Investing in Kyber Network (KNC) – Everything You Need to Know

What is Kyber Network?

Kyber Network is an on-chain liquidity protocol that aggregates liquidity from all available sources and brings them to one network. Liquidity is a crucial aspect for the success of DeFi applications, especially decentralized exchanges, and this is exactly the problem that Kyber Network aims to solve.

Based in Singapore, Kyber Network was founded by Loi Luu and Victor Tran. Low Luu holds a Bachelor's in Computer Sciences from Vietnam National University and holds a Doctorate in Philosophy in Computer Sciences from the famed National University of Singapore. Before founding Kyber Network, Loi used to work as a Research Assistant at the National University of Singapore. Currently, he is heading Kyber Network as CEO.

Victor Tran, another co-founder of Kyber Network, has a Bachelor's in Computer Sciences from the University of Engineering and Technology, Vietnam National University. Before founding Kyber Network, he was working with 24/7 Digital Group & Clixy as CTO. Yaron Velner was among the CTO of Kyber Network from 2017 to mid-2019. But he is no longer working with the company. Currently, he is working as CEO of Israeli company B Protocol.

The company has raised $60M in funding so far from 13 investors. Their investors are Amino Capital, Fundamental Labs, Hashed, Chain Capital, Fenbushi Capital, 8 Decimal Capital, IOSG Ventures, Iconium, Rockaway Blockchain Funds, and more. Kyber Network has also invested in Delta Exchange. Their investment was worth $5M at the time of ICO.

What Problem Does Kyber Network Solve?

It is common knowledge that most of the black-swan events like hacking involve centralized exchanges and entities. For instance, Mt. Gox, the largest cryptocurrency exchange in the early years of cryptocurrency, had to close down after a hacking incident.

Secondly, DeFi applications & centralized exchanges are not compatible due to their differences. But DeFi protocols have no other option but to offer their tokens on the centralized exchanges as they have almost 90% of the entire cryptocurrency trading volume.

Kyber Network brings a solution to this issue by aggregating the liquidity from multiple sources and bringing it to a single point. Before we move to what Kyber Network does, let's look at some data to understand why Kyber Network plays a crucial role today in the DeFi space.

When compared to centralized exchanges, decentralized exchanges are still behind in terms of liquidity available. For instance, the trading volume on decentralized exchanges was only a sliver above 10% compared to the trading volume on centralized exchanges in April 2021.

Currently, Centralized exchanges even beat Decentralized Exchanges when it comes to DeFi tokens. Isn't that the irony? The higher trading volume of DeFi tokens in centralized exchanges is counter-effective, considering that these exchanges are the opposite of what decentralized platforms stand for.

The issue with decentralized financial space is that the liquidity is available, but it is spread across multiple decentralized exchanges. That's where Kyber Network makes a difference. It brings all the available liquidity for a particular token at a single source, making it easier for a trader to buy and sell tokens. The traders also benefit by receiving the best rates.

Basically, anyone, either a business that accepts cryptocurrency or a DeFi protocol, can tap into Kyber Network and quickly swap cryptocurrencies without the need of any third party like a centralized cryptocurrency exchange.

As for the implementation of Kyber Network solutions, you can enable it on any blockchain that supports smart contract functionalities. The native token of Kyber Network is known as KNC, and Kyber envisages fulfilling three roles within the network, which we will explore below in detail. Holding KNC tokens will allow users to vote on crucial aspects related to the functioning of the protocol.

How Does Kyber Network Work?

There are multiple user types or roles that we must understand before moving on to learn how Kyber Network works. These are Users, Reserve entities, Reserve Contributors, The Reserve Manager, and the Kyber Network Operator. Each of them has specific roles. Any individual or organization that falls under the definition of the role will be categorized as such. It is because the smart contract interacts with each of them differently.

Users can be an individual who is a merchant or a trader or anybody, sending tokens to & fro the Kyber Network. It can also be a smart contract account. Reserve Entities are the ones that offer liquidity on Kyber Network, whereas anyone who funds the Reserve Entities is known as Reserve Contributors.

Reserve Managers, on the other hand, are responsible to calculate the rates of exchanges across different cryptocurrencies. They also enter the data about the rates in the network. The Kyber Network Operator decides which tokens will be listed on the network. It also decides which reserve entities will remain on the platform and which will be removed.

Dynamic Reserve Pool

When it comes to the main segment of Kyber Network that maintains liquidity on the Protocol, it is handled by the Dynamic Reserve Pool. Kyber Network has implemented an innovative system to prevent monopoly by placing multiple Reserve Entities in Dynamic Reserve Pool.

If a user wants to exchange ETH with any ERC20 tokens via Kyber and requests for the same, the protocol will search and select the Reserve Entity providing the best rates. There are two types of Reserve Entities, which are internal and external. Now, the question is why Kyber would involve any external Reserve Entities into the protocol? It helps maintain the decentralized nature of the protocol. Involving external players also provides an option for the new tokens, which have low volume by default, to list on Kyber.

The exchange rates that seem way off the normal have to pass a special check to ensure there are no bad elements within the network. Reserve Contributors also play a role in how Kyber Network functions. So, let's understand what role they play in terms of their engagement with public Reserve Entities.

The Reserve Contributors are individuals contributing liquidity to the public Reserve Entities, and in return, they receive a share of profits, known as rewards on Kyber Network. As of now, Kyber Network only allows Reserve Contributors to provide funds to public Reserve Entities. The reason behind this is that the Kyber Network has enacted a way to ensure that the funds in public reserves remain safe. They have put in place transparent fund management to handle all the exchanges through the public reserve.

The Special Features of Kyber Network

#1. As every exchange on Kyber Network is completed in a single blockchain transaction, the swapping of tokens is instant. Thus, takers do not have to wait for the trade to go through.

#2. Partial trade execution won't happen on Kyber. There can only be full or no trade, and hence, if there are chances that the order won't be fulfilled in its totality, the trade will get canceled.

#3. Kyber Network allows users to check the rates that they will receive for exchanging tokens. Thus, they can decide if they would like to go ahead with the trade or not.

#4. It is quite simple to integrate Kyber Network in any smart contracts to offer an instant exchange of tokens enabling multiple trade execution.

KNC Token

The governance token of Kyber Network is known as Kyber Network Crystal or KNC in short. Along with its governance functionality, KNC will also power the economy within the Kyber Network ecosystem. It will also have treasury functionality, which will fund the further development of the network. Let's understand each of these functions in a bit more detail.

A user will pay for any transactions within the Kyber Network. For instance, a user exchanging tokens on Kyber can pay in KNC to facilitate the trade. With new Kyber Network products and services available on the network, there will also be an increase in the usage of KNC tokens as a core currency within the Kyber Network ecosystem.

As for the governance aspect of holding KNC tokens, a KNC holder will have voting rights at the protocol level and also at the extended network level on different chains. Under the role of KNC tokens in treasury, the KNC funds will enable the development team of Kyber Network to develop the network further. The DAO members will also be able to tap into the KNC funds of the network for marketing and growth-related activities.

The maximum supply of KNC tokens is 226,000,000, whereas its current circulating supply is 210,252,944. At the time of writing, it is the 122nd largest cryptocurrency by market cap.

How to Buy Kyber Network (KNC)

Kyber Network (KNC) is currently available for purchase on the following exchanges:

Uphold – This is one of the top exchanges for United States & UK residents that offers a wide range of cryptocurrencies. Germany & Netherlands are prohibited.

Binance – Best for Australia, Singapore, UK, & USA residents. Canadian residents are prohibited.

Discount Code: EE59L0QP for 10% cashback off all trading fees for non-USA residents. USA residents: Trade $100 & Earn $10 in 30 days after account registration.

Kraken – Founded in 2011, Kraken is one of the most trusted names in the industry with over 9,000,000 users, and over $207 billion in quarterly trading volume.

They offer trading access to over 190 countries including Australia, Canada, Europe, and the USA. (Excluding New York & Washington state).

KuCoin – This exchange currently offers cryptocurrency trading of over 300 other popular tokens.  It is often the first to offer buying opportunities for new tokens.  This exchange currently accepts International & United States residents.

Uphold Disclaimer: Assets available on Uphold are subject to region. All investments and trading are risky and may result in the loss of capital. Cryptoassets are largely unregulated and are therefore not subject to protection.

How to Store Kyber Network (KNC)

If you seek to make a major investment in KNC or if you are planning on HODLing this crypto for long periods of time, a hardware wallet is the best option. Hardware wallets keep your crypto stored offline in “cold storage.” This strategy makes it impossible for online threats to access your holdings. The Ledger Nano S or the more advanced Ledger Nano X both support Kyber Network (KNC).

Kyber Network – The Protocol Improving Liquidity for DeFi Applications

Lack of liquidity is one of the biggest hindrances in the way of DeFi. The growth of decentralized exchanges has been phenomenal. When we compare the average ratio of trading volume on decentralized exchanges to the centralized exchanges in 2019 with that in April 2021, we find that there has been over 100% growth.

In 2019, the trading volume on decentralized exchanges was only 4% of the trading volume on centralized exchanges. The numbers have changed today, with the decentralized counterpart of CEXes now seeing trading volume in the range of 10%-11% of the centralized exchanges in April 2021. Players like Uniswap, Balancer, and others have led the DEX space pretty well.

But the issue is still prevalent as liquidity on decentralized exchanges is spread across a long list of exchanges. Now, Kyber Network is growing at a rapid pace. In time, Kyber Network will increase its user base, which will exacerbate the liquidity woes in the DeFi space. The current crypto bull market has played a crucial role in bringing Kyber Network into the limelight. If Kyber Network can leverage its newfound fame or not will also shape the future of decentralized exchanges. So far, Kyber Network has played all its cards right.