Kyber Network, a Token with Massive Potential
Today I will be taking a close look at Kyber Network, a project that is quickly shooting up the ranks on Coinmarketcap. Kyber Network Crystal is a decentralized exchange protocol that aggregates liquidity from numerous pools to provide end-users with competitive prices on token swaps. It aims to be the go-to liquidity layer for DeFi; a fast-growing space that gives this token a huge growth potential. Recently I have taken an interest for this project which has led me to open a position which I will be dollar-cost averaging as prices move in the following weeks. I will also be publishing monthly updates to see how the situation evolves, as new features and developments see the light. Let’s look now at some of the facts that make this token so interesting.
If we look at the market data, KNC is ranked in 39th place on Coinmarketcap, with a price of $1.18 per token and a market capitalization of $212 million, but the market it aims to be at the center of is worth billions so this is probably severely undervalued. The total supply is 210 million but this number is shrinking due to the fact that 70% of the fees collected by the network are being burnt. This proportion could change after the upcoming DAO but whatever the exact percentage that is set, the burn is rapidly reducing the supply with 5 million coins already burnt.
As for exchanges to buy the token, of course you can use the Kyber Dex, but there are other options. KNC is listed on most main exchanges like Coinbase Pro, Okex, Binance, Upbit… All of these are pretty big exchanges, so liquidity for the coin is very healthy.
The price has grown by 62% since the 1st of May which might be discouraging for some investors but I believe that the price still has a higher upside. It was the release of the ecosystem’s stats, the announcement of the upcoming DAO and the new Katalyst protocol that made the price explode. These developments are still being worked on and will probably be launched at the end of June or already in July. I expect that once the Katalyst protocol has been implemented we will see a further movement up.
Their website, Kyber.network, explains in great detail the nature of the project. Kyber network is an on-chain liquidity protocol that can be easily implemented into a dApp or website. A good example is DataDash’s new project called Unifox which has already integrated Kyber. But Kyber has many other partners and users of the protocol, and the list keeps growing.
There are multiple benefits from using the Kyber DEX. With it, you get instant trades without relying on an order-book to get your order filled. Furthermore, your order either will fill for the full amount or not at all so you will not be left with some dust after a partially filled order. You also get transparent prices that are very competitive thanks to the high number of liquidity pools. On top of this, we have had a recent integration with Chainlink price oracles that further decentralize the price data.
But not just end-users can benefit from Kyber. One of the biggest problems dApp creators have to face is how to obtain access to good liquidity for their tokens. With Kyber you can swap any ERC20 token into another, which means that any token deployed to the Ethereum network will automatically be available for swap.
The way the network works, market makers, token projects, liquidity pools and token holders provide liquidity, that is then aggregated and channeled through the Kyber network to be provided to dApps, wallets, exchanges or end-users.
The following popular blockchain interfaces already include a Kyber integration: Myetherwallet, Enjin, Imtoken and Eswap. But let’s look at how to exchange tokens from the Kyber Swap website, since it is their own product.
First you need to plug-in your wallet, be it Metamask, Ledger or Trezor. After that you can select a pair of tokens to swap, and it will offer you an exchange rate. Select the amount, click on swap and that’s it. This is considerably more convenient than using a centralized exchange, where you might even have to go through a tedious process of KYC before you can begin trading. This shows why the DEX (decentralized exchange) industry is growing so fast, as exchanging tokens this way has only advantages. At the moment only ERC20 tokens can be swapped through the network with the addition of some EOS integration.
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This Kyber-swap is the first of three components that form the Kyber network. The second one is the Kyber Reserve, which consists of third parties contributing tokens to the liquidity pool; and the third one is the Kyber-Developer. This has been instrumental in bringing new dApps, exchanges, wallets and other projects into the network, as it provides the documentation and tools they need to integrate their projects into Kyber’s liquidity pool.
If you want to read more about the functioning of Kyber network I recommend the following article:
https://www.exodus.io/blog/kyber-network-review/
The token behind the project is called Kyber Network Crystal token, and it has three main uses: The first one is to pay for fees, a proportion of which is burnt. At the moment the fee rate is 0.2% and 70% of that is being burnt with every operation; however this will change with the upcoming Katalyst upgrade. Also KNC ensures the smooth operation of the reserve system, as entities must use third-party tokens to buy the KNC that pays for their operations in the network. Finally, the KNC token binds together the Kyber network and the exchanges, wallets and dApps through a virtuous circle in which entities are rewarded with referral fees for redirecting traffic to the Kyber network.
However there are other upcoming uses for KNC. In the near future KNC will be able to generate passive income as it will start providing staking. Additionally, the new protocol will include governance options for the token so that holders can vote on key network parameters and other issues. The proposals will be bi-weekly and the system follows a delegated PoS structure, so if you don’t want to vote you can delegate your vote to third-party providers without sacrificing custody of your coins.
After Katalyst, there will be three main direct beneficiaries of the Kyber network: reserve managers, dApps and KNC holders.
The Katalyst upgrade will benefit reserve managers in that part of the collected fees will go to them as a reward for providing liquidity. This is also beneficial for the network, as offering this incentive leads to much greater liquidity reserves.
For dApp integrators, the new system will allow them to set their own spread, which essentially gives them control over the fees and the possibility to design their own business model. This is a good incentive for dApp developers and is expected to promote Kyber integration.
KNC holders will receive a portion of the network fees by staking their KNC, and by participating in the KyberDAO. So if you’re planning to stake the coin, remember that you will receive higher rewards if you participate in the voting.
If you want to stay up to date with the Kyber network I highly recommend joining their discord channel, where at the moment there are active discussions about fee distribution among the three pillars of the network. Here you will find details on the planned reward calculation for KNC holders. As a KNC holder you actually have the option to vote on this topic and decide how much of the fees go to token holders, how much is burnt, and how much is allocated to reserve rebates (for reserve managers). If you want to join their discord channel, just follow this link: https://discord.gg/CvPBTMu
As for the network statistics, the metrics you’ll find on their website are monthly USD volume, monthly trades, new users and unique addresses. All of them show a very consistent growth month by month that lately seems to be speeding up. And if we check the top 15 integrations list for Kyber, number one is as expected KyberSwap that saw a volume of $42 million in May, but you will see other very well known projects down the list which is evidence that integration is speeding up.
To summarize, there are many points about this project that convinced me to invest and get involved with it. Institutional investors are sure to like it, as it provides access to a steady sustained revenue-stream. Also all of those people that enjoy having a passive income from PoS coins will like this one, since it is a very well-established project compared to other staking coins. Staking will also lock some of the supply, taking it away from the market, which combined with an increased demand can make the price shoot up rapidly. But also, all of this has a very solid use-case as basis, as I believe a DEX is a much better system to exchange crypto-assets and the sector is likely to keep growing in the future. The more the network grows, the more fees will be paid and the more of the coin will be burnt, which further reduces supply. A token that makes all of this possible is an excellent asset that can provide very substantial profits in the long-run. All of this gives KNC a very bullish outlook.
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Video: https://youtu.be/95uZA_Fe6xk
