There are many new projects being built on the Ethereum protocol, and one of the more interesting is the Kyber Network. This project is attempting to totally decentralize cryptocurrency exchange by keeping it entirely on the blockchain. This will also make for a trustless exchange, and on the Kyber Network users will be able to exchange any cryptocurrency at all instantaneously. At least that’s the goal of the development team behind this project. It’s not certain if they can live up to their proposals, so let’s look deeper to see what progress has already been made and what’s coming in the near future. We’ll also get some idea of how the Kyber Network might differ from other decentralized exchange projects such as Bancor and the 0x Project.
Kyber Network Review: The Need for a Kyber Network
It’s strange that cryptocurrencies were built as a decentralized asset, but nearly all the exchanges created for them are centralized entities. This centralization has been troublesome at best, leading to increased costs for investors, as well as security vulnerabilities and thefts of assets. Not to mention the slow transfer times seen from some of these exchanges, and their lack of good customer service. There have even been reposts of exchanges locking users from their accounts and coins going missing.
These flaws in the centralized exchanges have led to more and more decentralized alternatives popping up in the recent months, however the decentralized exchanges come with their own set of problems. One major issue with most decentralized exchanges is a lack of liquidity. Some also suffer from high costs as network transaction fees are charged for every order modification that’s made.
The Kyber Network is created to solve these issues. It will be a decentralized exchange that keeps all its operations on the blockchain, and will provide adequate liquidity for investors at all times by using a reserve system instead of the traditional order book. The Kyber development team believes this system will keep costs at a minimum and will also allow for the exchange of any cryptocurrency at all.
The Kyber Network Team
The Kyber Network is headquartered in Singapore and was created by Loi Luu, Yaron Velner, and Victor Tran. Luu is the primary founder and his previous work included being co-founder of the decentralized mining pool SmartPool. He was also the creator of the very first open source security analyzer for Ethereum contracts known as Oyente. Additionally, there is an experienced and knowledgeable advisory team which includes Ethereum founder Vitalik Buterin.
The Kyber Network Roadmap
The Kyber Network has grown very rapidly, with the testnet going live just three months after the initial announcement of the project. An ICO followed after just one month in September 2017, and the project raised a very impressive 200,000 ETH worth $60 million at the time. Five months later in February 2018 the main net went live for whitelisted participants, and more recently on March 19, 2018 the main net went public as an open beta.
The exchange had planned to have support for exchange of all ERC-20 tokens by the end of the second quarter, and they met that goal. It’s always encouraging when a project meets its deadlines. In the coming months the team expects to make the KyberGO platform live, increase the number of developer APIs, support cross-chain exchanges, and provide more information on the Gormos scaling solution.
The KyberGO platform will do away with KYC requirements for ICOs, providing the most secure, convenient and liquid platform for any user to contribute to a token sale. A KGO (Kyber Genesis Offering) token sale will be a fully on-chain, highly secure and instant process where users can contribute using a wide variety of tokens and immediately receive the project’s new tokens in their wallet address.
Cross platform exchange will truly unlock the potential of the Kyber Network, allowing for the instantaneous exchange of any cryptocurrency coin or token in a trustless manner on the blockchain.
Kyber Network Review: How the Kyber Network Works
The Kyber Network will be an exchange, but it is also so much more, with plans to become a full-fledged transfer platform. The key difference between an exchange and the transfer capabilities of the Kyber Network is that when fully functional the tokens sent won’t even need to match the tokens received. When it is fully built-out, the Kyber Network will perform exchanges on the blockchain, allowing users to send any token and have it converted to any other token before it arrives at the receivers address. This is certainly convenient for individual users, but it also has far-reaching implications for businesses. It means merchants will be able to accept any cryptocurrency at all, but thanks to the power of the Kyber Network they can receive it all in the single cryptocurrency of their choice.
Roles Within the Kyber Network
There are a number of different roles and functions within the Kyber Network that will coordinate to make the network fully functional. These roles are as follows:
- Users – These are the individuals, merchants, businesses and smart contracts who will use the Kyber Network to send and receive cryptocurrencies.
- Reserve Entities – This role adds liquidity to the platform through a dynamic reserve pool. Reserve entities can be internal to the Kyber Network, and in the future they will also consist of registered third-parties with significant KNC holdings. Reserve entities can be both private and public depending on whether the public contributes to the reserves they hold. Having third-party reserve entities as part of the network adds diversity, and helps to keep the network more decentralized. It also allows for listing altcoins that may not otherwise have much demand of trading volumes.
- Reserve Contributors – These are the contributors to the public reserve entities. The inventive for becoming a reserve contributor is a share of the profits from the reserve.
- The Reserve Manager – Maintains the reserve, calculates exchange rates and enters them into the network. The reserve manager profits from exchange spreads set by them on their reserves. They can also benefit from increasing volume by accessing the entire Kyber Network.
- The Kyber Network Operator – Currently the Kyber Network team is filling the role of the network operator, which has a function to add or remove Reserve Entities as well as controlling the listing of tokens. Eventually, this role will revert to a proper decentralized governance.
Kyber Network Review: The Kyber Network Crystal (KNC)
The September 2017 ICO saw the release of the Kyber Network Crystal (KNC), which was valued at roughly $1 for the ICO. There were 226 million KNC created for the ICO, with 61% sold to the public, while the remaining 39% were split 50/50 between the founders/advisors and the Kyber Network company. Currently only roughly 134 million coins are in circulation, and the total supply has been reduced to 215.6 million after the company burned nearly 10.4 million coins in October 2017.
There will always be a minimum demand for the token, since it is required by Reserve Managers to operate the network. There are also future plans for more coin burns, which is hoped to keep an upward trajectory for the token. That hasn’t been the case in 2018 however, as the correction in the cryptocurrency markets has seen the KNC go from a high of $5.90 in early January to the July price of $0.922743.
The KNC is an ERC-20 token that can be stored in any ERC-20 compatible wallet such as MetaMask or MyEtherWallet. Kyber has expressed plans to create a Ropsten wallet for the KNC and this is currently in beta testing.
Those looking to purchase KNC can do so from OKEx, Huobi, Binance and a host of other smaller exchanges.
Kyber Network Review: Conclusion
With the obvious hard work and dedication of the development team there’s a chance that the Kyber Network could become the leading decentralized exchange. A focus on the trustless, inexpensive exchange of any cryptocurrency is something needed by the ecosystem. If Kyber Network realizes their vision of frictionless exchange of any cryptocurrency it could be just what’s needed for merchants and others to increase their adoption of cryptocurrencies.
Although the network is still in beta testing, reviews from users have been very positive, citing the ease of use, and the instantaneous transfers being made possible by the Kyber Network. The team met their goal of adding support for all ERC-20 tokens by the end of the second quarter of 2018, which is very encouraging.
The roadmap through 2019 is challenging, but if the team can continue performing and meeting their goals we could see impressive growth from the Kyber Network in the coming months.