In the past few years, blockchain has made its presence known in financial services such as online payments, cryptocurrency trading as well as storage. On top of this, blockchain technology is evolving even faster with the emergence of decentralized finance (DeFi), which promises to fill the gaps in traditional banking. Even though DeFi is a couple of years old, it has started to serve as an enabler of the mass adoption of cryptocurrency and blockchain.
With this mass adoption came DeFi lending platforms such as Kava (KAVA) which allows its users to lend and borrow cryptocurrencies without any involvement from intermediaries. Founded in 2018 by Kava Labs, the Kava blockchain focuses on making financial services easily accessible to all, and along with it offers KAVA crypto, its native coin. But how does it work? And what is KAVA crypto? Let’s find out.
Connecting your Kava Address to ZenLedger For Your Crypto Tax Forms
- To import your Kava transactions into ZenLedger for your crypto tax forms, all we need is your public address.
- Select the proper blockchain or wallet from the dropdown list.
- Paste your address into the address field in ZenLedger.
- Select if the wallet is based in the USA or not.
- Then hit the ADD COIN button
How does Kava work?
Kava is a high-speed Layer-1 blockchain network comprising a developer-friendly Co-Chain architecture that blends two of the most used permissionless protocols—Cosmos and Ethereum—into one scalable network.
The network leverages the speed and flexibility of Ethereum smart contracts and combines it with the interoperability of the Cosmos SDK, powered by the lightning-fast Tendermint consensus method.
Kava also leverages Cosmos to create USDX, a stablecoin, which is linked to the worth of the USD. Thus, every time a user stores crypto supported by Kava as security, USDX is minted and users can borrow crypto in USDX. Along with USDX, the Kava blockchain also offers KAVA crypto, a utility token used as a reserve currency when the system is undercollateralized and also used for governance proposals. Additionally, when users deposit their crypto funds to aid the lending system, they receive KAVA crypto once a week for participation.
With the application-specific blockchains hosted on Cosmos, also known as “zones,” Kava can integrate with other protocols and platforms. This is how users can add numerous tokens to the Kava blockchain for borrowing and lending.
Collateralized Debt Position (CDP)
The protocol uses the smart contract functionality to facilitate a peer-to-peer loaning system. Users can leverage smart contracts to put their funds in place, which leads to the mining of new USDX coins further allowing the users to use collateral for loans.
After this, the protocol automatically creates a distinct smart contract that locks in the worth of USDX to tally the US dollar’s value to minimize volatility, which is commonplace in the crypto market. This entire process is known as the collateralized debt position.
Users can wrap up the CDP and reclaim their collateralized crypto by covering their liability and paying a loaning fee. Once closed, the collateral is stored back in the same wallet and the loaned USDX is burnt or destroyed by the Kava protocol. The network also depends on a collateralization quotient to safeguard the protocol from unpredictability.
Why is Kava Unique?
Kava blockchain has a lot of competition in the DeFi lending space, but what makes Kava stand out from the crowd is its unique ability of interoperability and cross-chain operations all due to the Cosmos network.
As previously mentioned, Cosmos’ “zones” feature Kava loaning protocol users can deposit a host of non-native tokens such as Ethereum, Bitcoin, Binance (BNB), and several other major tokens. However, there’s a catch as all these tokens need to be covered as BEP-2 Binance Chain grade assets to allow collateralization.
Factors that Decide Kava’s Value
The value of Kava is directly attached to its technology, use case, and mainstream use. More so, KAVA crypto’s value also coincides with the market value of the tokens.
The unpredictable crypto market can affect the price of KAVA resulting in substantial price changes in a short time. Other factors that affect the prices are:
- Decisions made by the development team
- New Features
- In Kava’s case, adding more non-native tokens to the protocol
How to Buy Kava Crypto?
Buying Kava is a good way to diversify your crypto portfolio and on top of that, by collateralizing cryptocurrencies and minting USDX, you can earn weekly rewards in the form of KAVA, the native token. Here are the steps to buy KAVA:
- Open an online account with a reputed crypto exchange and consider the following things before choosing one:
Once you choose an exchange, provide your basic information for identity verification and you are good to go.
- Choose a Wallet to safely store your tokens. You can either choose a hardware wallet or a software wallet. While a software wallet is free to download and use, it doesn’t provide optimal security as it is connected to the internet. A hardware wallet on the other hand provides maximum security as it is a physical device that stores crypto and is not connected to the internet.
- Buy KAVA on the crypto exchange you chose after doing your research by adding fiat currency to your crypto account via credit/debit cards, wallets, or direct bank transfers. Lastly, transfer your bought coins to a crypto wallet of your choice.
As the blockchain develops further, Kava is ready to introduce more possibilities for collateralization from different tokens to USDX. Kava’s pioneer program has launched the first of the three unique incentive programs to help the rapid growth of the Kava network. Other than this, Kava’s roadmap includes several launches that will make Kava one of the leading projects in the cryptosphere.