Beyond the Ethereum platform there are currently very few platforms and projects that can offer DeFi services. One of the few is KAVA. KAVA is a platform that has a native token, which launched in 2019 as IEO on Binance. A problem, which is currently omnipresent in the DeFi space, is the limitation of lending crypto currencies, which primarily have nothing to do with Ethereum. Maker, a protocol on the Ethereum blockchain, for example, only allows the borrowing and lending of Ether or ERC20 tokens. Critics claim that this would harm the DeFi area, as those services are limited to only one blockchain, which is contradicting to the very meaning of Decentralized Finance.
This is where KAVA comes in. The platform makes it possible to use other crypto currencies, beyond the Ethereum Blockchain, as collateral for a loan. Especially larger crypto currencies, such as Bitcoin and Ripple, can be deposited as crypto assets in the CDP (Collateralized Debt Position). In return, users can take out a loan in the form of USDX, a stable coin. USDX is minted in a similar way as DAI, which is the decentralized stable coin in the Maker protocol. USDX, just like DAI, also has its own savings rate.
As of today, you can only use wrapped Bitcoin (tokens on Ethereum) as collateral in DeFi services, but not native bitcoins. On KAVA real bitcoins can be deposited and used. Therefore, Kava makes blockchains interoperable and combines their liquidity.
Kava has also a lending mechanism, which allows people to earn interest rates on BNB, BTC, XRP and more. This is possible through a similar technology as Aave or Compound.
Since KAVA was also launched as an IEO on Binance, it is clear that Binance is also pursuing certain goals in this sector. KAVA is a kind of entrance ticket for Binance into the DeFi space. As a central exchange, Binance is a big player, but must also adapt to the development towards more decentralization. KAVA therefore also has a certain priority as a project for Binance.
KAVA is expected to attract "conservative" users, who currently have their positions mainly in Bitcoin and Ripple. This expands the range immensely, as DeFi is still very young and not yet established in the general public crypto industry. Many investors often see various tokens as speculative objects, KAVA could thus bring more steadfastness and continuous growth into the space through new applications.
The token from KAVA is a utility token and is primarily intended to cover three tasks: Firstly, security, of course. KAVA tokens are sent to the validators as block bonuses and transaction fees. If the general rules and guidelines of the blockchain are violated, the validators risk losing all tokens. On the one hand, this creates financial incentives, but it also prevents possible cases of fraud.
Furthermore, the KAVA token acts as a lender of last resort, since if the system is no longer sufficiently secured, KAVA is used to buy USDX from the market in order to sufficiently secure the system again.
The third purpose fulfilled by the KAVA token is a democratic aspect. KAVA tokens are also used for elections and proposals on critical Parameters of the CDP system. Token holder therefore decide on key features of the protocol, including, which assets are supported as collateral, their debt limit, collateral ratio, savings rate of USDX and much more.
KAVA is one of the most exciting DeFi protocols in space and has a great potential for development. By trying to integrate large and already established coins like Bitcoin and Ripple into the DeFi Space, one naturally attracts a lot of attention, while it simultaneously benefits the whole area. But the token also fulfills a kind of purpose for Binance, as the Exchange protocol should pave its way to the DeFi space. Furthermore, it has to be stressed that KAVA, among others with Ripple and Cosmos, has well-known partners for their project. The platform itself could fundamentally change and simplify the lending of crypto currencies across different blockchains, which every DeFi enthusiast can be happy about. KAVA's solution-oriented approach to simplify the lending of various assets can add significant value to the entire space.