The fast-growing realm of decentralized finance, known as DeFi, has produced some of the year’s richest returns for cryptocurrency investors, from Compound’s COMP tokens to Chainlink’s LINK. You can see the dynamics of the token movement on the Olymp Trade exchange.
So it may come as little surprise that the Kyber Network’s KNC token has jumped eight-fold in price this year, giving it the largest market capitalization among decentralized exchanges tracked by the data firm Messari.
First Mover interviewed Kyber CEO Loi Luu about the project, including its July 7 launch of the KyberDAO governance platform. Luu says some 30% of the circulating supply of KNC tokens are staked on the platform, which he argues is evidence that “holders want to get behind it.”
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First Mover: How would you explain Kyber to the uninitiated?
The short version is to say it’s a liquidity protocol for anybody, anywhere. The longer version of it is we’re building an on-chain liquidity endpoint in which contributors integrate to either contribute liquidity or utilize liquidity.
So why has the KNC token done so well this year?
People look at the growth of Kyber, and people look at the ecosystem that we’re building. I think so far we have one of the biggest ecosystems in this space. We have more than 100 different applications, wallets, that have integrated with Kyber. We have surpassed $1 billion of volume in 2020 and we are looking to cross $3 billion before the end of the year. Whether the token can do well or not, it really depends on how the protocol is performing.
Do you think there’s any speculation in the KNC token related to future Kyber developments?
Honestly, I think there’s going to be speculation for any token, so it’s not only for KNC. If you ask me, that’s true for every token.
What is the importance of liquidity in this ecosystem?
In finance, liquidity is the key. We are working closely with the DeFi community. For example, an asset management protocol from time to time, they need to rebalance their portfolio. So they need to do a lot of on-chain trading from one asset to another. And that’s where Kyber can come in, because they can do everything on-chain.
What advantage does Kyber have by being on-chain?
I emphasize a lot on the on-chain aspect because everything Kyber does runs on the smart contract, on the blockchain. It’s important to run everything on-chain so it is smart contract talking to smart contract. Everything is trustless that way. There is no centralized custodian.
How do you feel about this year’s boom in DeFi?
Currently we are seeing a lot of experiments happening in the DeFi ecosystem, from liquidity mining, from bootstrapping adoption of a protocol and things like that. I think this is good that there are a lot of things happening. We’ve also started seeing a lot of new projects that have nothing to do with DeFi also branded as DeFi to get some hype. So I think there’s definitely some hype, but compared with the ICO boom in 2017, it’s nowhere close. We’re not seeing retail get into the DeFi hype. We’re not seeing people talking about DeFi in the mainstream.
DeFi is built on Ethereum, but there are constraints on that protocol, especially right now. How are you feeling about that today?
I think it really worries us. The gas prices, or fees to use Ethereum, are still very high. So we are actively looking at different layer-2 protocols to see which one that we should work with. For end users, they can’t pay $5 to $10 everytime they use a decentralized protocol. There must be a cheaper and more efficient way to use decentralized applications every day.