Centralized exchanges have been receiving quite some heat for their slow processing times and security vulnerabilities. While decentralized networks and exchanges have come into the picture, they pose certain issues as well. With the growing number of tokens, the pressing need for an innovative tokenization solution is massive.
A unique solution to such problems has emerged as the Kyber Network – a decentralized exchange platform that strives to offer instant and secure exchanges at minimum cost.
What Is KNC & What Are They Trying To Achieve?
The Kyber Network is a decentralized exchange platform that allows transformation and trade of tokens, digital assets, and currencies with high liquidity. The protocol utilizes Ethereum-based smart contracts to execute the exchange of assets. The open-source proxy payment service facilitates the secure, instant and highly liquid exchange of assets.
The on-chain exchange platform eliminates order books and utilizes highly liquid reserves. The trustless portal allows traders to pay in one currency and accept payments in another currency type. Ultimately, the Kyber Network provides secure and instant exchanging of cryptocurrencies and assets at minimal costs.
The decentralized platform working via smart contracts and rich APIs solves the problems related to centralized as well as decentralized exchanges. The decentralized network eliminates the security risks associated with centralized exchanges. It allows instant exchanges to allow faster transactions. Alleviating the problems posed by the existing decentralized exchanges, KNC offers high liquidity for dynamic exchanging and features high compatibility for a wide range of digital assets. Not trading amidst the exchange, the Kyber Network serves as a medium for exchanging tokens between individuals too. The portal gives traders the power to perform in crypto exchanges, ICOs, and token sales even if you do not possess the required token.
How Does It Work?
Before delving into the working of the Kyber network, let us look at the key components of the network that take an active part in each transaction. These include:
- The users of the network like individual traders, merchants and smart contract accounts, who utilize the network for sending and receiving tokens.
- Reserve Entities that add to the liquidity of the network. This includes both – Kyber’s own liquid reserve and reserves hosted by third parties. Both private and public reserves can take part in these transactions.
- The Reserve Contributors are the ones who provide funds to the public reserves and share their profits too.
- The Reserve Manager who maintains the reserve and the reserve contributors. Based on this, the manager calculates the rate of exchange and feeds the information and rates into the Kyber network.
- The Network operator is the one who is responsible for adding or removing Reserve Entities and controlling the tokens listed on the exchange portal. The Kyber team is taking up this role during the initial phases. However, it will soon have appropriate decentralized governance in place.
All these components work together within the Kyber Network to execute an exchange. When a user sends a token to the network (Token A); the reserve manager scans through the various exchange options and costs to find the best rate. Then, finding a suitable reserve where a contributor will provide the desired token (Token B), the exchange takes place. The reserve is credited with Token A and Token B is extracted from the network. The reserve contributor takes a share of the profit in return for the contribution.
This is the basic working principle followed by the Kyber Network. The biggest benefit of using the network is that it does not hold any token with itself, until and unless Kyber’s reserve is used.
What Is The Use Case of The Coin?
The Kyber network utilizes its own token – Kyber Network Crystal or KNC for fueling its operations. The native token is an ERC20 token that is required to operate a reserve on the Kyber Network. There are primarily, two use cases of the token. These include:
- KNC is used to reward partners like blockchain explorers and wallets who bring users to the Kyber Network.
- Reserve managers are required to purchase KNC to operate the reserves. Whenever an exchange is performed, the Kyber Network charges a small fee in the form of KNC for their access to the network.
Who Is Competing V.S Kyber Network?
As for the competition, the 0x Project serves as Kyber Network’s biggest competitor. With both platforms offering a decentralized exchange platform to traders, Kyber Network and 0x have some differences between them. Let us take a look at some of the key distinguishing features of the Kyber Network and the 0x Project:
|0x Project||Kyber Network|
|The 0x Project utilizes a hybrid method where an order book is maintained. The orders are lodged off-chain in an order book and then moved on-chain for the execution of the trade.||Kyber Network works entirely on-chin with no presence of an order book. The network utilizes reserves for exchange and conversions.|
|The exchange protocol is used for setting up DApps. It has already been used in applications such as Aragon, MelonPort, Blocknet, etc.||The Ethereum based protocol serves as a liquidity network, empowering transactions between ecosystems, individuals and DApps.|
|The 0x tokens have a fixed circulation. As such, the tokens used for paying fees are recycled and kept within the ecosystem.||The KNC tokens used for payment of fees are burnt after the completion of the transaction.|
Apart from 0x, Kyber Network also faces some competition form exchanges like ShapeShift and Changelly. These are both centralized exchange networks. Shapeshift allows exchange between cryptocurrencies only, while Changelly allows conversion of fiat currencies into cryptocurrencies too. Kyber Network, on the other hand, is a decentralized portal that allows exchange between cryptocurrencies and other crypto assets too.
Major Developments Over The Years
Since its Mainnet launch in the first quarter of 2018, Kyber Network has undergone various major developments. In 2018, the team was able to add support for ERC20-ERC20 conversions in the form of KyberSwap. The team also created a unique developer APIs suite for facilitating the Implementation of Kyber protocol in DApps. Moving on, the Kyber Team has been opening up reserves to ensure the liquidity of the platform and has showcased support for advanced financial instruments. In September 2019, the Kyber Network released the KyberSwap Application for Android devices.
Expanding, the Kyber Network has managed to get various partners like Gifto, MyEtherWallet, ICON, Request Network and many more. The team aims to establish a proper governance framework to create a growing Kyber community.
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