Is KAVA a good investment?

tl;drKava is a software protocol that uses multiple cryptocurrencies to allow its users to borrow and lend assets without the need for a traditional financial intermediary. In this way, Kava is considered one of a number of emerging decentralized finance (DeFi) projects. However, whereas most DeFi projects run on Ethereum, Kava is instead built on Cosmos, a design decision its team 1argues adds additional functionality. Kava is a cross-chain decentralized finance (DeFi) lending platform that enables users to take out loans by locking-in collateral in exchange for USDX, a stablecoin soft-pegged to the U.S. dollar. Built on Cosmos, the protocol utilizes the ecosystem’s zones feature to provide interoperability and support for cryptocurrencies that reside on disparate blockchains, such as Bitcoin and XRP. At its core, the Kava protocol functions similarly to a bank. It enables users to deposit their assets and obtain loans and charges interest on USDX borrowings and savings. Traditional financial institutions only ever provide these services after tedious registration processes, rigorous credit score checks, and compliance with know-your-customer (KYC) and anti-money laundering (AML) regulations. However, because of Kava’s decentralized nature, users need only supply their wallet address and any supported cryptocurrency to enjoy similar services. Kava's price today (October 4, 2021) is $6.25 with a 24-hour trading volume of $108,163,622. KAVA's price is down -0.9% in the last 24 hours. It has a circulating supply of 91 Million KAVA coins and a total supply of 146 Million. Kava's ROI with 207% in a year underperformed in 'Cosmos Ecosystem, Lending/Borrowing, Finance / Banking, Decentralized Finance (DeFi)' categories which had 341% growth over the past year. It's underperformed in the crypto market which had 2854% growth over the past year. You can track Kava's Return On Investment (ROI) on our website for Free.
Is KAVA a good investment?
Is KAVA a good investment?
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Introduction

Kava is a software protocol that uses multiple cryptocurrencies to allow its users to borrow and lend assets without the need for a traditional financial intermediary. In this way, Kava is considered one of a number of emerging decentralized finance (DeFi) projects. However, whereas most DeFi projects run on Ethereum, Kava is instead built on Cosmos, a design decision its team argues adds additional functionality.

Kava is a cross-chain decentralized finance (DeFi) lending platform that enables users to take out loans by locking-in collateral in exchange for USDX, a stablecoin soft-pegged to the U.S. dollar. Built on Cosmos, the protocol utilizes the ecosystem’s zones feature to provide interoperability and support for cryptocurrencies that reside on disparate blockchains, such as Bitcoin and XRP.

Kava seeks to become the de facto DeFi lending protocol through its decentralized lending capabilities and USDX stablecoin, facilitating access to a greater variety of crypto assets for its users.

The Kava token (KAVA) is the native governance token and staking asset for the Kava protocol. Holders of the token are responsible for governing the protocol, voting on smart contract and operational parameter proposals, securing the network and acting as the lender of last resort. 

How does Kava work?

At its core, the Kava protocol functions similarly to a bank. It enables users to deposit their assets and obtain loans and charges interest on USDX borrowings and savings.

Traditional financial institutions only ever provide these services after tedious registration processes, rigorous credit score checks, and compliance with know-your-customer (KYC) and anti-money laundering (AML) regulations. However, because of Kava’s decentralized nature, users need only supply their wallet address and any supported cryptocurrency to enjoy similar services.

To obtain a USDX loan, users should head over to Kava.io and supply supported crypto collateral to lock into the Kava smart contract. Presently, Kava supports BNB, BTC, BUSD, XRP, KAVA, and HARD as collateral. The generated USDX loan amount will depend on two factors: i) the quantity of collateral locked in and ii) the chosen collateral’s collateralization ratio.

For instance, if BNB is chosen as collateral and its collateralization ratio is 150%, then an individual would need to lock in at least $1.50 worth of BNB to mint $1 USDX. This loan will then incur an interest rate known as the stability fee, payable in KAVA. If an individual fails to keep their collateralization ratio above the asset’s stipulated liquidation ratio, then the locked-in assets will be seized, and a 7.5% liquidation fee imposed. Different assets will have different collateralization ratios, stability fees, and liquidity ratios in accordance with their respective volatility and risk profiles.

To ensure that these loans are overcollateralized, Kava utilizes four key modules in tandem with the KAVA token: i) the price feed module, ii) the auction module, iii) the CDP module, and iv) liquidator module. In essence, these mechanisms help align economic incentives and market dynamics to ensure that the protocol remains stable, secure, and trustless. The inner workings of these core modules can be read about on Kava’s Github page.

The Kava token serves three main functions:

  1. Governance
  2. Security
  3. Recapitalization

For governance, KAVA holders can participate, vote, and propose changes to the Kava protocol. These changes can take the form of smart contract modifications, adjustments to the global debt limit, or the addition or removal of collateral assets, among other considerations. Voting can be conducted either directly or delegated to validators. The numerous implemented and proposed changes can be viewed freely on Kava’s governance page.

In terms of security, KAVA is used to validate transactions on the network. The protocol’s Proof of Stake (PoS) consensus mechanism enables KAVA token holders to stake their tokens and validate transactions. The top 100 stakers, determined by their proportion of staked KAVA, are designated as validators. Rewards are paid to these validators in KAVA derived from transaction fees and block rewards to incentivize proper validation of the system. Non-performance or improper validation results in the reduction of these rewards.

Finally, there is KAVA’s role as a reserve currency for recapitalization. In the event that the Kava protocol becomes undercollateralized, additional KAVA tokens are minted by the protocol and sold for USDX through auctions. This occurs until the system returns USDX to its target peg of 1 U.S. dollar.

Similarly, if the Kava protocol is sufficiently collateralized, the stability fees (paid in KAVA) from loans/collateralized debt positions (CDP) are burned. This reduces the token’s supply and increases its scarcity and value. In this way, proper governance results in KAVA’s appreciation and vice versa.

Financial Analysis

Kava's price today (October 4, 2021) is $6.25 with a 24-hour trading volume of $108,163,622. KAVA's price is down -0.9% in the last 24 hours. It has a circulating supply of 91 Million KAVA coins and a total supply of 146 Million. Kava's ROI with 207% in a year underperformed in 'Cosmos Ecosystem, Lending/Borrowing, Finance / Banking, Decentralized Finance (DeFi)' categories which had 341% growth over the past year. It's underperformed in the crypto market which had 2854% growth over the past year. You can track Kava Return On Investment (ROI) on our website for Free.

A capable marketing team and brand awareness have a direct impact on the success of any project. According to our data, Kava's Twitter account saw an increase of 24% in the number of followers over the months from September 28 until October 04 of 2021. Moreover, its Telegram channel users went up by 2% over the same period. You can follow Kava's popularity using our report, which is accessible in our website's popularity.

Our data indicate that Kava's ranking among the markets' cryptocurrencies in terms of market capitalization increased over the last months, from 142 to 141. Also, its price saw a similar trend, rising from $5.56 to $6.46 today at the time of writing. However, its liquidity score is 57% upper the market's average score, which means that it would be easier to sell the Kava if the market is falling. You can find our report about Kava's market capitalization, price, and liquidity score on our webpage.

You are saying that KAVA Token is the best cryptocurrency to invest in?

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To see our reports and easily compare the available investment options, check out our website.

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