Kava – a cross-chain CDP platform leveraging Cosmos’ SDK – has announced new changes to the tokens monetary policy.
— Kava Labs (@kava_labs) March 17, 2020
The goal of the changes is to help overcome the bootstrapping problem of USDX liquidity and usage. For those unfamiliar, USDX is Kava’s native stablecoin while KAVA is the protocol token.
With that in mind, Kava is aiming to build a CDP platform and USD-pegged stablecoin to compete with Maker. While this is no easy task, Kava is planning on incentivizing liquidity within the ecosystem to ensure a successful launch of USDX and the Kava CDP system.
Taking notes from prominent derivatives protocol Synthetix, growth incentives are vital for early networks to garner some initial usage and traction from the broader community. As such, a clear incentive structure rewarding early participants with a stake in the network is one of the more driving initiatives a nascent network can take.
In order to successfully bootstrap USDX liquidity, Kava is planning on implementing an addition 15% inflation on KAVA in the first year and reducing it every year for the next three years. Rather than directing the KAVA inflation towards something like a Uniswap liquidity pool, the new tokens will be directed towards rewarding users who deposit assets and mint USDX.
The preliminary supply schedule can be seen as follows:
All growth incentives will be denominated in KAVA where distributions will be locked and require action for users to claim them.
Once assets are deposited into the CDP system and USDX is minted, users will be rewarded in KAVA. The main goal with this initiative is to bootstrap 10M USDX in liquidity, collateralized by 30M in major crypto assets.
That said, all KAVA rewards are locked for 52-weeks in order to mitigate immediate sell pressure and align users for the long-term. In addition, users will be able to stake the KAVA to help secure the network and earn supplementary block rewards.
Rewards will be distributed on a weekly basis to encourage periodic clustering of users activity where all users will have two weeks to redeem before their rewards go back into the incentive pool.
Kava is a CDP lending and stablecoin platform built using the Cosmos SDK. The Maker competitor is aiming to serve the greater crypto community by offering decentralized leverage and stability for users of major crypto assets like BTC, XRP, BNB, and ATOM.
During an extreme black swan event, even if Maker Dao $DAI fails $KAVA will prevail! #Kava was built from the bottom up w speed & stress testing that'll continue to serve users of major cryptocurrency assets including BTC, XRP, BNB & ATOM to name a few.
— Kava Labs (@kava_labs) March 16, 2020
The protocol is entirely permissionless, allowing users to issue loans to themselves with no counterparty risks or credit scores needed.
Similar to MKR and MakerDAO, KAVA holders can vote on proposals to change the protocol or the system parameters including the debt ceiling, accepted collateral types, the collateral-to-debt ratio, and the price of stability fees for CDPs.
One of the more novel aspects offering by Kava is staking the native asset for network security. As in the Cosmos Hub, users can delegate their voting rights to validators (dedicated nodes of the network responsible for validating transactions) in exchange, stakers receive transaction fees and stability fees paid by users when closing CDPs.
The CDP platform launched in late 2019.