DeFi Coming to Cosmos.

Kevin Davis
Jun 21 · 3 min read
Introducing Kava’s Cross-chain CDP Platform

The software that runs the Cosmos Hub, Cosmos SDK, is emerging as the framework of choice for many teams building new applications for the decentralized economy. Binance, the world’s largest crypto exchange, built its DEX using Cosmos’ framework. Combined with ATOM, that brings the total assets managed by Cosmos blockchains to over $5 billion in the first 3 months since launch.

Pulling Assets From the Outside In

While new assets on Cosmos are getting a lot of attention, it’s important to remember that Cosmos is designed with existing assets like Bitcoin in mind. Eric Meltzer put it well:

Since the launch of Cosmos, pegged assets are making progress: the first design and specification for a Bitcoin peg zone was published, a fully functional Ethereum bridge was just released, and numerous other peg zones are in the works for other major assets, including Kava Labs’ specification for an XRP peg zone.

With the foundations for asset movement well underway, all that is needed are great venues for them to be used in order to cause a swell of value to be injected into Cosmos.

Introducing Kava - DeFi for Crypto Networks

By applying our expertise in cross-chain settlement, Kava Labs has developed a new technology set that combines the benefits and interoperable functionality of Cosmos with DeFi applications traders want today.

Kava will support a diverse set of crypto assets starting with BTC, XRP, and ATOM

Users can use any asset supported by Cosmos as collateral in Kava, making it accessible to more assets than any existing DeFi platform. Today, Kava’s primary goal is to bring DeFi to assets that otherwise wouldn’t have access. One of Kava Labs first initiatives is applying our cross-chain expertise to bring XRP to Cosmos and provide DeFi services to it. We will be moving to support other assets shortly thereafter and collaborating with other peg zones.

The first products built using Kava allows users to access decentralized leverage and hedging. Kava platform users can gain exposure on their crypto assets through margin trading and hedge using the USDX stablecoin as a stable store of value.

The Kava Token

The Kava blockchain is secured by Proof-of-Stake consensus and has a native token for securing the network called the KAVA token. KAVA tokens represent the ability to secure and participate in the governance of the Kava blockchain. Token holders can stake their tokens directly, or delegate them to a staking service provider. Staked Kava tokens have the ability to participate in the governance of the system, including deciding what types of collateral the system supports and how many stablecoins the system can create. For more information, see the specification.

Deflationary Fees

Users on Kava lock their cryptoassets as collateral and accrue fees on any USDX stablecoins they draw. These fees are paid for in Kava tokens and burned. During normal times, Kava users will close their positions and pay for the fees in Kava, resulting in a deflationary event for Kava tokens.

Inflationary Stabilization

In the event the system becomes under-collateralized due to a crash in the value of collateral, KAVA will be minted and sold for USDX until the required collateralization ratio is restored.

The Road Ahead

The framework for locking collateral in multiple assets and issuing USDX is built. Now the focus is on working with great validators to secure the Kava blockchain and building a community who wants to take ownership and participate in the governance of Kava. If you’re a validator who wants to work with us on launching Kava, reach out in our validator chat!

Join the Conversation and Stay Up-to-date

RiotChat: riot.im/app/#/room/#kava-validators:matrix.org

Twitter: twitter.com/kava_labs

Telegram: t.me/kavalabs

Github: github.com/Kava-Labs

Kava Labs Blog

This publication features news and articles from the Kava Labs team. Kava Labs is a developer of the Kava blockchain, the first cross-blockchain DeFi platform.

Thanks to Scott Stuart and Brian Kerr

Kevin Davis

Written by

I work on interledger and other cool tech in the blockchain and interoperability space for @kava-labs.

Kava Labs Blog

This publication features news and articles from the Kava Labs team. Kava Labs is a developer of the Kava blockchain, the first cross-blockchain DeFi platform.

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