What is KAVA?
Kava is a decentralized protocol that allows users to borrow and lend assets using various cryptocurrencies without the need of a conventional financial middleman.
Linking the recent emergence of decentralized financial (DeFi) initiatives to Kava, one of a number of new projects, this is one way to think about it. The creators of Kava believe that by using Cosmos instead of Ethereum, the project gains extra capabilities.
Cryptocurrencies that are staked on the platform are put into contracts on the Cosmos network and bound to the value of the USDX coin, which is tied to the value of the U.S. dollar.
Crypto assets accepted by Kava use a feature of Cosmos called zones to govern their arrangement, which are operated by separate networks. The initiative has the potential to enable borrowers to access more crypto assets including XRP, BNB, and BTC.
Users of USDX may earn weekly incentives in the form of KAVA, the cryptocurrency of KAVA.
How Does KAVA Work?
Kava enables customers to save funds in a customized smart contract and get USDX by pledging the assets as collateral.
The derivative on the back end, referred to as a collateralized debt position (CDP), effectively stabilizes the value of USDX, helping to guarantee that the American dollar maintains its value.
Kava (USDX) is usually over-collateralized, which means that borrowers deposit more collateral than is necessary to ensure USDX token liquidity.
In order to determine the liquidation price, we utilize the ratio of debt to collateral.
A collateralization ratio of 200% means that a user would be liquidated if the USDX (the collateral held in the protocol) is worth less than 2x the value of the cryptocurrency held in the protocol.
The collateral stored in smart contracts will be automatically liquidated and burnt if the debt-to-collateral value falls below a defined level.
What is the History of KAVA?
In 2018, Brian Kerr, Ruaridh O’Donnell, and Scott Stuart started the company Kava alongside each other.
In order to create the Kava platform, the creators formed a for-profit business called Kava Labs.
Next, in early 2019, the Kava team had a token sale on Binance, where they raised $3 million by selling 6.5% of the entire KAVA supply.
The decentralized lending platform for Kava, which had been in development since early 2019, was formally launched in June 2020, and this time USDX could be used as collateral for loans. A total of $24 million in BNB has been locked into contracts and an equivalent amount has been borrowed USDX at the present exchange rate.