“Crypto Is Very Much An Attention Economy” – Brian Kerr
Cryptocurrency advocate and analyst, growth hacker
According to data from DeFi Pulse, the value of assets locked in the DeFi ecosystem has doubled from $1 billion to $2 billion in just under one month.
Without any doubt, the lending niche has been at the heart of this unprecedented growth, with platforms like Compound and Maker leading the DeFi narrative and attracting over $1.2 billions worth of assets.
So, I decided to dig into the DeFi landscape in search of a next promising protocol or a token potent enough to explode like Compound. And, actually, I found one. And invested 1BTC in the project called Kava.
“adopted the growth-by-decentralization model by automating the process for users anywhere in the world to instantly generate loans and seamlessly connect them to global demand.”
I figured that if Kava could attract just 2% of the Bitcoin’s Defi Market, worth over $170 billion, then the value of the assets locked in its platform will automatically rise to $3.4 billion.
Already, this forecast beats Maker and Compound’s current locked assets, valued at $600 million and $670 million respectively, Furthermore, I expect Kava to capture 10% of BNB and 5% of XRP locked in DeFi, resulting in potential in the inflow of an additional $600 million worth of assets into its ecosystem.
Nonetheless, the data available on CoinMarketCap does not reflect these opportunities, nor does it capture the real value of the token. CoinMarketCap only focuses on the tradeable circulating supply of tokens to estimate the market cap.
This model of calculating market value does not do justice to tokens like KAVA, which support staking.
As a matter of fact, there is 89 million KAVA, worth around $111.5 million staked. Hence, its position on CoinMarketCap’s ranking is not a true reflection of the token’s value. KAVA has consistently averaged a $15 million daily volume, which places it among the top 50 of actively traded cryptocurrencies.
Although the metric system of CoinMarketCap has failed to showcase the real value of the Kava market, you will expect a more niche-based ranking infrastructure, like DeFi Pulse, to accurately estimate its size. However, this is not the case because the DeFi Pulse protocol only tracks on-chain data from Ethereum smart contracts.
Thus, data detailing the performance of Kava and its token is not featured on DeFi Pulse. A similar trope affects platforms that do not rely on Ethereum blockchain. For instance, though there are over 9000 BTC locked as BTCB on Binance Chain, yet the token does not feature on DeFi Pulse’s rankings.
The inaccurate tracking of KAVA’s value on CoinMarketCap and its absence on DeFi Pulse gives credence to its growing reputation and shows that the real value of KAVA token is higher and at the same time – hidden.
So I would prefer to call Kava not an Uber of Bitcoin, but a hidden gem of DeFi.
Note that the market opportunities highlighted in this article are peculiar to Kava because it supports more than one major crypto asset. Unlike Kava, Compound and Maker’s growth is bound to the Ethereum market. As such, they are neither a direct competitor to Kava nor do they have the community potential to rival its development.
Likewise, its decision to enable an incentivized community-based system that cuts across established crypto infrastructures shows that Kava token is poised for an inevitable price uptrend.
Kava is one of the few token projects Ripple has invested in. Similarly, it caught the eye of Hard Yaka fund, co-founded by Greg Kidd – known for his track record as a serial investor in unicorn companies like Coinbase, Twitter, Square, and Ripple. Other investors include Lemniscap and Arrington XRP Capital.
I had a chance to have a short interview with Brian Kerr, CEO and co-founder of Kava Labs. We discussed prevailing trends in the DeFi market, infrastructures of the Kava platform, and the prospect of the ecosystem.
Andrey Sergeenkov: Different growth metrics are indicating renewed interest in the DeFi landscape regardless of the few setbacks recorded earlier this year. Can you tell us some of the factors that brought about this unprecedented demand for DeFi tokens and protocols?
Andrey Sergeenkov: Don’t you think that it put extra pressure on developers to fast-track an already blistering paced development cycle?
To your point, I think some teams have cut corners, especially in the code review and audit phase which is dangerous because a minor bug can lead to severe loss of users funds in these types of applications. The hacks and issues that occurred earlier this year were great reminders to teams across the space to ensure they have a robust process for evaluating, testing, and auditing their code before deploying it and having user funds at risk.
Given the recent growth of users, collateral in DeFi, and other metrics that positively impact the fundamentals of these DeFi applications suggest rapid growth and demand, not a bubble.
Andrey Sergeenkov: How does Kava fit into these narratives? Has the recent DeFi hype rubbed off on its market visibility?
In terms of attention, getting added to FTX exchange’s Index for DeFi assets was quite nice. All the exchanges want to list Kava because the token is very liquid and trades well and the recent events only help elevate Kava further.
The recent DeFi hype has brought new eyes to the space. Kava has definitely seen an increase in web traffic and users thanks to this. Still I wish Kava was visible on leaderboards like DeFi Pulse so people could see the progress we are making.
Andrey Sergeenkov: The Kava ecosystem has cross-chain functionality that allows it to capture a broader array of markets. How does this put Kava at an advantage and ensure that it has better leverage than the likes of Compound?
Brian Kerr: Ethereum-based projects have tons of competition. Evidence of this can be seen by the number of new money market-like products trying to compete with Compound. Thankfully, because Kava is working on the hard problem of cross-chain DeFi, Kava is competing in green pastures and going after a much larger market.
Andrey Sergeenkov: Is this one of the perks of opting for a more robust blockchain infrastructure than the popular Ethereum network?
Smart contracts on ethereum are usually decentralized, but because of the nature of the turing complete smart contracting system, financial contracts leave an abundant surface area for hackers, bugs, and other malicious exploits to occur.
Additionally, Ethereum’s dApp success is one of its downfalls when it comes to being a platform for DeFi apps. The recent events on Ethereum that plagued MakerDao highlight some of the issues. The transactions from apps like cryptokitties and heavy amounts of ERC-20 tether transactions congest the network to a degree that running financial services in this environment is very risky. This results in prohibitively high gas fees and oracles that cannot get transactions through to post accurate prices leaving the DeFi apps at serious risk.
Andrey Sergeenkov: Judging from the economic blueprint of Kava, it is clear that the ecosystem has established a community-based growth system that ensures active participation and induces interoperability with Binance Chain. Can you explain the technicalities of this framework and how it will help grow the valuation of Kava token?
The community voted for just under ~3.8M KAVA to be awarded over 52 weeks to BNB users that mint USDX and help build its supply. This works out to 74,000 KAVA per week.
Brian Kerr: If it was inflation for the sake of inflation and not something fueling network growth, it would be a concern. This inflationary reward structure is dedicated to driving network growth and early participation. As long as inflation is less than the networks growth, everyone should be coming out ahead.
Andrey Sergeenkov: I am excited about the pedigree of individuals and organizations backing the Kava ecosystems in various capacities. How has the ecosystem managed to attract the involvement of reputable brands, and does it give credence to Kava’s prospect in the DeFi landscape?
Brian Kerr: What attracted the likes of Tendermint, Ripple, Binance, Chainlink and many other leading organizations to Kava? I wish I could take credit, but I think it has been due to Kava’s unique positioning within the space. The world is hungry for DeFi and outside of Ethereum Kava is the only reputable solution capable and of meeting the DeFi needs of the greater crypto space.
Andrey Sergeenkov: What are your long-term expectations for both Kava and the DeFi market?
As DeFi gets expanded from the $27B marketcap of ETH to the $273B market cap of Bitcoin and the other major assets I think we will see a massive influx of attention, users, and capital into the DeFi space.
Looking forward I expect DeFi to also start growing into the mainstream retail space. I see Kava’s USDX with 5%+ APY and other DeFi apps being leveraged in investing apps like Robinhoob and Wealthfront as alternatives to cash accounts. The superior yields in DeFi present a compelling alternative to today’s cash accounts which offer a measly 0.30% APY. Potentially banks trying to attract new customers might move in this direction as well.