What is Kyber Network?
Kyber Network is a decentralized, blockchain-based protocol that facilitates the exchange of tokens without an intermediary and provides liquidity for decentralized finance (DeFi) applications
It is integrated with more than 100 applications and powers KyberSwap, Kyber Network's decentralized exchange (DEX).
Importance of Liquidity in DeFi
Liquidity is crucial for healthy DeFi markets, as it enables the exchange of assets without significantly affecting their price, provides trading activity, and facilitates the conversion of assets to cash. However, new DeFi protocols often struggle to attain and maintain liquidity.
Kyber Network's Solution
Kyber Network emerged as a permissionless protocol to address the liquidity challenges in DeFi. It aggregates liquidity from various sources, including token holders, market makers, and decentralized exchanges, into a single liquidity pool on its network.
How Kyber Network Works
Kyber Network consists of smart contracts that can be implemented on any smart contract-capable blockchain, although it is currently only implemented on Ethereum.
Token Swaps
Kyber Network allows users to execute instant token swaps without relying on a trusted third party.
Here's how a typical trade works:
- The user sends the source token to the Kyber Network smart contract.
- The contract queries its reserves for the best exchange rate.
- The contract sends the source token to the reserve with the best rate.
- The reserve sends the destination token to the user.
KyberDAO and KNC
Holders of Kyber Network's native token, KNC, can participate in the governance of the network through KyberDAO. They can vote on the network's fee model, rebates for reserves, and other proposals. KNC is a deflationary staking token, meaning its supply will decrease over time.
Kyber Network's broadly integrated protocol offers a decentralized solution to DeFi's liquidity challenges, providing ERC-20 tokens with ecosystem-wide utility.
Its permissionless approach and instant token swaps make it a valuable tool for dApps, DeFi platforms, and crypto wallets.
References:
Kyber Network: How Does it Work? | Gemini. (n.d.). Retrieved from https://www.gemini.com/cryptopedia/what-is-kyber-network
elegant_solution. (n.d.). Retrieved January 13, 2024, from https://www.freepik.com/author/user28432665
Freepik - Goodstudiominsk. (n.d.). Retrieved January 5, 2024, from https://www.freepik.com/author/goodstudiominsk
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