Everything You Want To Know About KAVA’s DeFi Lending Platform
Recently, the collateralized debt position (CDP) platform from KAVA went live. The DeFi Lending Platform features BNB collateral, USDX loans, and minting rewards.
Minting USDX rewards were delayed until the 1st of July, 2020. The reason for this being that the Kava Stability Committee was created to adjust a set of Kava parameters quickly, in response to system conditions. However, in creating this committee, Kava Labs forgot to include delegating one of the parameters that have control of turning on/off USDX minting rewards for BNB users. Nothing to worry about, however, this non-critical issue can still be controlled by governance votes. And by turning on rewards via the on-chain governance process, which will take two weeks, minting USDX rewards can become ready. However, on June 30th Kava Labs announced that the proposal dit not pass.
KAVA Labs has built the DeFi Lending Platform in collaboration with multiple contributors. For example, the cross-chain functionality between Kava and Binance Chain allowed the implementation of Chainlink Oracles on the Cosmos-SDK, and all the core code for Kava’s lending functionality. Furthermore, earlier this year Coindesk announced in an article that Framework Ventures — a fund focused on decentralized finance (DeFi) plays including Synthetix and Chainlink — purchased between 1% and 5% of all Kava tokens. Investing around $USD 750,000 in the platform.
🕵️♂️ What’s Included?
So, what’s included after the Mainnet launch on the 14th of June? The first aspect is an auction, created for: bidding and payout of different auction types, which include surplus auctions, debt auctions, and surplus reserve auctions. Secondly, the CDP, which is the highlight of KAVA. A CDP allows the creation of a stable asset that is pegged to an external price — often the USD — by collateralization with another asset. The collateral is locked in a CDP and new stable assets can be minted up to a part of the value of the collateral. As mentioned before, the KAVA CDP uses BNB as collateral to be able to mint USDX. If you desire to unlock the collateral, you’ll have to repay your debt by returning the stable assets to the CDP. These digital assets will be burned and then the collateral is unlocked. In the event of price changes, this collateral can be seized and sold off in auctions by the system to reclaim and reduce the supply of stable assets.
Thirdly the BEP3 Protocol is implemented to secure cross-chain asset transfers between KAVA and compatible chains, such as the Binance Chain. The way it works is that all transactions are witnessed and transmitted between blockchains by the Binance BEP3 deputy process. The deputy is responsible for delivering tokens when the swap is successfully completed. For more information about this protocol, click here.
Other aspects are the Committee, which is a governance module that makes it possible for groups of accounts to vote and enact proposals without a full governance vote. The Kavadist allows for governance to control the minting of digital assets into a separate module account. The Pricefeed handles the posting of prices for various markets by a group of whitelisted oracles. Upon completion of each block, the median price of all oracle posted prices is determined for each market and stored. Furthermore, validator-vesting a Cosmos SDK sub-module defining new types of vesting accounts, Validator Vesting Account is introduced. Lastly, an Incentive module, that allows for governance controlled user incentives for users who create stable assets by opening a collateralized debt position (CDP) is included.
Besides the CDP going live, there are two new tools to the KAVA DeFi Platform. Those are an auction bot and a Chainlink Price Oracle. The auction bot is still highly experimental, however, it has been tested against kava-testnet-6000. The client software can be configured to participate in collateral auctions. Such auctions happen when a user’s CDP has fallen below the minimum collateralization ratio and is liquidated.
Now that the development of the core modules for the Kava DeFi Lending Platform is out of the way, Kava Labs will shift its focus towards expanding support to additional collateral types and integrating USDX, into wallets, exchanges, and applications. If you’d like to keep updated with the latest news on KAVA, click here.
More Information & Sources
DISCLAIMER: This is not financial advice. Staking, delegation, and cryptocurrencies involve a high degree of risk, and there is always the possibility of loss, including the loss of all staked digital assets. Additionally, delegators are at risk of slashing in case of security or liveness faults on some protocols. We advise you to do your due diligence before choosing a validator.