Earlier this week, we took a deep dive into Kyber Network – a sector-leading DEX which has been enjoying monumental growth in recent weeks despite significant price drops on popular assets like Ether.
Since January 1st, 2019:
USD Volume: +2,668%
ETH Volume: +1,201%
Unique Addresses: +332%
Fundamentals for @KyberNetwork have been surging ??
— DeFi Rate (@DefiRate) March 17, 2020
Underpinning the explosive product is a robust ecosystem of wallets, dApps and market makers all powering what is shaping to be one of the most used exchanges in the entire cryptocurrency landscape.
In light of this growth, we wanted to dive deeper into the minds behind the project, getting a clear vision of where the project has its sights in 2020.
To help distil that vision, we took some time to chat with Deniz Omer – Kyber’s head of ecosystem growth.
Let’s hear what he had to say in our latest exclusive interview!
Tell us a bit about your background prior to Kyber!
Prior to crypto, I spent almost a decade in conventional finance working for Thomson Reuters. In early 2016 I stumbled across Ethereum and the notion of a Turing-complete blockchain. I was mostly Ethereum focused, first buying ETH then MKR and then watching the whole ICO craze unfold. I remained very selective and saw Kyber as a great project through all the noise.
Seeing as I did a masters in digital currencies from 2016-2017, I was lucky enough to learn from a great program that had a lot of respected people like Andreas Antonopoulos coming to give lectures and talks during the early days of crypto.
With Kyber, I came to the project early as an evangelist and eventually turned it into my now full time role as the head of ecosystem growth.
And what was it about Kyber that attracted you?
The team is super cool to work with. Loi, Victor and everyone on the core team are also extremely easy to work with. They were building an awesome solution to a problem by adding a proper decentralization model. While there were other DEX models, I always felt that Kyber’s solution had the most potential.
Whenever someone mentions Kyber, Uniswap quickly comes into the conversation. What does that relationship look like?
Uniswap has had tremendous growth in the past year. The thing I like about both of our models is that it’s completely on-chain. The core decentralized aspect shows that everything being on-chain is a tried and true model which many are likely to follow.
Where it starts to differ is that Uniswap relies on its automated market maker. You always have liquidity, but that comes at the price of there being a lot of slippage. Kyber’s scope is more expansive in my mind. You can get Uniswap’s style and plug that into Kyber, or you can plug in any type of market-making price discovery like an automated or a manual model.
With this, I feel like we offer much more flexibility. In tandem, it’s been great to see that both projects have been exploding. 0x Protocol has also been doing super interesting things and we’re starting to see layer 2 DEXs making their way to the table.
Crazy how far Ethereum dex volumes have come over the last 12 months. Feb 2019 @KyberNetwork had around $13M volume, a year later, $138M! 10x growth over 12 months!
— Deniz.eth Omer (@DenizOmer) February 29, 2020
Perhaps the best thing is that every experiment is being carried out which lets us all collectively learn.
Who would you say Kyber’s average user is?
Kyber has a ton of different ways for people to use it. For example, KyberSwap is only one of the many aspects of Kyber. It’s really all about personal preference in the way people wish to trade, so we wanted to offer that flexibility for them to do that.
In tandem with day traders, we’ve got a bunch of wallet integrations and dApps plugged into Kyber. We’re integrated with Nuo Network, Fulcrum, Torque, InstaDapp, beToken, and DeFiZap just to name a few.
The way I like to think about our value is if you want to build a 5x leverage position on something like Fulcrum, you can automate it into one single transaction thanks to Kyber.
And what’re some of the new integrations you’re exploring?
Our first focus was on wallets. The dApp scene was pretty small back in 2018 and it wasn’t until recently that a lot of products started shipping. Now in 2019 and into today, we have a much more mature dApp landscape.
There’s been a huge explosion in DeFi and it made a lot more sense for us to focus our attention there as the sector needs liquidity to grow. With that being said, we’re still integrating other interesting projects like games, donation platforms, etc.
— Axie Infinity (@AxieInfinity) March 17, 2020
We recognize that today, mostly all the growth has come from DeFi. However, the answer for “who needs liquidity” is always changing. We’re seeing this play out right before our eyes as the liquidity streams are changing. For example, we’ve seen projects from DEX aggregators to margin trading to lossless lotteries and even streaming money.
To summarize, we’re less category-focused, and more use-case aware. The most exciting ones are the ones you can’t imagine right now!
Let’s talk about the upcoming tokenomic reworks with Katalyst. What does that rollout plan look like?
It’s a journey that started in 2017. First, we wanted to build a proof of concept exchange that was highly secure. Next, we started pulling in liquidity and plugging into dapps to build an extensive ecosystem. We now have over 80 different dapps across 8 or 9 different categories.
Throughout this whole process we were sure to stay aware of the decentralized ethos, thinking – Is this product making their lives easier? We always had the notion of wanting to move to a more decentralized model over time.
In this spirit, we decided to run some experiments with a couple DAOs like Aragon. We asked the community “Should we put up a community fund?” and the answer was an overwhelming yes.
Next, with DAOStack, we wanted to let the community run their own experiment. We basically said, here’s $5k to go and do what you want. This spawned a ton of cool initiatives like tshirts, articles, memes and more.
Now that we’ve watched all those experiments play out, it’s time for Katalyst. We know our contracts work, and we know there’s a strong ecosystem behind us. With those pieces in place, it’s time to build the Kyber DAO and make all those users active participants in this stakeholding experiment.
We’re thrilled to announce our major protocol upgrade Katalyst which will align stakeholder incentives & better serve the liquidity needs for the ecosystem. Katalyst fulfils 3 goals: drive Kyber adoption, create value for KNC, & improve liquidity for DeFi!https://t.co/8dox9Uvj7Z
And what kind of DAO framework are you using?
Both Aragon and DAOstack are great but they don’t quite fit our needs. With this in mind, we’re building the DAO in house. Our team has built contracts which have handled over $1B so we felt confident that we could build our own framework.
Simply put, if you don’t vote, you won’t get a reward. There are likely to be passive holders who aren’t into voting all the time so they’re ok with active voters making the best decisions and getting rewarded for that.
New KyberDAO+KNC Staking model announced! Looking forward to taking this big step together with DeFi projects, dapps, wallets(basically everyone/anyone who uses @KyberNetwork's ERC20/ETH liquidity), VCs, and our awesome community. 2020 is going to be huge! https://t.co/I9VnfCORZH
— Deniz.eth Omer (@DenizOmer) December 17, 2019
One of the most novel aspects of Kyber’s DAO is issuing ETH as rewards. Can you talk about how you guys came to that decision?
All of our ecosystem participants are sharing the same pool. We’re collecting ETH from our exchange, so why not use it as rewards?
The rest of the rewards models we’ve seen are largely inflationary. By using ETH, there’s a very clear value floor. With inflation, the average holder is being diluted so we felt this was a more sound link.
Users can only gain rewards if they vote within the eligible period so what I’m hoping to see is different stakeholders representing themselves through pool masters.
Some people might not have the energy or capacity to vote every two weeks. Instead, they can delegate to this person who they know is effective – like DeFi dApps.
This ultimately removes a small layer of friction in the sense that you’re rewarding in the protocol layer currency. Giving out Ether is without a doubt the most valuable asset to reward in. It’s more valuable than any other currency and we think this will help drive a lot of participation.
Let’s talk about the Reserve Managers of Kyber and how Katalyst helps them?
Right now, RMs have had to pay the 0.3% fee to make the market. Going forward, they receive a rebate. The DAO will decide how much, i.e. 70% goes to stakeholders, other 30% for rebates.
I’ve had lots of feedback that without having to pay a fee, liquidity providers feel much more incentivized to contribute stagnant liquidity and earn rebates for doing so.
If you enjoy DeFi but still haven't read about @KyberNetwork's upcoming Katalyst upgrade, you really should.
— DeFi Dude ??? (defidude.eth) (@DeFiDude) March 16, 2020
Why do you think DEXs have seen so much growth in recent weeks?
- Technical advances
- Better product interfaces
- Clear ecosystem growth
Boiling it down, the experience at large has drastically improved. Users don’t have to wait for 30 confirmations and there’s no loss of custody. As more people come to crypto, they see this and want to start using it. For example, the number of users on Kyber has been steadily increasing. Within DEXs, there are purely noncustodial exchanges and they’re the ones seeing the most growth.
Similarly, there’s more trust in these dApps at a basic level. People can see that they’ve been ticking along nonstop since launch and even when other dApps struggled amongst the midst of market volatility in the past two weeks – Maker and dYdX being two good examples – Kyber was chugging along smoothly. All we had to do was increase the max gas limit we were willing to allow and in doing so, we were able to provide an open marketplace to establish an equilibrium.
The extreme volatile market just gave all defi protocols an once-in-a-crypto-lifetime test. Really proud of what @KyberNetwork has achieved during this hard time; all the new trade volume records are solid proofs of the resiliency of our design/ tech! pic.twitter.com/Uuru5RqTmi
— Loi Luu (@loi_luu) March 13, 2020
It’s all-natural. As DeFI has exploded, that growth is directly correlated to someone like bZx’s growth as well. It’s more than just pure traders and I think we’re only just getting started.
What’s the timeline for Katalyst looking like?
We’re aiming for a Q2 2020 launch and are still on track to meet that target.
In the meantime we’ll be releasing more material like our ecosystem reports to keep everyone in the loop.
For those looking to get involved, we spun up a new Discord to discuss important decisions about the various aspects of our ecosystem.
??Kyber is now on @discordapp! Official announcements & discussions will be there instead of telegram.
Join our Discord Launch Contest (11 Mar-12 Apr)! Help people learn about Katalyst & win from a 1500 KNC??prize pool! https://t.co/YE3oPxSgfR
Join now: https://t.co/GATUjxaPzt
— Kyber Network (@KyberNetwork) March 11, 2020
We’re always looking for new opinions so feel free to come get involved!
As you can see throughout this article, Kyber is one of the most robust projects to spawn out of the madness of 2017 Ethereum incubation.
While many projects have fully given up on their tokens, Kyber has continued to innovate, largely revitalizing the discussion with the upcoming release of Katalyst.
As the sector leading DEX continues to evolve, it’s evident that there will be more and more opportunities for users – both technical and nontechnical – to share in their upside, directly building on the distributed nature that makes web3 projects so exciting.
To keep up on all things Kyber, be sure to follow them on Twitter.
We’ll be keeping a close eye for future updates and will be sure to report on any news as it gets announced!
Cooper is focused on building compelling blockchain products. He currently works as the managing director at Fitzner Blockchain Consulting and is a contributor to DAOs like MetaCartel and Moloch. He is an active member of the Ethereum community and has a strong interest in for-profit businesses such as The Block Crypto and Messari.