Binance Academy: Kyber Network (KNC) - What Is It?
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TL;DR
Founded by Loi Luu and Victor Tran in 2017, Kyber Network is a multi-chain cryptocurrency liquidity hub that makes DeFi trading more efficient and cost-effective and ultimately enables DeFi for all in an easy, fast, cheap and secure way.
Its flagship product, KyberSwap, is a DEX and aggregator aimed at being the best liquidity platform to swap and earn on all chains, equipped with tools and automation to help users make informed decisions and maximize their results. KyberSwap is deployed on over 11 chains, including Ethereum, Polygon, BNB Chain, and Avalanche.
Kyber is a community-governed project, and the Kyber Network Crystal (KNC) token is an ERC-20 token used to align incentives for multiple stakeholders. KNC holders can stake tokens on KyberDAO to vote on proposals and earn KNC rewards.
Kyber's reputation stems from 5 years in DeFi, bringing value to the ecosystem and prioritizing user safety with smart contract audits and blockchain insurance in place. The project's vision is to become the liquidity infrastructure and transaction layer for the decentralized economy.
What is KyberSwap?
KyberSwap.com is Kyber Network's flagship DEX aggregator and liquidity platform that aims to provide the best swap rates for traders while enabling liquidity providers to maximize earnings through capital efficiency.
As of June 2022, KyberSwap is deployed on over 11 chains, including Ethereum, Polygon, BNB Chain, Avalanche, Cronos, Fantom, Aurora, Velas, Oasis, Arbitrum, and BitTorrent, with over 60 DEXes integrated and 20,000+ tokens supported.
KyberSwap enables users to swap, earn and seamlessly participate in DeFi in each of the supported chains. KyberSwap is a decentralized and permissionless trading platform. This means users have complete control over their orders and funds.
KyberSwap aims to solve the daily liquidity challenges that many DeFi Traders encounter while also maximizing rewards for liquidity providers with superior capital-efficient pools.
How does KyberSwap work?
For Traders
KyberSwap provides access to more than 20,000 tokens and $34B TVL across more than 60 DEXs on 11 chains, while it ensures the best swap rates by using an advanced router and gas-efficient smart contracts as well as exploring on-chain arbitrage opportunities. Users can get the best rates while enjoying an advanced, easy-to-use interface that offers live price charts, free pro-trader tools, and live trading route visualization.
By dynamically routing through liquidity pools on each chain from more than 60 DEXes, KyberSwap enables users to access more than 20,000 tokens, without needing to check rates across multiple platforms or use different platforms on each chain. KyberSwap does not charge an additional fee during aggregation.
Those looking to spot tokens in DeFi can enjoy KyberSwap's Discover page, a DeFi tool that helps users identify tokens that are likely to start trending soon. This is done based on on-chain data, trading volume, and price trendlines.
For Liquidity Providers
KyberSwap's protocol provides liquidity providers with capital-efficient pools with security, such as anti-sniping attacks, protecting LPs from bots that deposit and remove liquidity before large volumes of trades. Capital efficiency also means that smaller pool volumes can serve very large volumes of trade and transactions, providing superior returns to LPs.
Additional automation provides increased user benefits, such as single token deposits (so LPs don't have to deposit two sets of tokens) and auto-compounding (pool fees compound automatically). These features extend to KyberSwap's 11 chains, providing DeFi users access to various existing pools or even creating pools themselves.
KyberSwap adopts a Dynamic Market Maker (DMM) protocol, which is a modified version of the traditional Automated Market Maker (AMM) model used by Uniswap and other DEXes. When the market is too volatile, fees can dynamically increase to reflect better the risks involved in each trade. When the market is stable and volatility drops, fees decrease. The DMM automatically recalculates fees by analyzing on-chain volume data for each liquidity pool.
This system is quite similar to ridesharing apps like Uber. During high-demand hours, such as rush hour, the price of Uber rides goes up. Likewise, prices decrease when there is a lower demand for rides.
KyberSwap’s second feature is a “programmable price curve” called Amplification (AMP). This allows a liquidity pool to mimic higher levels of liquidity without needing more tokens. Liquidity providers can set their own AMP according to the type of token pair in the pool. Pairs with lower deviations, like stablecoins, will have higher AMP.
On the other hand, more volatile pairs will have lower AMP. Liquidity pools with AMP equal to one are pools that still work according to the dynamic fee model but with no amplification. This allows projects to turn $200k of liquidity into more than $1M effective liquidity for higher efficiency. Liquidity providers can also earn rewards through KyberSwap’s liquidity mining farms.
What makes KyberSwap unique?
A few attributes of KyberSwap that make it unique are:
1. Highly integrated aggregator and liquidity protocol.
2. Strong user benefits: best rates aggregator, automation, security, and free advanced tools.
3. KyberSwap’s liquidity protocol uses its DMM and Amplification to increase efficiency and reduce the risks of slippage and impermanent loss. Slippage is when a trade executes at a lower or higher price than desired due to low liquidity (thin order books). Impermanent loss can be defined as a price decrease experienced by a crypto asset after you put it in a liquidity pool.
What is the Kyber Network Crystal (KNC) token?
Kyber Network Crystal (KNC) is KyberSwap’s native token that fuels the Kyber Network ecosystem. Working on a Proof of Stake (PoS) consensus mechanism, KNC holders can participate in the DAO and vote on all the governance proposals related to the future of the network by staking their KNC assets or delegating their vote to a third-party platform.
KNC holders can contribute KNC to eligible farming pools for liquidity mining rewards. For other activities such as Trading Contests, Gleam Giveaways, and AMAs, participants are also rewarded with KNC tokens. KNC is traded on DeFi exchanges like KyberSwap and on several centralized exchanges like Binance.
How to use KyberSwap
If you’re looking to swap your crypto tokens on KyberSwap, follow the steps below to get started.
1. Visit KyberSwap.
2. Connect your DeFi wallet. KyberSwap supports MetaMask, Coin98, WalletConnect, Coinbase Wallet and Ledger.
3. Select your desired crypto token pair. You can check the details of your transaction under “More Information.”
4. Swap and confirm the transaction on your crypto wallet.
Apart from swaps, users can also provide liquidity by using one of KyberSwap’s pools or creating new pools. They can also stake their LP tokens in one of the eligible farms.
Closing Thoughts
Kyber Network is the liquidity hub that powers KyberSwap, a decentralized exchange built on Ethereum. It’s a hub for decentralized services and a place where DeFi enthusiasts can build, exchange, and improve the crypto space. Kyber Network’s DEX, KyberSwap, is focused on improving the experience for liquidity providers and traders in the DeFi space.
