Kyber Network is an on-chain liquidity protocol that lets decentralized applications, decentralized finance users, and traders swap tokens instantly without having to use external order book exchanges like Binance.
So how does Kyber Network work and why is it helpful for DeFi and crypto traders? In this beginner’s guide, I’ll explain everything you need to know about Kyber Network and its KNC token. Before we start, if you are planning to trade or mine Bitcoin, then you may visit https://www.bitcoin-up.live/
A Quick Intro to Kyber Network
Kyber Network provides decentralized, on-chain liquidity for decentralized finance (DeFi) ecosystems and decentralized applications (DApps).
It lets DApps seamlessly integrate with liquidity pools and trading services without requiring users to deposit funds on exchanges. Developers can build DApps on top of Kyber to enable token swaps, payments, and more.
At its core, Kyber Network helps connect endpoints like DApps, vendors, and traders with liquidity pools and cryptocurrency reserves. This allows for instant token swaps and transactions without the need for order books and counterparties.
Kyber was one of the first DeFi protocols launched in 2017 and aims to offer seamless liquidity to the decentralized ecosystem. The project is led by the Singapore-based Kyber Network team and has processed over $60 billion in transactions so far.
How Does Kyber Network Work?
Kyber Network has a few main roles that allow the system to provide flexible on-chain liquidity:
- Reserves – These are pools of tokens that provide liquidity for the network. Different reserve managers like Oxbull and StakeWithUs contribute liquidity to Kyber.
- Proxy Tokens – Kyber Network Proxy tokens help obfuscate order routing so that reserves don’t see where orders are coming from. This prevents front running on the network.
- Kyber Network Operator – The Kyber team is the network operator that maintains the Kyber smart contracts, KyberDAO, protocol policies, and manages the reserve ecosystem.
- End Users – The end users are DeFi users, traders, vendors, and DApps that tap into the Kyber Network to access instant liquidity. Popular DApps built on Kyber include Synthetix, Nuo Network, Set Protocol, and more.
Here’s a simple overview of how Kyber Network provides decentralized liquidity:
- A DApp connects to the Kyber contract to request a token swap or payment.
- The contract checks Kyber reserves and returns the best rates across reserves.
- The DApp requests a swap at the most optimal rate. This happens via the Kyber Proxy to prevent front running.
- The actual trade is executed directly between the DApp and liquidity reserve. Kyber is not a counterparty or intermediary.
- The DApp instantly receives the swapped tokens without creating an order on an order book.
So in summary, Kyber Network offers on-chain liquidity and instant settlement by connecting DApps with reserves willing to provide liquidity. The Kyber Operator maintains the overall network.
The Role of the KNC Token
The KNC token is an integral part of Kyber Network’s operations and incentive mechanisms. It is used for three primary purposes:
- Reserve Fees – KNC is paid by reserves to the Kyber Operator to be allowed to participate and earn trading fees from trades. The Operator burns the KNC, meaning the token supply reduces over time.
- Protocol Governance – KNC holders can stake their tokens in KyberDAO to vote on protocol parameters like fee structure, reserve approvals, new feature upgrades, and more.
- Delegated Payments – The KNC token also supports delegated token payments for vendors using the KyberWidgets payment API. KNC covers transaction costs and simplifies payments for users.
Overall, holding the KNC token represents a stake in the Kyber Network. Paying fees and voting gives holders the right to help govern and influence the future direction of the protocol.
Kyber Network Team & Progress
Kyber Network is an open-source protocol developed by the Kyber Network team based in Singapore. The project was founded in 2017 by CEO Loi Luu, CTO Yaron Velner, and advisor Vitalik Buterin.
Some key achievements and developments so far include:
- KyberSwap launch in 2018 as one of the first DEX aggregators
- Katalyst protocol upgrade in 2020 to improve incentives and enable KyberDAO
- Oasis emergency shutdown in 2020 to protect users during the Black Thursday crash
- Kyber 3.0 launch in 2021 to improve scalability, privacy, and composability
- Over $60 billion in cumulative volume and 2.5 million KNC burned
Kyber Network also introduced developer APIs like Kyber Oracle and Kyber Widgets to make it easy to integrate with DApps. Popular DeFi platforms like Synthetix, bZx, and Set Protocol have integrated with Kyber.
Looking ahead, Kyber aims to offer high performance, complete liquidity, and a wide range of financial products for DeFi. The protocol is evolving to meet the needs of the rapidly growing landscape.
Pros and Cons of Kyber Network
Here are some of the key advantages and disadvantages to consider with Kyber Network:
- Seamless token swaps and payments for DApps without order books
- No deposits or counterparty risks as trades occur directly between users and reserves
- Wide range of reserve managers provide deep liquidity pools
- KNC token aligns incentives between platform stakeholders
- Rapidly growing ecosystem and strong developer mindshare
- Requires DApp integration work to benefit unlike standalone DEXs
- KNC rewards and incentives are complex for casual users
- Reserves can be permissioned unlike fully permissionless AMMs
- Platform revenues accrue mainly to Kyber team through KNC burns
Overall, Kyber Network provides a flexible way for developers to build DApps with liquidity “baked in” without reinventing the wheel each time. The dynamic reserve system and focus on composability are strong advantages.
Kyber Network pioneered on-chain liquidity and made it easy for any DApp to plug into liquid markets. The project demonstrated how to connect endpoints like vendors, traders, and DApps to reserves in a seamless way.
KNC tokenomics, KyberDAO, and incentives like developer APIs and KyberWidget payments give the platform aligned stakeholders and room for evolution. While not without some centralization concerns, Kyber Network offers a powerful DeFi primitive for developers.
Kyber Network removed many friction points when moving between tokens, opening up potential new use cases and business models in DeFi. With ambitions to eventually become a public utility supporting all of DeFi, Kyber Network is an innovative project that’s worth keeping an eye on.
Frequently Asked Questions
Why use KNC?
The Kyber Network, dependent on its objective to offer a substitute for more conventional centralized exchange platforms, might be attractive to users. Until this point, you will find many wallets which have included the Kyber Network to permit people to exchange cryptocurrencies inside their ecosystem.
Furthermore, a couple of projects have integrated Kyber’s API to help with transactions. Some examples are Decentraland, the favourite virtual reality platform, as well as Edcon, the Ethereum advancement event.
Investors might additionally appear to purchase KNC and add it to their profile in case they have faith in the coming role of decentralized switches in extending as well as broadening access to crypto assets.
What is Kyber Network?
Kyber Network is an on-chain liquidity protocol that allows decentralized token swaps and payments for DApps, vendors, and DeFi users without traditional order books and intermediaries.
Who created Kyber Network?
Kyber Network was created in 2017 by Loi Luu, Yaron Velner, and Vitalik Buterin. The core team is based in Singapore.
What is KNC token used for?
KNC is the Kyber Network Crystals token used for fees, governance, and delegated payments. KNC aligns incentives for platform stakeholders.
How does Kyber Network work?
Kyber Network connects users or DApps with liquidity reserves that can facilitate instant token swap and payment transactions on-chain.
What are some pros and cons of Kyber Network?
Pros are instant swaps, wide liquidity, developer incentives, and aligning stakeholders. Cons are integration costs, complex incentives, and platform revenues mainly accruing to the Kyber team.
How is Kyber Network different from a decentralized exchange?
Kyber Network is not an exchange itself but rather an on-chain liquidity protocol DApps and exchanges can tap into. It removes order books and intermediaries from swaps.
What is KyberSwap?
KyberSwap is a DEX aggregator and interface for end users to easily swap tokens using Kyber Network liquidity reserves and rates.
What is Katalyst?
Katalyst is a Kyber Network protocol upgrade that improved incentives, launched KyberDAO, and migrated KNC to its own chain to give stakeholders more say.
Can I stake KNC?
Yes, KNC holders can stake their tokens in KyberDAO to help govern protocol parameters and earn staking rewards.