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Why Kyber Network Tokens Tripled to $100M Despite the Coronavirus Recession

Kyber may be the Great Lockdown’s hottest token project. 

According to the analytics firm Flipside Crypto, the Kyber Network is one of the fastest-growing token projects so far during the coronavirus-led recession (in terms of developer contributions, social media chatter, blockchain records, wallet addresses and corresponding apps).

This decentralized exchange (DEX) protocol is associated with the token KNC, which jumped up in price since 2019, from roughly $0.18 in December 2019 to $0.64 by early May 2020, according to Messari. Traders don’t need to use KNC but in the near future they’ll be able to use it for staking rewards and to vote on development decisions. 

In the meantime, the Kyber Network protocol is essentially the third-most-popular DEX, with nearly $5.4 million worth of reserves in its decentralized finance (DeFi) systems, ranked behind Uniswap and IDEX. It’s estimated the protocol handled $200 million worth of volume in March alone. It was utilized by 13,000 crypto wallet addresses in March out of 62,264 active addresses tallied since January 2019.

Plus, this Asian DEX startup with team members in Vietnam and Singapore is now also part of the first batch of participants in Chicago’s DeFi Alliance (CDA), joined by DeFi startups like IDEX, dYdx, Synthetix, Set Protocol, Opyn and 0x. 

Read more: Ethereum’s Top DEX Is Rebooting With New Scaling Features

CDA co-founder Imran Khan of Volt Capital said over 100 teams applied to join the CDA, but only seven startups were chosen.

“Market makers and liquidity providers all need different options based on their trading strategies,” Khan said. “Kyber’s competitive advantage is that it’s a decentralized exchange, they can play regulatory arbitrage and grow quickly.”

Liquidity

So far, the Kyber Network’s liquidity appears relatively healthy. In January 2020, Binance Research estimated the project had 35,000 active users. 

The network survived its first true stress-test in March, when the protocol supported $33 million worth of trading in a single day without any significant glitches despite cataclysmic volatility in broader markets. Khan added the CDA aims to grow the value of assets locked in DeFi systems from roughly $1 billion to $8 billion by 2021. 

“For the space to get real liquidity, we need professional market making,” said Kyber Network CEO Loi Luu.

Most DEXs saw significant gains during the start of the coronavirus crisis, so this doesn’t make Kyber unique. For example, fellow CDA member 0x reached a new all-time high in March with over $100 million worth of volume. What makes Kyber different from startups like 0x is that the former is primarily a liquidity protocol, not just a DEX. 

Read more: Chicago’s Trading Firms Look to DeFi With New ‘Alliance’

The Kyber Network DEX is merely a proof-of-concept, to show the protocol can allow on-chain trading functionality. Many wallets and DeFi platforms, like Uniswap and Trust Wallet, are also connected to the Kyber protocol on the backend. 

“On-chain market making is very different from off-chain market making, because you are actually using the blockchain to run all your operations,” said Kyber Network advisor Ming Ng. “Smart contracts can only talk to other smart contracts.” 

In short, in order for ethereum to become a global financial platform, something like Kyber Network (although not limited to it) would have to translate smart-contract functionality throughout all the layers of a trade.

team_retreat_katalyst
Kyber Network staffers at a team retreat.
Source: Kyber Network

Chains

Even if trades are settled on-chain, usually order books are off-chain, which is precisely the gap the Kyber Network wants to bridge. 

Stepping back, liquidity generally means the ability to move money around and actually use it, while a “smart contract” is just software that automatically triggers business activity. So, for example, if a trader wanted to build a tool that queried for the price of a specific asset across integrated order books, he could use the Kyber Network to do it. Then his smart contract could execute a trade or change the amount or price. 

“They are providing a different way to trade and some of the market makers will be more comfortable working with them,” Luu said of fellow CDA members IDEX and 0x. “You can have the full-fleshed decentralized stack [with Kyber], from the domain name and code to the smart contract as well.”

Getting more professional market makers to experiment with on-chain trading will be a challenge, but Luu’s staff of 55 still has more than half of its original token sale funds, Luu said. The KNC initial coin offering (ICO) reportedly raised 200,000 ether (ETH) in 2017. Plus, the team has been dogfooding their protocol by using it for market making and the above-mentioned DEX, turning a modest profit so far. 

“Market makers should be able to make a profit using Kyber,” Ng said. “We’re building a fully sustainable ecosystem where all the players in the ecosystem can make money.”

A new protocol upgrade coming in late June, called Katalyst, will allow KNC token holders to participate in a proof-of-stake system to earn rewards for helping maintain this DeFi network.

Read more: Kyber to Offer Delegated Token Staking After Coming Network Upgrade

When the token sale proceeds run dry, the namesake startup could also use this mechanism to earn money, just like other stakeholders. For now, demand for the token is surging across exchanges as more teams use the Kyber protocol for unique trading strategies related to stablecoins like dai, USDC and tether.  

Some traders may prefer a more familiar exchange and settlement model. For those who want to experiment with quasi-decentralized models, the CDA now offers the old guard a structure for getting hands-on experience working on-chain. Likewise, Volt Capital’s Khan said his fund plans to participate in staking on the Kyber Network. 

“The goal for Kyber Network as a DEX is that assets being traded should not exit the protocol,” Khan said. “Deeper liquidity enables more efficient markets and new ways to onboard retail traders.”

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IBM Takes 7% Stake in Trade-Finance Blockchain Network We.Trade

IBM has become a shareholder in we.trade, the trade-finance platform jointly owned by 12 European banks, signaling further consolidation across the enterprise blockchain space.

Ciaran McGowan, we.trade’s CEO, said the deepening relationship with Big Blue will help the platform in its next phase of global expansion.

“Now we’ve got a very strong partnership with IBM for scaling globally and we are working closely together on Asia, Africa and Latin America,” McGowan said.

We.trade has the distinction of being the first enterprise blockchain consortium to go live, which happened back in early 2018. The platform was formed by a group of banks to help European small and medium-sized enterprises (SMEs) get better access to trade finance. IBM has been the project’s technology partner from inception.

Read more: Staying Alive: Why the World of Enterprise Blockchain Has Turned to Collaborations

However, the plan at we.trade was always to take its technology in-house and rely less on IBM, as stated by McGowan at last October’s Sibos event in London.

“It’s all about getting the right balance,” McGowan said this week regarding IBM’s new role as part-owner of the platform, as well as the sole technology provider. “Back then [in 2019], we had seven staff at the company and it wasn’t realistic for seven staff to make all the decisions, to collate all the different requirements, to prioritize and manage everything.”

The move also raises the question of IP ownership, something that has caused problems for IBM in the past with blockchain consortia.

Part of we.trade’s success was down to the fact no single entity had more say than another. The platform’s previous CEO, Roberto Mancone, pointed to a “clear distinction” between IBM’s IP, which was the components used to build the platform, and the IP of the platform itself. 

Read more: IBM and Maersk Struggle to Sign Partners to Shipping Blockchain

These lines appear to be blurring now. In addition to owning the Hyperledger-based IBM Blockchain Platform that we.trade is built on, IBM would own 7% of the platform’s IP, McGowan confirmed.

A concession being promoted by we.trade (and IBM), involves a new multi-cloud approach, so customers can use Microsoft Azure or AWS, instead of having to use IBM Cloud.

IBM joins we.trade’s existing 12 shareholder banks: CaixaBank, Deutsche Bank, Erste Group, HSBC, KBC, Nordea, Rabobank, Santander, Société Générale, UBS and UniCredit. 

McGowan said some European banks are “playing wait and see” with enterprise blockchain, especially in the busy trade finance space.

“I think that because there are quite a number of players in the space, and quite a number of banks on those platforms, the European banks have been kind of sitting back and are maybe afraid to join one platform in case another does better.”

Read more: Banking Giant UBS Goes Live on We.Trade Blockchain for Trade Finance

Still, McGowan said we.trade plans to interoperate with Hong Kong’s eTradeConnect, a blockchain-based trade finance platform formed by 12 Asian banks. An investment round planned for September will see the platform onboarding some insurance companies as well as more banks, he added.

Asked if IBM is getting its hooks into a platform that previously had a semblance of independence, Parm Sangha, the global trade finance leader at IBM, said: “Hyperledger is open-source; IBM has opened up to have a multi-cloud approach. The only thing we are collaborating smarter on is where does this all go – and that is the pursuit of market share and market size.”

A source involved in the enterprise blockchain space who wished to remain anonymous said we can expect to see IBM begin rolling together its big blockchain services such as TradeLens and Food Trust, in an attempt to get critical network mass.

“I’m not sure that strategy will work – the cost of transition may be higher than the cost of integrating those services together,” they said.

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IOV Labs Takes on Lightning Network With New Light Client

IOV Labs, which builds platforms secured by bitcoin’s hash rate, launched Wednesday a light client for the Lumino Payments Network, its smart contract-compatible rival to the lightning network 

Lumino Light Client will run on mobile devices via integrated wallet apps, according to the Gibraltar-based firm. 

Light Client comes nearly a year after the firm formerly known as RIF Labs unveiled Lumino. Based on IOV Labs subsidiary RSK’s Rootstock sidechain, Lumino secures smart contracts and ERC-20 compliant tokens via the bitcoin network in what IOV Labs called a “layer three solution.”

Before Lumino, Gabriel Kurman, an RIF strategist said 10 full nodes and three “hubs” – nodes that communicate with light clients but do not manage any private keys – comprised the Lumino Network for a processing power of about 100 transactions per second (tps). That’s faster than the bitcoin mainchain (about 3.6 tps by the 7-day average) slower than Visa (65,000 tps capacity) and well below what IOV Labs claims Lumino can scale to: 20,000 tps. 

“All the focus now is in bootstrapping the network and the more nodes, channels and hubs we have the more transactions can be processed in the network as a whole,” Kurman said.

For now, IOV is assuming Light Client will be Lumino’s most critical user gateway, “as we expect 99% of the users access it via a mobile Light Client,” Kurman said.

IOV is also attuned to crypto users’ increasing appetite for stablecoins. 

“Given the growing ecosystem of decentralized stablecoins being launched on RSK & Lumino, such as DollarOnChain (Bitcoin-backed collateralized Dollar), RIFDollar (RDOC), there is a great opportunity for wallets to enable off-chain nanopayments,” Kurman said.

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Vietnam’s HDBank Taps Blockchain Network to Streamline Bank Credit for Corporates

HDBank has signed up to a blockchain network from Contour with the aim of bringing trade finance into the digital realm.

The Vietnam-based bank is the latest financial institution to join Contour’s network with a view to streamlining the issuance of letters of credit with the use of a blockchain and smart contracts, local media reported on Tuesday.

Contour is a blockchain trade platform built on R3’s Corda tech and designed to streamline transaction settlement processes. It rebranded from Voltron in late January 2020, naming R3’s Asia chief Carl Wegner as CEO in the run-up to a full commercial launch of its digitized letter-of-credit (LoC) service.

A letter of credit refers to a formal letter from a bank that essentially guarantees a buyer’s payment to a seller within a specific time frame. If for some reason the transaction fails, the letter obligates the bank to cover the full amount of the purchase.

Historically, letters of credit have been paper-based, which brings costs in both time and manual processing. Putting the process on a blockchain is said to be able to streamline the process, allowing letters to be issued in real-time in a secure and private manner utilizing process automation provided by smart contracts.

“The focus with our network has always been to establish a neutral platform that all different types of banks and corporates can use for trade finance transactions,” Wegner said in a statement.

“That is the ultimate aim of Contour, and it’s something we’re continuing to see as we welcome HDBank into the network,” he added.

As of Dec. 31, 2019, HDBank had total consolidated assets of $9.89 billion, a year-on-year increase of 21.1%, and equity of $878.8 million, according to Vietnam News.

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Filecoin Is Mailing Out Hard Drives of Climate Data to Kick-start Its File-Storage Network

Get a giant hard drive from the Filecoin team stuffed with data on climate, the world’s literature or the human genome and get ready to earn some crypto.

“I think people don’t fully appreciate the enormous logistics involved with moving data at a massive scale,” Ian Darrow, head of operations at Filecoin, told CoinDesk in an interview. 

The Filecoin Foundation is inviting anyone to join its “mission to improve the internet,” Darrow said in a press statement. The new program is called Filecoin Discover, and it is seeding the file storage network early with what Filecoin calls “verified datasets.” 

This data will be delivered to future miners physically, on eight-terabyte hard drives, with instructions on how to link the devices to the Filecoin system, which should go live this year. (In a post last month on the project’s cryptoeconomics, Filecoin explained why the physical delivery of data was more efficient.)

Each hard drive will cost $265 but presumably future Filecoin miners expect storing that much data will ultimately be worth the upfront cost in fiat.

There may be some advantage to being early on Filecoin, according to the recent cryptoeconomics post, but when the network is small, some block rewards will also be deferred, in order to align miner incentives with user needs. 

The datasets available through Discover are in the public interest, offered by the Filecoin Foundation as a way of advancing its mission to make humanity’s data robust and accessible. The company hopes the nature of the data and the support that comes with it will help attract new, smaller users to the network. 

That said, future miners will need to understand that mining for Filecoin is different than other kinds of mining. It’s not just putting in work but being continuously accessible. 

“As a Filecoin miner, you are storing specific pieces of real data for real people, so you do want that data to be reliably available,” Darrow said. 

At 8 terabyte, Darrow noted, this is feasible for someone to set up in their home. While it is a technical process, it comes with instructions and the team is optimistic that by following them users will be ready to run their first hard drive and become interested in expanding their participation. Having lots of smaller users helps make the network more decentralized. 

“This serves as an entry point to get people more involved,” Darrow said of the new program.

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‘Very Near Launch’: Polkadot Founder Gavin Wood Details Network Rollout

The Polkadot network is “very near launch,” founder Gavin Wood told attendees of the Ready Layer One (RL1) virtual conference on Wednesday in a sneak peek of the Ethereum co-founder’s new network.

Wood, who wrote Ethereum’s technical paper in 2014, created Polkadot with the intention of allowing users to send transactions across blockchains such as Bitcoin and Ethereum in what is commonly referred to as making them interoperable.

Like Kusama, Wood told RL1 attendees Polkadot will roll out in five or six stages, beginning with a “chain candidate” launched by the Web3 Foundation. The candidate operates as a de facto genesis block for the network, but under the guidance of Web3 Foundation developers. If the candidate does not meet the team’s requirements during this initial phase, it will be replaced by another, Wood said.

Notably, the network will launch under a Proof-of-Authority (PoA) consensus algorithm that Wood invented, which will initially give all on-chain authority to the Web3 Foundation, the non-profit behind Polkadot. As such, the Polkadot network will have limited functionality, Wood said.

“It allows us to start the chain without having to have a set of validators already assembled and having to trust in our potentially unfulfilled governance structures to move the chain forward,Wood said.

The PoA structure is not dissimilar to the NEAR protocol, another Ethereum competitor that announced the launch of its mainnet earlier this week. NEAR is likewise rolling out in a heavily restricted form.

Subsequent stages of the Polkadot rollout will issue the network’s DOT tokens to holders and form validators for the planned switch to PoS. This work will be overseen by a “Sudo module,” Wood said, that will govern how the blockchain structure is initially formed. This module will eventually be dissolved, with DOT token holders taking over the network’s governance toward the end of Polkadot’s launch.

The Sudo module and overarching rollout structure are a “staging ground as much as a proposal” for evolving the chain from something that is restricted to something that is permissionless, Wood said.

Watch Wood’s full presentation below:

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BitMEX Is Making Bitcoin Network More Expensive for Everyone, Researcher Finds

Every day, around mid-morning New York time, the average fee bitcoin users worldwide pay to send the cryptocurrency spikes for up to an hour, then returns to normal. A respected researcher thinks he’s found the reason: BitMEX.

If the crypto derivatives exchange used more efficient technologies when broadcasting transactions, users could save as much as roughly 1.7 bitcoin (worth more than $15,000 at press time) in fees every day, or about 7 percent of total daily fees paid, argues pseudonymous bitcoin engineer 0xb10c.

“The daily broadcast has a significant impact on the Bitcoin network and user fees,” 0xb10c wrote in a recent report

Nearly every time a user sends a bitcoin transaction, they tack on a (usually) small fee along with it. Fees fluctuate all the time, depending on how much congestion is in the network. That’s because there is limited space for transactions to go through. If there are too many transactions sent at the same time, miners will prioritize ushering through those with higher fees. Those with smaller fees will have to wait.

Read more: Bitcoin’s Crash Triggers Over $700M in Liquidations on BitMEX

Because BitMEX broadcasts thousands of transactions at once at the same time every day, it leads to a fee increase every day, 0xb10c contends.

“Every day at around 13:08 UTC (9:08 a.m. ET), multiple megabytes of optimized transactions, mostly user withdrawals, are broadcast by BitMEX. The effect is immediately noticeable as a spike in the feerates, which estimators recommend and users pay,” 0xb10c told CoinDesk. His research indicates that this has been going on since at least September. 

BitMEX, which is based in Seychelles, did not answer a request for comment by press time. 

0xb10c has been writing a series of posts about insights he gleaned as he built the Bitcoin Transaction Monitor, a data tool for exploring transactions on the network in detail. 

Fee pressure

Most bitcoin wallets have fee estimators built in that estimate what fee a user should add to a transaction to ensure it is accepted in a timely fashion. If the network is handling too many transactions at once and the fee is too small, it could take longer for the transaction to go through. 

Because of BitMEX’s many transactions going on at once, clogging the blockchain, the estimators move the fee up and many users pay them.

BitMEX broadcasts thousands of bitcoin transactions at once at the same time every day, leading to a fee increase every day.

While users obviously prefer lower fees, higher fees strengthen the network’s security, especially when block rewards (miners’ main source of income right now) decrease every four years, 0xb10c added. The third halving of mining rewards is expected to take place next week, and has only highlighted long-term worries about network security. 

That said, developers and other bitcoin enthusiasts have long been trying to push big exchanges and wallet providers (far beyond just BitMEX) to adopt scaling technologies that could cut fees and make the network run more efficiently. These include Segregated Witness, or SegWit, a scaling upgrade that became available in 2017.

“It’s a bit strange to realize that fees would be close to 0 if exchanges used better practices. Their profligacy helps maintain the fee pressure,” tweeted Nic Carter, co-founder of crypto data provider CoinMetrics, in response to 0xb10c’s research.

Illustrating the problem, on March 12, the day bitcoin’s price crashed in tandem with the equity markets as the coronavirus pandemic shook the world’s economies, the usage of SegWit-updated nodes dropped 5%.

screen-shot-2020-05-05-at-3-01-42-pm
Source: Blockchain.com

Binance, the world’s largest exchange, saw outsized volume day on March 11-12 — over $1 billion and $945 million respectively instead of the seven-day rolling average across January and February of $637 million, according to CryptoCompare — but hadn’t yet moved to SegWit wallets. Binance spokesperson Jessica Jung said the exchange has not updated to SegWit, “but it’s in the pipeline.”

Read more: BitMEX Restricts Access to Japanese Residents, Citing Changes to Local Law

Beyond SegWit, 0xb10c recommended BitMEX use “output batching,” a years-old technique of cramming many transactions into one to save on transaction space. He also mentioned Schnorr/Taproot, a Bitcoin upgrade that’s been in the pipeline for years that some developers estimate will finally be deployed over the next year.

“By utilizing scaling techniques, some of which have been industry standards for multiple years, the impact could be reduced. BitMEX is stepping in the right direction by planning to switch to nested SegWit. They, however, shouldn’t stop there,” 0xb10c wrote.

William Foxley contributed reporting. 

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