Kyber Network Review: Decentralized Liquidity for the World
in Kyber Network Crystal (KNC)
Kyber Network Review: What is Kyber Network? Basic Overview
At the most basic level, Kyber Network is a protocol that enables automated, decentralized, instant, and low-fee exchanges of Ethereum-based assets. These assets include Ethereum (ETH) itself and ERC20 tokens.
Kyber Network is one of the few ICO projects from the 2017 ICO boom that’s both alive and well. The project has been on users’ minds as it and the price of its token, Kyber Network Crystal (KNC), continue to grow.
In this Kyber Network review, we’ll tell you everything you need to know about this increasingly important project, including its potential for growth moving forward.
How Does Kyber Network Work?
Kyber Network not only provides a decentralized means of exchange to compete with centralized crypto exchanges but also connects various token ecosystems to enable the free flow of assets through the decentralized web.
Own some KNC but want to purchase a hardware wallet from a company that only accepts DAI (a stablecoin that mirrors the value of the US dollar)? If they’re part of Kyber Network, it won’t be a problem. You can pay in KNC and Kyber’s smart contracts will automatically convert your KNC to DAI for the merchant.
Instead of being limited to using KNC with Kyber only or DAI with Maker (Dai’s protocol) only, you can use both KNC and DAI on each other’s ecosystems as well as on other token ecosystems.
Kyber exchanges happen faster and cheaper than on many centralized exchanges or payment processors. Not to mention you don’t have to trust anyone, including Kyber, with your funds. Nobody handles your assets other than Kyber’s smart contracts. That’s the magic of smart contracts and decentralization.
Here’s an easy to understand explanation of how Kyber’s magic happens in the background:
Kyber has token reserves that contain various assets that “takers” (users, decentralized applications or Dapps, exchanges, and wallets) can exchange for. Token holders, token projects, market makers, and liquidity pools provide the assets for these reserves.
So going back to the hardware wallet example where you want to use KNC to buy a hardware wallet from a company that only accepts DAI payments.
When you, a “taker”, initiate payment in KNC to a hardware wallet company that only takes DAI, your payment calls Kyber’s smart contracts to start a token swap. The smart contracts draw from token reserves to exchange your KNC for DAI, which is then given to the hardware wallet company. You get more utility with your KNC, while the company gets (relatively) more stable crypto payments in the form of US dollar-based tokens.
So instead of only being able to use KNC in the KNC ecosystem, you can use it with any Ethereum-based ecosystem that’s connected to Kyber Network. Apply that example to not just KNC but every other Ethereum token. Being able to use any Ethereum token freely on Ethereum’s network (the biggest smart contract-based network as of writing) makes every token involved more useful.
Other benefits of Kyber you might like include:
Since all Kyber Network transactions are recorded on the public Ethereum blockchain, you can verify things like exchange rates offered by reserves to see if you’re getting the best exchange rates.
No partially executed orders
On centralized exchanges (and even some decentralized exchanges), buy or sell orders you place might only fill partially. This is annoying if you wanted a certain amount of a token.
Luckily, Kyber doesn’t suffer from this due to the fact that you have all of the Kyber reserve’s assets available for exchange instead of depending on a single buyer/seller on the other side of a transaction.
Easy integration for Dapps, wallets, and other crypto entities
Kyber wants to make it easy for Dapps, wallets, and other crypto entities to plug into Kyber’s liquidity and enhance their offerings. This is something that’s been working amazingly for Kyber, as we’ll show in the Kyber Partnerships/Integrations section.
If you’re looking for a more technical explanation of how Kyber Network works, be sure to check the Kyber whitepaper.
Kyber Network Crystal (KNC) - Kyber Network’s Token
So now that you know that Kyber Network enables a ton of value transfer, what about its token, Kyber Network Crystal (KNC), which some people mistakenly call Kyber Network Coin?
Back to KNC, which does a few things in the Kyber Network:
Reserve contributors pay KNC for every transaction
Remember the token holders, token projects, market makers, and liquidity pools that provide assets for Kyber Network’s reserves? To be a part of the network, reserve contributors pay a fee for every transaction. The fee prevents them from wash trading, or creating fake buying and selling activity in the network.
Reserve contributors do have an incentive to participate in the network though, since they can make money off the spread or the difference between buying and selling prices. However, they have to make sure that this spread is competitive, since Kyber automatically matches takers or token exchangers with the best rates. Favoring the best rates creates competition among reserve contributors to keep spreads reasonable.
Kyber Network integrations (e.g., Dapps and wallets) receive KNC for every transaction
30% of the transaction fees that reserve contributors pay for Kyber Network transactions go to Kyber Network integrations like Dapps, wallets, exchanges, and businesses. For every transaction that they facilitate, they earn KNC. This incentivizes them to onboard more users to their products, growing Kyber Network and its exchange activity even further.
KNC gets burned every transaction
While 30% of the transaction fees that reserve contributors pay to operate in the Kyber Network go to Dapps and other Kyber integrators, 70% is burned, or sent to a random, unusable wallet address.
In other words, by making part of the Kyber transaction fees forever useless with every transaction, the total supply of KNC tokens goes down with every Kyber Network transaction. Following basic supply and demand, if supply goes down while demand stays the same or increases, price should go up.
Kyber Staking (Katalyst Upgrade)
While KNC does have some utility in the current version of Kyber Network, Kyber is planning to increase KNC’s utility even further, by implementing staking, a popular form of crypto passive income, with its upcoming Katalyst upgrade.
Right now, token mechanisms like burning encourage people to HODL but for greater adoption and participation in the network, there needs to be other ways to use KNC.
More specifically, while HODLers and network integrations like Dapps benefit from burning and a portion of all transaction fees, reserve contributors need more of an incentive to join Kyber Network. With reserve contributors only earning KNC on spreads, it can be hard to justify purchasing a lot of KNC to join Kyber Network (since contributors pay KNC for every transaction).
Kyber will incentivize these market makers to participate further via staking by paying them for participating in Kyber Network governance. Governance decisions would include things like transaction fees, the proportion of transaction fees that go towards different things, and listing tokens (potentially huge).
Katalyst will make Kyber more decentralized since stakeholders don’t require a large minimum balance to participate. Nevertheless, the more you stake, the more you earn.
This waiving of the minimum balance also applies to integration with Kyber, which removes a barrier to entry for reserve contributors who were previously thinking of joining Kyber Network.
However, it’s not just liquidity providers that get a lower barrier to entry. Dapp builders will also have the option to set their own spread for transactions instead of the currently predetermined 30% of Kyber’s .25% transaction fee. This encourages many more Dapps to build with Kyber, since some might not be able to sustain a legitimate business with the current 30% of .25% transaction fee model.
The Katalyst upgrade could not only lead to a sharp increase in demand for KNC because of staking rewards but also because, as Kyber continues to become one of the top exchange protocols, people might want a say as to which tokens get listed on Kyber.
It makes sense that holders of different tokens would want to take advantage of Kyber’s ever-growing exchange protocol and have their tokens listed on Kyber so that more people can buy them.
Along with staking rewards, a say in governance, and no minimum balance to stake (as well as to integrate with Kyber), reserve contributors will also receive part of the network transaction fees based on how many trades and trading volume they facilitate.
These kinds of rebates are not only great for market makers but also for takers like Dapps who use Kyber to swap as well. Makers are incentivized to grow trade quantity and trading volume. This means takers also get greater liquidity (ability to buy and sell large amounts without drastic changes in price), more available assets, and generally more trading opportunities.
For reference, it can be very hard to buy or sell large amounts of some Ethereum tokens without going through more obscure and suspicious centralized exchanges. This might all change with Katalyst.
The Katalyst upgrade, if launched successfully, will truly enhance the Kyber Network, the Ethereum ecosystem’s liquidity, and KNC’s value:
Kyber Network Team
Loi Luu, Yaron Velner, and Victor Tran founded Kyber Network, which has its headquarters in blockchain-friendly Singapore. Luu co-founded the decentralized mining pool project SmartPool and created Oyente, the first open-source security analyzer for Ethereum smart contracts.
Notably, the team also has Ethereum founder himself Vitalik Buterin as one of their advisors.
As Kyber Network continues to grow, more and more partners and Dapps are joining Kyber’s ecosystem.
Partners include the likes of many wallets, lending Dapps, and token projects. Dapps and other liquidity takers include:
- Popular Ethereum wallets like MyEtherWallet
- Popular NFT projects like Decentraland
- Popular exchange protocols like Uniswap and Oasis, which powers Maker, the biggest decentralized finance (DeFi) project
- And most popular DeFi applications
Kyber also makes it easy for projects to plug into the Kyber Network ecosystem with developer-friendly resources, which only adds to Kyber’s growing list of partners and integrations.
Kyber Network Future
Clearly, Kyber Network is a heavy-hitting blockchain project.
Frictionless exchange of Ethereum tokens, amazing token economics that will only get better, a great team, and an ever-expanding list of noteworthy integrations as well as partnerships bode well for Kyber Network’s future.
But is there more we should consider?
Massive increase in trading volume
For one, trading volume has been on an absolute tear, even in 2020, despite all the issues in global markets due to coronavirus:
Massive increase in token burns
Another metric to look at is how many KNC have been burned by the network. As mentioned, if supply of something goes down, while the demand stays the same or increases, price should go up.
In the case of KNC, supply has been decreasing rapidly:
Thus, it took 15 months to burn 1 million KNC. After that, it only took 2.5 months to burn 2 million KNC. Then after that, only 3 months to burn 3 million KNC. After another 3 months, number 4 million was burned.
There are 211,322,492 total KNC as of writing. That supply is fixed. At current rates, when crypto is not even close to being as popular as it was during the 2017 cryptocurrency bubble, it takes about 3 months to burn 1 million KNC.
Given that trading volume is rising drastically, too - in other words, people are using Kyber more and more - I think you can see where this is all going. Increasing demand for an increasingly hard-to-get asset.
In case you have any doubts, you can check the KNC burning statistics on Kyber’s tracker, which lists the blockchain records of each token burn.
Connecting EOS and Ethereum (Waterloo)
Another development that bodes well for Kyber’s future is Waterloo, Kyber’s plan to connect Ethereum with EOS, the 2nd biggest smart contract platform.
While Waterloo is still a work in progress, the significance of this development cannot be understated. Connecting the Ethereum and EOS ecosystems would be huge. For example, imagine being able to transfer crypto tokens between EOS and ETH freely without having to convert an ETH token for e.g. BTC before buying an EOS token.
Kyber team is active in the crypto community
Kyber is also very active when it comes to promoting its offerings to developers. Kyber presented at Devcon V (Devcon is the biggest Ethereum conference), Berlin Blockchain Week 2019, ETHIndia 2019, ETHDenver 2020, and many more industry events.
Not only does the Kyber team actively promote Kyber at events, but it also has sponsored hackathons, where the team gives out crypto to developers who build products using Kyber’s technology.
Therefore, not only is Kyber Network itself doing well in terms of network growth and so on, but developers who build the next generation of Dapps will likely be familiar with Kyber due to how active Kyber is in the community.
Kyber Network Wallet
If you’re looking for a place to store your KNC, you have a few options.
KyberSwap, Kyber’s user facing app that lets you swap tokens, has an app for Android and iOS. Note that Kyber’s parent company moved from Malta to the British Virgin Islands so they had to resubmit their iOS app to the App Store. Currently, they are waiting for Apple’s approval. Kyber’s mailing list (join at the bottom of their website) should keep you informed of any updates.
If you prefer not to store your valuable KNC on your phone, you can store your KNC in any wallet with ERC20 support, such as the Exodus Ethereum wallet, MyEtherWallet, or MetaMask. This is because KNC is an ERC20 token.
However, with MyEtherWallet and MetaMask, it’s a good idea to use those services with a hardware wallet like the Trezor or Ledger. MyEtherWallet and MetaMask, a web wallet and browser extension respectively, are too insecure as it is, since your private keys are exposed to the Internet. Hardware wallets are designed so your private keys never leave your device.
Kyber Network Review Conclusion
Clearly, Kyber Network has been on a roll lately. Besides everything we’ve mentioned, Kyber was also the most used DeFi project in 2019. Can they keep up the pace?
While that remains to be seen, this Kyber Network review has shown that Kyber’s prospects look bright and we’re excited to see where Kyber takes the decentralized world moving forward.
Information provided is for informational purposes only and should not be considered financial advice. Investing in crypto assets is speculative and carries a high degree of risk; you may lose some or all of the money that is invested. Past performance is not indicative of future results.