowly becoming the toast of the crypto community. The growth recorded in the DeFi market in recent weeks is so impressive that experts believe that it will drive the next phase of crypto adoption.
On the 27th of June, a news article published on Cointelegraph detailed the explosiveness of the DeFi market and the chances that we might have a bubbling financial bubble on our hands. In it, the author Andrew Singer identified three events that might suggest that the DeFi ecosystem is approaching the bubble territory. First was the unprecedented rise in the value of Compound’s governance token from $64 to $3352 in just under five days. The second was an almost similar price spike of Balancer’s governance token within 12 hours of going live on the Ethereum mainnet. Lastly, there was an 80% increase in the total value of US dollars locked in the DeFi ecosystem over the past 30 days. As explained in the article, growth patterns such as this are common in the “startup space when a product idea catches on.”
Just as 5G is the new driver in the smartphone market, so also has DeFi become the most potent development factor in the crypto space. Investors are increasingly buying into the DeFi hype, and this has changed the dynamics of the crypto space. The long-term viability of the DeFi market hinges on viable platforms, which will eventually take up the mantle and lead new phases of growth or establish decentralized finance in the heart of the global financial sector.
One of such DeFi systems considered is Kava, a cross-chain lending platform. Note that this sentiment is not due to the mere fact that the lending niche remains the sector gaining significant traction. In contrast, the governance model, market visibility, innovative edge, and recent launch of the company’s lending platform featuring BNB and USDX rewards are some of the reasons why Kava is positioned to play a crucial role in the upcoming DeFi expansion.
For one, the project has attracted significant coverage in some of the most reputable media houses in the crypto scene. Jennifer Spencer, writer for Entrepreneur Magazine called Kava “the Uber of Bitcoin”. Andrew Rossow, writer for the Today Show and CoinTelegraph also highlighted Kava’s uber-like business model and noted that the team behind KAVA has “adopted the growth-by-decentralization model by automating the process for users anywhere in the world to instantly generate loans and seamlessly connect them to global demand.”
With respect to the similarities between Kava’s development and Uber’s, I believe it’s better to call Kava a hidden gem of DeFi. However, it becomes necessary to ask why Kava is deserving of the “hidden gem” tag and how it compares with the more celebrated DeFi platforms like Compound and Maker.
Facts and Figures Showing Kava’s Prominence within the DeFi Narrative
As expected, investors and the media have focused on selected DeFi projects because of their volatile rise in valuation. The likes of Compound will remain at the center of discussion as long as its token continues to generate unprecedented returns to investors. According to the data from DeFi Pulse and DeFi Prime, Compound is the clear winner in the budding DeFi space with over $600 million locked in the platform, while Maker is a close second with over $500 million worth of assets locked. The fact that both systems rely on the Ethereum blockchain means that they are not only competing for dominance in the broader DeFi ecosystem but are also vying for prominence in the smaller Ethereum landscape.
“Listing Kava on DeFi pulse is very similar to adding an ethereum project. Each kava full node exposes the necessary endpoints to display the data that DeFi pulse needs, similar to how Ethereum nodes (like infura) can be queried to display stats for ethereum based projects,” said Kevin Davis lead engineer.
Conversely, some believe that Kava has managed to sidestep this restriction by enabling a lending platform that captures the users of a diverse array of crypto assets, which include BTC, XRP, BNB, and ATOM. At the same time, it has rid itself of the limitations attributed to the Ethereum Network and adopted a more robust native blockchain lending facility that will ensure that it continues to deliver premium financial services to users of major cryptocurrencies like BTC, BNB, or XRP to name a few. Brian Kerr, CEO and co-founder of Kava Labs, has maintained that Ethereum does not possess the architecture necessary to meet the scaling and security requirements of DeFi systems. I reached out to Brian for comment and he chimed in:
“A lot of the early development in crypto happened on Ethereum because it was the only smart contracting system available. It was the first, but many other superior platforms have been built since.”
Apart from possessing an innovative edge and capturing a broader market, Kava has had a good run in the DeFi market, regardless of its $40 million market cap, which is pale when compared to the performance of Compound and Maker. But if you look beyond market cap and focus on other metrics, you will notice that the token has averaged a $15 million daily volume in the last few months, thanks to its availability on over ten crypto exchanges including Binance.com. A closer look at the platform’s economic blueprint indicates that there are enough reasons why Kava could topple the current rankings of the DeFi market.
Proponents argue that it has created a formidable economic foundation by supporting a wide array of popular coins. If Kava manages to attract bitcoin holders in their numbers and locks just 2% of the cryptocurrency’s market cap valued at over $160 billion, then it has enough leverage to lead the DeFi narrative. The same level of success is probable in the XRP ($8 billion) and BNB (over $2 billion) landscape, where who knows what could happen, but when you look at the network effect and the percentage of BAT now locked in DeFi (80%+), assuming only 5% or 10% of the market caps respectively is not an unreasonable claim.
Unsurprisingly enough, Kava’s “hidden gem” tag is somewhat substantiated by the pedigree of investors, partners, and validators associated with the project. The long list includes Lemniscap, Arrington XRP Capital, Binance, Huobi, Okex, Cosmos, Ripple, and Hard Yaka fund of Greg Kidd – a serial investor linked to Coinbase, Square, Twitter, and Ripple. The company is based in Silicon Valley and the founding team has a 17 year combined experience of Silicon Valley VC backed software startups to high return ratio. Meaning, it’s a similar group of entrepreneur friends like what has been seen in the case of successful DeFi projects like Compound.
Robert Leshner, CEO of Compound, happens to be an investor in Kava as well. Who knows, maybe Compound will integrate the Kava blockchain soon. Judging by its ability to pool formidable allies, and their highly specialized growing developer team of Yale and UC Berkeley grads and PhD’s, there is no doubt that Kava is poised for great things. However, it has a long way to go before it can feature prominently in the DeFi conversation.
By the way, the heady days of the airdrop era are behind us, but there are still these opportunities around in DeFi yet. And Kava is offering a year-long giveaway to win a share of KAVA tokens in weekly draws.
Cryptocurrency investor, journalist, analyst, and growth hacker. I cover crypto, blockchain, crowdfunding, and education.