Why is Kava considered the next heavyweight player in the public chain track?

Author: Azuma/Odaily Planet Daily

The story of Kava begins with Cosmos.

With the rise of ecological projects represented by Terra and the final implementation of the Inter-Blockchain Communication protocol (IBC), people's understanding and value assessment logic of Cosmos and its ecological projects have undergone new changes.

For a long time, as two major Layer 0 protocols aimed at breaking down interoperability barriers between different blockchains, the industry has often compared Cosmos with Polkadot.

However, in earlier years, when the infrastructure components of both were not yet perfect and the ecological systems had not yet expanded, Cosmos's reputation was often slightly lower than that of Polkadot, which had the star power of its founder.

Recently, market changes have broken this situation and changed many people's fixed perceptions. As time goes on and concepts begin to materialize, the ecosystem starts to flourish.

The development of Cosmos and Polkadot has shown a starkly different trend. While many Polkadot ecological projects are still trying to obtain launch opportunities through cumbersome auction processes, many Cosmos projects represented by Terra and Kava have already completed several rounds of iteration and evolution through practical experience.

One noteworthy aspect of this cognitive disruption in Cosmos is the reversal of market value by its ecological project Terra. The reason for this "inversion" is that Cosmos is fundamentally different from other underlying protocols like Polkadot; it does not bear the finality of transactions for ecological projects.

In other words, every project launched on Cosmos is an independently operating public chain, but they can achieve cross-chain interoperability through the IBC protocol.

This means that the market value of Cosmos will not become a "hard cap" for its ecological projects, thus opening up greater imaginative space for many ecological projects, including Kava.

Kava: Don't call me DeFi, call me Layer 1

Speaking of Kava, many people's first impression of the project may come from Binance Launchpad.

The development team of the Kava project, Kava Labs, was founded in 2018 and initially made some attempts in other directions. However, starting in 2019, they foresaw the infinite development potential of "cross-chain + DeFi" and subsequently chose to focus on the Cosmos SDK.

A common misunderstanding about Kava is that it is just an ordinary DeFi protocol, but as we emphasized earlier, every project launched on Cosmos is an independently operating public chain, and introducing Kava solely as DeFi clearly does not cover the full essence of the project.

Therefore, we attempt to redefine Kava with our understanding: Kava is a Layer 1 public chain centered around DeFi, capable of achieving cross-chain interoperability with other ecosystems through protocols like IBC.

As of the time of writing, the Kava mainnet has undergone nine major version upgrades, and according to the latest plan, Kava will implement its tenth major version upgrade next month, introducing Ethereum Virtual Machine (EVM) support. At that time, Kava will become the first underlying public chain to support both EVM and Cosmos SDK development environments.

Looking back at this long upgrade journey, we can clearly capture the growth trajectory of Kava, clarifying how Kava as a Layer 1 public chain has grown from 0 to 1, and then from 1 towards ∞.

For ease of understanding, we will divide Kava's development history into three stages based on a timeline and introduce them sequentially.

Mainnet Launch - Kava 8: Growth from 0 to 1

The period from the official launch of the mainnet in November 2019 to the completion of the eighth upgrade in August 2021 represents Kava's past.

During this time, Kava's main work was to improve various underlying infrastructures, which included both network-level capacity testing and optimization, as well as the development of various foundational applications at the ecological level.

As a latecomer focused on DeFi, Kava built a set of applications for basic scenarios such as stablecoin minting, lending, and trading to ensure that users could promptly access reliable foundational DeFi services upon entry.

• In June 2020, Kava's stablecoin minting protocol Kava CDP (now renamed Kava Mint) officially launched, allowing users to collateralize assets like BNB to mint Kava's native decentralized stablecoin USDX.

• In October 2020, Kava launched its lending market Harvest.io (which later changed its name to HARD Protocol and has since been renamed Kava Lend) v1 version during the fourth upgrade of the mainnet, allowing users to deposit various ecological assets such as BTC, XRP, BNB, BUSD, and USDX as suppliers.

• In May 2021, Kava activated the v2 version of HARD Protocol during the fifth upgrade of the mainnet, unlocking the borrowing function of the lending market and implementing automatic adjustment of floating interest rates between borrowing and lending.

• In August 2021, Kava launched its AMM-based decentralized exchange Kava Swap during the eighth upgrade of the mainnet, allowing users to seamlessly trade various assets across different blockchains or earn trading fees and additional rewards by providing liquidity.

At this point, Kava has built a complete set of foundational DeFi services on its chain. As of the time of writing, the total value locked (TVL) of Kava Mint, Kava Lend, and Kava Swap has reached $600 million, and the three have collaborated to achieve a closed loop of Kava's DeFi business scenarios.

In the next stage, Kava will leverage this entire set of services to provide seamless asset aggregation and exchange services for different users across different ecosystems, thereby improving cross-chain financial efficiency.

Kava 9: All Roads Lead to Kava

With the gradual improvement of infrastructure, Kava also began to consider the next stage issue—how to attract more liquidity to its ecosystem.

Before Kava, the explosive stories of new-generation public chains like Avalanche and Fantom had repeatedly confirmed a "truth": to grow a public chain ecosystem, establishing cross-chain pathways is a necessary prerequisite. To this end, Kava completed its ninth major version upgrade of the mainnet in January.

The Kava 9 mainnet upgrade included several important matters, among which the most core was undoubtedly the integration of IBC. IBC stands for Inter-Blockchain Communication Protocol.

This cross-chain transmission protocol was developed over several years by top development teams such as Tendermint, Agoric Systems, and the Interchain Foundation, allowing multiple different blockchain networks to transfer data and state information through packet exchange.

As a Layer-1 blockchain built on the Cosmos SDK, the integration of IBC represents a significant leap for Kava. This not only means that all assets on all IBC-supported blockchains (such as Kava Mint, Kava Lend, Kava Swap) can cross to Kava, but also that the service scenarios of foundational applications like Kava Mint, Kava Lend, and Kava Swap will expand to the entire Cosmos ecosystem.

With the bridge established, to incentivize more users to bridge liquidity in, Kava simultaneously launched a liquidity incentive program called Surge. During the incentive period, all users supplying IBC assets on Kava Lend will receive considerable incentive rewards.

As of the time of writing, the first phase of the ATOM Surge incentive has ended, attracting $24 million in liquidity to the ATOM lending pool, and the next phase of the AKT Surge incentive is about to launch.

Note: Under the Surge plan, the potential earnings estimates for users vary with the scale of the ATOM liquidity pool.

Another important aspect of liquidity bridging in the Kava 9 mainnet upgrade is the improvement of the foundational module for cross-chain bridges with the Ethereum network, thus supporting the minting or burning of wrapped ERC-20 tokens on the Kava network, controlling deposit limits, and whitelisting specific tokens.

However, this does not mean that the "Kava - Ethereum" cross-chain bridge has been activated simultaneously with the upgrade; it is merely a preparatory work to enable the cross-chain bridge to be activated directly without a chain upgrade.

In addition, Kava Labs is also actively exploring cooperation with third-party cross-chain bridges like Celer cBridge to achieve low-cost scalable multi-chain interoperability, allowing users to quickly and cost-effectively transfer assets between Ethereum, Ethereum Layer 2, other EVM-compatible chains, and the Kava chain.

Kava 10: Cosmos SDK + EVM, Prospects from 1 to ∞

With the infrastructure already in place and cross-chain channels opened, Kava's development has entered a new stage from 1 to ∞. In this new phase, the main question Kava needs to consider has become how to provide more flexible, comprehensive, and powerful support for ecological projects to attract more projects to choose to settle on Kava.

During the public chain explosion in September last year, several new-generation public chains achieved a massive explosion in ecological applications through substantial economic incentives. At the same time, Kava also launched its first phase of a $185 million ecological incentive fund to encourage more applications and developers to innovate based on Kava. However, based on the ecological growth rate over the past few months, the actual effect of the Kava incentive fund seems to be less than that of other public chains like Avalanche and Fantom.

In our view, the reason for this situation is primarily that the Cosmos SDK development environment currently supported by Kava has not yet achieved large-scale popularity at the EVM level.

As the earliest and most successful programmable public chain, Ethereum's underlying development environment, EVM, has almost become the standard configuration for development in the blockchain world. Most of the emerging public chains that have exploded earlier are also EVM-compatible chains. In contrast, while the Cosmos SDK has sufficient speed and interoperability advantages, it is clearly unrealistic to replace EVM in a short time.

To this end, Kava has decided to introduce EVM development environment support in the upcoming tenth major upgrade of the mainnet to provide developers with a richer environment choice. This decision sounds simple, but implementing it is not easy. No public chain in the Cosmos ecosystem that has launched its mainnet has been able to simultaneously provide both Cosmos SDK and EVM development environments.

To address this challenge, Kava's solution is to build a co-chain architecture, characterized by providing two separate chains for the Cosmos SDK and EVM development environments, and allowing seamless collaboration between the two co-chains through a translation module, integrating them into a unified network (note: hereinafter referred to as the Kava network). Developers can build in any environment they desire on this network without sacrificing access to users and assets in the other environment.

Kava's official analogy for this is very vivid: "You can think of it as the two hemispheres of the brain, one optimized for developers in the Cosmos ecosystem and the other optimized for developers in the Ethereum ecosystem."

According to Kava's plan, the Kava 10 upgrade will be executed in multiple small phases as follows:

• On February 7, Kava will launch a pioneer program, introducing incentives to promote the rapid growth of the Kava network before the mainnet launch. 100,000 KAVA will be awarded to protocols deployed on the Kava network.

• On March 8, the Kava network will support a group of closed protocol partners to deploy on the EVM co-chain, conducting stress tests on Kava's EVM compatibility and execution environment before public testing.

• On April 5, before the Kava network mainnet launch, Kava will reward participants testing the co-chain architecture. Participants will earn rewards by personally experiencing the protocols and DApps that will be launched on the Kava network.

• On April 5, the public beta version of the Ethereum cross-chain bridge will unlock ERC-20 and ERC-1155 assets on the Kava network.

• On May 3, the Kava network will officially complete and fully launch, featuring a co-chain architecture of Ethereum and Cosmos. Developers will be able to seamlessly build in both EVM and Cosmos SDK execution environments, connecting the two largest decentralized ecosystems globally.

• Starting in May, Kava will launch incentive programs for various projects such as DeFi, GameFi, and NFTs, releasing substantial rewards for developers each year to promote rapid ecological development.

Strategically, the Kava 10 upgrade may be the most important milestone in Kava's development history. With the completion of the upgrade, Kava will officially enter the Kava Network 1.0 era of "two chains, one network."

The Next Heavyweight Player in the Public Chain Track

For a long time, Kava's vision has been to become the cross-chain DeFi hub of Cosmos and even the entire blockchain world. Looking closely at the multiple upgrades Kava has completed and is about to execute, we can see that Kava has a clear rhythm in its future development, knowing what it needs and what it should do.

From the gradual refinement of foundational DeFi services such as stablecoins, lending, and AMM DEX, to actively establishing cross-chain pathways with other ecosystems, and then striving to expand into more diverse development environments, Kava is steadily approaching its ultimate vision.

The explosion of the public chain track ignited market investment sentiment in the second half of 2021. Entering 2022, investors are still actively searching for the next potential breakout player in this track.

If Kava can successfully complete its tenth upgrade, it will become the first Layer 1 network that simultaneously supports the speed and interoperability of Cosmos SDK and the flexibility and developer support of EVM, having already laid a solid foundation in foundational applications and cross-chain pathways.

With this accumulation, the potential that Kava is about to unleash should not be underestimated.