A talk between Staking Rewards and Loi Luu, who is the Founder and CEO of Kyber Network.
Kyber Network is an on-chain liquidity protocol that aggregates liquidity from a wide range of reserves, powering instant and secure token swaps in any decentralized application.
The team just recently launched its Katalyst protocol upgrade and KyberDAO, which allows users to stake their KNC, vote on important proposals, and earn a % of all transaction fees (currently 65%) from trading activities on Kyber Network. So what further features does Kyber have coming up? And what does Loi think about the DeFi market in general?
We are diving into DeFi’s Key-Value Proposition, Challenges, Competition, Composability, and the role of Bitcoin in DeFi.
SR: Can you share a brief introduction about you and your crypto career? 🙂
Loi: I was originally from Vietnam. Since I was young I have been interested in programming, particularly in how to design algorithms and data structures to solve challenging problems. I moved to Singapore at the age of 22 to pursue my PhD in Computer Science at National University of Singapore. While completing my PhD, I became particularly interested in the topic of Blockchain and Cryptocurrencies. Along with my early academic collaborators, some of whom ultimately became my Kyber Network co-founders, we were impressed by how fundamentally different and game-changing blockchain technology and cryptocurrencies were. In particular, the ability to run an entire global technological and economic system without relying on any centralized party felt like an entire new world. This motivated me to eventually enter the crypto industry.
Why DEXes/DEX Protocols?
SR: What do you believe is the most outstanding advantage of decentralized exchanges like Kyber compared to traditional finance? And what excites you the most about it personally?
Loi: There have been many high profile hacks on centralized exchanges over the past few years, for example Mt Gox in 2014, with millions of dollars worth of crypto assets lost. They were important reminders that you do not have complete control over your crypto assets residing in these custodial services, and risk losing them to hacks.
In 2017, my co-founders and I started researching decentralized exchanges as we couldn’t find any convenient solution for the average user to swap tokens securely. There was also no solution supporting liquidity for the smart contract ecosystem, since incumbent platforms were hybrids that still involved a centralized server. We started developing Kyber Network, a fully on-chain and permissionless protocol meant to provide liquidity for the decentralized ecosystem.
In my opinion, the most powerful advantages of decentralized exchange protocols are the fact that they are trustless, non-custodial, and transactions are fully transparent.
KyberSwap.com, our in-house token swap platform powered by Kyber Network’s fully on-chain protocol, allows fast, simple, and secure token swaps. Users don’t need to deposit or withdraw their assets because everything is run on the smart contract. When users connect their wallet to convert their tokens, they only interact with the smart contact. Trades are atomic, which means that either the trade happens or you get your funds back, and this is guaranteed by the smart contract. Trades are also fully transparent and verifiable.
In addition, since Kyber Network is fully on-chain, interaction with smart contracts and decentralized applications is simple and straightforward, and other developers can take full advantage of DeFi composability and use Kyber for their liquidity needs in a variety of use cases. This is one of the key reasons why Kyber is the most used and integrated protocol in DeFi, with over 100 DApps using us for their liquidity needs.
SR: Which noteworthy challenges do you see that DeFi has to overcome before real adoption can and will happen? How do you tackle these challenges with Kyber Network?
Loi: Based on the various discussions about DeFi I had with other project founders, and the joint user surveys we have participated in, the main reasons for the lack of adoption of DEXs and DeFi in general were the lack of education, smart contract security concerns, UI/UX, and liquidity issues.
At Kyber, we have taken steps to address these issues. We regularly educate our users on the benefits of decentralized technologies over centralized ones, our smart contracts have undergone multiple audits, and our protocol aggregates liquidity from multiple on-chain sources to give better rates and liquidity to our takers (DApps and end users).
In addition, our in-house token swap platform KyberSwap.com is well known for its great user interface and experience, and we continue to iterate and ensure our technical documentation is easily understood and used by developers.
Overall, it is not easy for a single project to overcome all the inherent challenges of DeFi on its own. A team effort is required, and ecosystem participants have to sometimes put aside their different goals and work together to help drive DeFi adoption. A good example of an ecosystem-wide collaboration effort that Kyber helped launch is the Wrapped Bitcoin (WBTC) initiative, in which over 35 different blockchain projects came together to bring Bitcoin liquidity to Ethereum. Today, there are over 15,000 WBTC ($160M) minted and used in DeFi apps on Ethereum.
Staking vs Lending
SR: What is your take on the dynamics between staking and lending KNC tokens? Will there be a competition? Possibly harmful?
Loi: I believe there are merits to both staking and lending KNC tokens. There are many different Kyber stakeholders in the ecosystem, so it is important that KNC can be used in different scenarios.
To recap, KNC is a deflationary governance token which can be used by token holders to stake and vote on important proposals on the KyberDAO, a decentralized governance platform. In return for their participation, these token holders get rewarded in ETH, while selected reserves get rebates and some KNC tokens are burned.
But apart from staking KNC, sometimes token holders might need to use KNC for loans, margin trading, or collateral, and it is great to see that they can already do so on DeFi platforms such as Aave, Fulcrum, Maker, and Nuo.
There are also other KNC use cases (some on other third-party platforms):
- Gas-free, no-fee Limit Orders on KyberSwap.com
- Payments on the Kyber Swag Store powered by Origin Dshop
- Payments at vendors with PundiX terminals installed
- Payments through the Crypto.com and Monolith mobile apps and Visa Cards
You can read more about KNC here!
Composability in DeFi
SR: How do you evaluate whether you would like to partner or integrate with another DeFi protocol?
Loi: One of the amazing things about DeFi is its composability and Kyber’s on-chain liquidity protocol is designed to be permissionless to use. Our code is open source, and documentation can be found on our developer portal and Github. We do not restrict any project from integrating our technology to embed decentralized token swaps in their platform or for other liquidity needs. As Kyber is fully on-chain, integration with DApps is also simple and straightforward. We also have a passionate and vibrant developer community and members often help each other with integration issues.
For projects that we work with directly, we try to find points of synergy so that our close collaboration will further amplify the security and value we bring to our users and the DeFi ecosystem.
Bitcoin and DeFi
SR: What kind of role does Bitcoin play in the DeFi space in your opinion? 😉
Loi: Bitcoin definitely still has a big role to play in the DeFi space. After so many years, it is still the most traded cryptocurrency, with the highest market capitalization and the highest liquidity.
Recognizing the need for Bitcoin liquidity on Ethereum, Kyber helped launch the Wrapped Bitcoin (WBTC) initiative together with Ren, BitGo, and other blockchain projects. WBTC is an ERC20 token backed 1:1 with real BTC custodied by BitGo. WBTC is now the most popular and practical way to use Bitcoin on Ethereum, with over 15,000 WBTC ($160M) minted and used in DeFi apps on Ethereum. For instance, WBTC is used as collateral on lending platforms such as MakerDAO, Compound, and Aave.
With the popularity of WBTC, we are starting to see the rise of new Bitcoin-pegged assets such as renBTC by Ren, pBTC by Provable Things, and tBTC by Keep. It’d be interesting to see how these different technologies develop, but overall it is clear that Bitcoin is very much in demand in the DeFi space. Over time, we might see more Bitcoin-focused projects start experimenting in DeFi.
SR: Can you share a bit of the Kyber roadmap for the coming year? Anything exciting we can look forward to?
Loi: ‘Katalyst’, our major protocol upgrade was just launched successfully along with our KyberDAO. We are one of the most successful DAOs in terms of staked value, votes, and rewards distributed.
- 50M+ KNC staked
- 8000+ votes in total over 6 Epochs
- $1M+ in rewards distributed to voters
Within a short span of a few days since our very first KyberDAO proposal went live, over 57M KNC (~US$85M) have been staked, with over 4000 staking addresses and 2580 voters. This makes the KyberDAO one of the most popular active DAOs to date, with the highest on-chain voter participation.
Most of our efforts are now focused on resolving any early technical issues, increasing the range of staking options, and further optimising the KyberDAO platform to provide a seamless decentralized governance experience for all KNC holders.
Later in the year, we will be looking to enhance liquidity on Kyber through our Fed Price Reserves (FPRs) and exciting new initiatives. This involves working closely with professional market makers, developers, and the Chicago DeFi Alliance to build the necessary infrastructure to streamline the on-chain market-making process.
Lastly, our KyberSwap team also has more feature launches lined up for our retail traders. In this strategy update, we share our thoughts regarding how we perceive the current environment and elaborate on our plans for Kyber Network moving forward.