Kava’s decentralized finance protocol (DeFi) was officially launched on the Cosmos main network (ATOM), with the initial integration of Binance Coin (BNB) as a guarantee.
Kava works in a similar way to MakerDAO (MKR), which allows users to deposit cryptoactives and loan Kava’s stablecoin, USDX. The project focuses on providing interoperability to DeFi and promises guarantees from other chains, including Bitcoin Lifestyle and Ethereum (ETH).
The initial collateral form is BNB, which provides the Binance token with a DeFi application. It is no secret that the exchange sought to input its token into DeFi, previously associated with Equilibrium, based on EOS.
Kava was incubated by Binance Launchpad, which probably considered the decision to accept BNB only at launch. Binance CEO Changpeng Zhao (CZ) said, „Kava is devising another BNB application, which adds additional value to BNB holders.
The launch is accompanied by a promotional offer that rewards Kava’s creditors with the project token, which can be used to participate in its governance.
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Interoperable, but not yet compatible
The Kava project is the first of its kind to be launched in Cosmos, a project that strongly emphasizes interoperability with other block chains. Cosmos SDK is also feeding the Binance chain, which greatly facilitates the integration of BNB into Kava.
There are many projects in alternative smart contract platforms that seek to emulate Ethereum DeFi in some way. For example, a version very similar to the single garment of the old Maker was launched in Tron (TRX) in March.
As mentioned above, EOS has its own Maker analog in Equilibrium. The project follows a similar path to Kava with the integration of Bitcoin warranties, implemented a few days before a similar decision by the manufacturer.
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However, one of the strengths of the DeFi ecosystem at Ethereum is the large number of projects that can interact with each other, a feature called composability.
This can lead to interesting mechanics, such as the recent addition of Uniswap tokens to Aave, which can be used to reinforce old cash funds. Some features of Uniswap V2, such as flash swaps, were also designed with composition in mind. Instant loans and composition can also be violated, as evidenced by bZX hacks.
Although Kava is interoperable in the sense of accepting assets in the cross chain, there are still no other projects for which it is compatible. Kava CEO Brian Kerr told Cointelegraph that Kava’s vision is to become a „DeFi center“ in the Cosmos center and zone model.
He believes that architecture makes it easier for other Ethereum DeFi projects like Compound and Augur to enter the Cosmos, though he sees three different ways to do so.
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They could use an Ethereum bridge for Cosmos „to maintain the existing network effect and not have to rewrite their base code“. But he also mentioned that other projects could simply migrate to Cosmos to benefit from improved infrastructure.
Finally, another way could be through direct integration with Kava:
„Many smart contracts at Ethereum don’t need their own security, but they would benefit from being in the Cosmos ecosystem. I imagine that composite or similar systems are built directly in some of the larger centres of the Cosmos, such as Kava“.