Kyber Network is a blockchain platform that facilitates the instant exchange and conversion of cryptocurrencies. The platform runs on the Ethereum mainnet and provides APIs that allow Ethereum wallets to easily receive payments from Bitcoin, Zcash and other supported cryptocurrencies. Kyber Network is essentially a decentralized exchange that instantly processes on-chain trade requests with guaranteed liquidity. The network features several novel constructions which enable it to fulfill its use case:
Token reserve warehouse – Instead of maintaining a global orderbook, Kyber Network maintains a reserve warehouse that holds an appropriate amount of tokens to maintain exchange liquidity. The reserve is directly controlled by the Kyber smart contract, which will fetch a conversion rate for each exchange pair from all the reserves. The rates are updated by the reserve managers, and the Kyber contract will select the best rate for users.
New standard contract wallet – Kyber Network introduced a new contract wallet that enables the Kyber contract to send a user’s exchanged tokens to their destination address on their behalf.
Modular design – The Kyber contract is designed with well modularized components that allow it to dynamically add new tokens or delist existing tokens. This enables the network to work with any token or digital asset that will be released in the future.
Cross-chain trading – Kyber Network plans to leverage relays and future platforms like Cosmos and Polkadot to enable cross-chain trading and payments.
Kyber Network also features a native token called Kyber Network Crystal (KNC), which is used to reward users who generate trading activities in the platform. Before operating a reserve, users must have KNC tokens. In every trade, a fraction of the fees charged by the reserve will be paid to the network in KNC. The trade fee gives reserve managers the right to operate and earn profits from trading activities on the network.
KNC tokens earned via fees will be burned after a very small percentage is used to pay for any operational costs and supporting partners. The Kyber team believes burning the tokens will cause them to appreciate in value as the total circulating supply reduces.
KNC Pricing, Market Cap and Volume
Kyber Network Crystal has a maximum available supply of 226,000,000 tokens. It was released after an ICO in September 2017, which raised 200,000 ETH from over 21,300 different sources spread out over 130 countries. After the ICO, the available supply was distributed as follows:
- 61.06% is held by ICO participants
- 19.47% is held by founders or consultants
- 19.47% is held by the Kyber team for internal use
KNC’s market cap reached over $780 million USD in January 2018, but it hasn’t managed to remain stable. Its price will likely continue to fluctuate until the platform is officially opened to the general public.
How Kyber Network Works
There are five actors on the network who independently interact with the Kyber contract:
General users: Anyone who performs transactions on the network. These include individual users, merchants, and smart contract accounts.
Reserve entities: Entities provide exchange liquidity. Reserves can be classified as public or private depending on whether or not they take contributions from the public.
Reserve contributors: Contributors provide capital to reserve entities for a share of the profits. Reserve contributors only exist in public reserves that accept contributions from the public to build up the reserve.
Reserve managers: Managers maintain the reserves and determine exchange rates, which they feed to the network.
Kyber Network operators: Operators are responsible for the addition and removal of reserve entities, and the listing or delisting of exchange pairs on the network. The Kyber team will initially act as the network operators to bootstrap the platform in its early stages. This will change once a proper decentralized governance system is implemented to take over operator duties.
High Liquidity with Leveraged Reserves
Kyber Network guarantees high liquidity by leveraging existing reserves on the network. Different reserves are directly managed by different reserve managers. The network allows multiple reserves to co-exist to enable better prices and guarantee better liquidity. Allowing different people to manage their own reserves allows the network to support low-trading volume tokens by handing over the management of those tokens to corresponding reserve managers.
Kyber Network does not hold any of the funds in the reserves. The funds are stored on reserve contracts that follow the network’s ground principles. When a trade/conversion request is issued, the network will fetch the conversion rates from all reserves that can process the request. The network then selects the best rates and executes the request.
Types of Reserves
The network will feature two types of reserves: private reserves that don’t accept contributions, and public reserves that take external contributions and share profits with contributors. To mitigate the security risks for public reserves, Kyber implements a transparent management model that allows contributors to track all trading activities performed by reserve managers.
Private reserves won’t be as much of a security risk because the funds are handled locally and external parties can’t interfere without permission. Everything should remain secure as long as the private reserve manager follows good security practices.
Kyber Network will initially launch with only one reserve maintained by the Kyber team, which will be the main source of liquidity for the system before other reserves are registered. The Kyber team wants to encourage reserve managers to monetize their assets by fulfilling trade requests from users in exchange for conversion fees.
The network will feature a reserve manager portal that displays network stats and performance details, and helps managers maintain their portfolio. The portal will have various standard trading strategies and algorithms managers can use to automatically set prices and re-balance their portfolio. Reserve managers will also be able to use it to implement and deploy their own strategies when and where they see fit.
The Kyber team plans to collaborate with wallet providers and token projects to encourage the adoption of the platform.
Kyber vs. Other Cryptocurrencies
As the blockchain industry continues to grow and more crypto assets are introduced, the need for a decentralized exchange that lets users instantly convert their crypto tokens becomes more apparent. Kyber Network fulfills this need with four main system features:
Trustless and secure – Network operators don’t hold any reserve tokens, so users don’t have to trust the intentions of reserve entities. The integrity of the network is enforced by the Kyber smart contract.
Instant trade – An exchange/conversion is executed immediately with zero confirmation time. This particular features is what sets Kyber Network apart from existing exchanges.
On-chain exchange – The exchange runs on the blockchain and can be accessed by user accounts and smart contracts. Smart contracts can interact with the exchange directly without third-party intervention to receive funds from tokens they didn’t originally support. This feature enables Kyber Network to function as an on-chain proxy payment platform for all accounts.
Compatibility – The payment API can communicate with all existing smart contracts without requiring any kind of modification.
Buying, Selling and Storing KNC Tokens
KNC has been in the top 100 cryptocurrencies based on market cap for most of its life. This means that it is available at a wide range of large cryptocurrency exchanges. Some popular exchanges currently offering KNC trading include: Binance, Huobi, Coinnest, OKEx, Gate.io, Liqui, Kucoin, Cryptopia, TDAX, Coinrail, and Livecoin.
KNC uses the ERC20 token standard, which means it can be stored on any Ethereum wallet including Mist, MyEtherWallet, and Metamask. KNC can also be stored on any hardware wallet that supports ERC20 tokens like Ledger Nano S and Trezor. For mobile storage, Kyber Network has partnered with Trust Ethereum Wallet, which has apps for Android and iOS.
Liquidity of Kyber Network Crystal
Kyber Network’s unique use case and successful ICO has made it a top project to watch for 2018 and beyond, but its true potential won’t be known until the platform is fully opened up to the public. So far, everything seems to be going as planned, and as a result, KNC has maintained good market liquidity.
The mainnet pilot platform was launched on February 12, 2018 to holders of the Kyber Genesis Token (KGT), which was airdropped to KNC holders who completed their know-your-customer (KYC) check. KGT tokens are non-transferable and have no significant utility aside from identification purposes. Only after KGT holders have tested and verified the platform will it be opened to the public.
The Kyber team expect to fully open the platform to the public in April 2018. It will start by listing at least 10 cryptocurrencies, with more to be added in the future.