Kyber Ecosystem Report #24 (Feb ‘21)

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Kyber Network

8 min readMar 15, 2021

Hello fellow Kyberians,

Development of Kyber 3.0 is now in full swing and the team have started shipping important components of the upgrade. One such component is the upgrade to the KNC token itself which will vastly expand its role in growing Kyber Network and this important upgrade is currently being voted on by the KyberDAO. We provide more information on this below.

Another important component is the Dynamic Market Maker and the team recently released the DMM Whitepaper which covers how this new model combines Dynamic Fees and preset Amplification Factors to allow for highly optimized and capital efficient market making. This innovation on existing AMMs will improve on impermanent loss and provide increased profitability to LPs and we look forward to our community and LPs participating in such pools.

As we deliver on Katana and Kaizen, the two major phases of the Kyber 3.0 releases (you can read full details here) the next few months include the deployment of various Kyber 3.0 pieces and we are incredibly excited to be working on these and revealing them as they are ready.

KNC Token Contract Migration

Proposal: github
KyberDAO vote: kyber.org

In essence, the new KNC migration proposal is about adding flexibility to the token to allow it to both undergo upgrades more efficiently, and give the KyberDAO the ability to use KNC to bootstrap and support various growth initiatives.

The current KNC smart contract is not upgradable, not integrated into the KyberDAO, and has a fixed supply. This fixed supply characteristic has meant that although KNC has been a deflationary asset, it has missed out on funding opportunities which other DeFi projects with elastic supplies have used to great effect to increase their trade and volume activity significantly and this reflects in their token valuations.

Of course we do not take a change of the KNC model lightly and why we’ve been in lengthy discussions with all stakeholders over the last few months to dissect and analyze the effects of such a change. The KNC migration proposal is now the most commented on discussion proposal of any Ethereum DAO and is a good demonstration of the high involvement and passion of the Kyber community. We strongly believe that the value capture by KNC through new initiatives that can be funded by an elastic supply far outweigh any dilution effects from a slightly increased supply, and we invite all KNC stakers to vote for or against the proposal as they see fit here.

DMM Whitepaper Released

You might have seen Loi’s recent tweet thread about the innovation the new DMM is bringing to the AMM space and we can’t wait to deploy it on Kyber Network so that LPs in DeFi have a new and improved way to provide liquidity (teaser: this might have gone live by the time you’re reading next month’s ecosystem blog 😉). In a nutshell, the main value proposition of the new DMM is as follows:

Existing & proposed solutions to improving poor capital efficiency and impermanent loss rely on external data or extrinsic compensation which introduces vulnerabilities (while specialized solutions like Curve Finance only apply to similiar token assets such as stablecoins or pegged token pairs)
DMM introduces Amplification Factor and Dynamic Fees to mitigate these challenges.
Amplification Factor (aka a programmable pricing curve) allows pool creators to decide on the price curve of any given token pair (as opposed to the fixed x*y=k constant on Uniswap for example) before deploying the pool. As a result, slippage can be set to far more optimal levels ranging from 5–10X improvement on WBTC/ETH to 100X on stablecoin pairs.
Dynamic Fees allow for fees to fluctuate to reflect the risk in market conditions. The higher the market volatility, the higher the fees to discourage unprofitable arbitrage and shift profits to LPs.

We are hoping the new DMM serves as a launchpad for further innovation in dynamic market making. With billions in daily volume across DeFi, any increases in efficiency in market making mechanisms result in significant savings to stakeholders and the DMM will be an important part of this toolkit.

You can read the full whitepaper here: https://files.kyber.network/DMM-Feb21.pdf

Community Call 3

For an audio/visual update of all things Kyber 3.0, KNC, the DMM, and the KyberDAO, we recommend watching the third KyberDAO community call or reading the recap blog here. Hosted by @DeFiDude, the call dived into:

KyberDAO stats (more than $10M distributed as rewards to voters and rebates to liquidity providers!)
What to expect from Kyber 3.0: Phase 1 Katana Q1-Q2: launch DMM + KNC Migration. Phase 2 Kaizen Q3: introduction of more improvements and completion of full network upgrade
Introduction to the ‘Learn & Win’ series and how the community can help and support Kyber 3.0 throughout Phase 1 and 2.
DMM Progress Update

We also wanted to express our full support for EIP-1559. This proposal aims to make transaction fees far more predictable to users when they submit transactions and therefore reduces overpaying for them, while also bringing a host of other improvements that reduces the risks associated with miner extractable value. This proposal was recently confirmed to be included in the Ethereum London upgrade some time this summer (in the meantime, the Berlin Update goes live in April) and many teams have come out to state their support for it in opposition to some miners’ resistance to deploy this upgrade.

Kyber Network Stats

Although February’s trading activity wasn’t as high as January’s blockbuster figures, volumes surpassed a respectable half a billion dollars and represents Kyber’s second best month of trading volume:

February’s DApp integration volumes were slightly down over January although they remain at relatively high levels compared to the last six months:

Most reserves saw a drop in volumes while professional market makers continue to dominate the top of the reserve tables.

As is usual for DeFi, a lot of the volume is happening against stablecoin pairs and these account for just under half of all Kyber Network swaps:

KNC

KNC holders were in for a double treat over the last month with the airdrop of XTK to any KNC staker that participated in the KyberDAO through xKNC, and the kick-off of the 50,000 FUSE token reward for LPs providing KNC/USDC liquidity on FuseSwap. Between staking in the KyberDAO, LP farming, and lending, KNC holders now have multiple ways to increase the yield on their KNC holdings.

KyberWorld

There are plenty of signs DeFi is expanding its horizons but even we were pleasantly surprised to see Kyber featured in the latest St. Loius Fed report on how DeFi is poised to lead to a paradigm shift in the financial industry. Kyber Network was highlighted as a good example of a DeFi project that ‘serves as a backbone protocol for a large variety of DeFi applications’.

Over the last month you could also have caught us at The Conference Exchanges’ DeFi Edition where we joined a panel with members of the Maker Foundation, Matic, and B.Protocol to discuss the state of DeFi in 2021 and what innovations we can expect to see in the near future, and at Unblock 2021 giving a workshop titled Solidity Development Workflow & Lessons

Recently we also had the pleasure of joining the ASIA DeFi Network and the Japan DeFi Alliance to expand Kyber’s reach across these markets and provide our expertise to up and coming teams.

Middle of March you can also catch us at the Blockchain Africa 2021 Conference alongside our colleagues from Consensus, Aave, and BCG to discuss institutional adoption of Decentralized Finance.

Scammer Beware!

Unsurprisingly, the bullish fervor in the crypto markets have also seen a flood of scammers trying to trick people out of their crypto. We wanted to draw your attention that there are multiple fake Kyber Network telegram groups trying to scam our community members so please always double check to make sure you are interacting in the legitimate channel. Link: https://t.me/kybernetwork

Kyber in the Media

As usual, Kyber was frequently mentioned in the media and we’ve linked a select few below:

AltcoinBuzz, CoinDesk, Crowdfunder, Block Crypto, CoinSpeaker, CoinRadar, Somag News, The Block, AltcoinBuzz 2

Conclusion

February ushered in the Lunar New Year and with it, the Year of the Ox. The Ox encapsulates the Kyber team spirit well as not only is it known for its hard work, but one of its lucky colors is green! As I publish this blog post, the rest of the team are busy heads down coding, brainstorming, and jumping into calls to coordinate and bring Kyber 3.0 closer to reality and we just can’t wait to deliver what we’ve built and watch Kyber Network grow another tenfold. As always, thank you for your support, and Happy Lunar New Year!