Kyber Network (KNC) is a decentralized on-chain liquidity protocol and cryptocurrency that allows for the exchange and conversion of digital assets. It provides a payment API and a widget that allows users to receive payments from any ERC-20 token listed in Kyber. The Kyber team also operates KyberSwap, a Decentralized Exchange (DEX) that uses the Kyber protocol for liquidity.

Overview

Kyber Network's main idea is to support on-chain and instant trades with guaranteed liquidity. It is a protocol that can be integrated into any application. Using this protocol, developers can build payment flows and applications, including instant token swap services, token payments, and financial dapps. ^[1]

History

Kyber Network is an Ethereum-based protocol focused on aggregating market liquidity and facilitating swaps for ERC-20 tokens. The team raised money through an Initial Coin Offering (ICO) in September 2017 and launched the mainnet in February 2018. ^[2]

Around early July 7, 2020, the Kyber Network launched its protocol upgrade: Katalyst. The launch of this allowed KNC token holders to both earn a yield on their investment and participate in the economic decisions made for the network as a whole. In addition to the protocol upgrade, they also launched KyberDAO and staking, which offered new benefits for liquidity providers, KNC, and DEX token holders.^[3] The addition of this was expected to solidify Kyber's weight within the DeFi space.

Tech

KyberNetwork's main focus is to support on-chain and instant trades with guaranteed liquidity. It functions by aggregating liquidity from reserves that are operated by reserve managers. These managers are responsible for maintaining liquidity in the trading pairs offered and updating bid and ask spreads. For their services, managers are compensated through the spread in each transaction. Further, anyone with additional capital can contribute to reserve pools and receive a return. ^[4]

There are currently three types of reserve managers: Fed Price Reserve utilizes off-chain price feeds and calculates conversation rates, Automated Price Reserve uses an algorithm to automatically determine prices based on relative liquidity, and Orderbook Reserve which is the only trustless method that uses a fully on-chain order book.

Services such as wallets, vendors, or decentralized applications can build on top of Kyber to access the pools of capital consisting of the aggregate of all reserves. Users of these services can swap tokens with their orders being executed at the best price available. This incentivizes reserve managers to ensure they keep their prices competitive and to make markets in lower liquidity tokens where they can take larger spreads.

The July 2020 introduction of Katalyst allows for KNC token holders to earn a yield, and participate in the governance of the Kyber Network, brought the protocol fee down to 0.2%, removed the Liquidity Providers' requirements to hold a bond in KNC (to add liquidity) as a way to remove some of the barriers to entry for new liquidity providers. In addition to the new benefits for liquidity providers, they also now have a new incentive to continue to provide liquidity, as they will receive rebates from protocol fees. ^[5]

Kyber currently has over 45 reserves. There are 3 main types of reserves: the first 2 types, Automated Price Reserve (APR) and Fed Price Reserve (FPR) are dedicated liquidity providers for Kyber, while the Bridge Reserve takes liquidity from other on-chain providers like Uniswap, Oasis, and Bancor. ^[6]

Kyber Fed Price Reserve (FPR)

Fed Price Reserves is designed to allow professional market makers or advanced developers to effectively market-make and generate profits on-chain. Market makers running FPRs provide liquidity for about 70% - 80% of all trades happening on Kyber. FPRs provide a strong set of advantages that make market-making for a wide range of tokens profitable and feasible. These advantages include high capital/gas efficiency, immediate exposure to the widest set of takers in DeFi (Decentralized Finance), exact control over pricing strategies and risk exposure, and a range of safety mechanisms. ^[7]

In FPRs, prices are fed on-chain by market makers using highly capital and gas-efficient mechanisms to make rapid market-making for a wide range of tokens feasible. The FPR architecture allows professional market makers to either manually or build bots to operate their own unique algorithms, customize their trading strategy, and adjust their desired risk exposure. ^[8]

Kyber Automated Price Reserve (APR)

The Kyber APR is built for token teams that want to list their tokens and individuals who have large token holdings. Kyber APR was designed with a focus on ease of maintenance. Many of the top token teams have already listed their tokens on Kyber by setting up APRs, including Synthetix, Melon, DAOstack, and Gnosis. ^[9]

The APR relies on Kyber's pre-defined algorithm set in the smart contract to automatically provide conversion rates for a token. It changes the price of the token based on the trades performed and the ETH/token inventory provided. The APR also provides Reserve managers the ability to set liquidity parameters that suit their specific needs and current market conditions. ^[10]

KNC Token

KNC tokens, also known as Kyber Network Crystals, are named after the crystals in Star Wars used to power lightsabers. They are the native token of Kyber Network. KNC is used to pay reserve fees which are either burned and taken out of the total supply or redistributed into the ecosystem. There is a total supply of 210 million KNC tokens on the Kyber Network as of November 2020. However, because of token burns that number is expected to decrease. ^[12]

Initial Coin Offering

Kyber finalized an Initial Coin Offering (ICO) on September 15, 2017, managing to raise $52 million at a price of 0.00166 ETH per KNC token. 61.06% of tokens were sold in the ICO, 19.47% were saved for the founders, advisors, and seed investors, and the remaining 19.47% were reserved for the company. The company used 50% of the initially raised funds for the reserve, 30% for development, 10% for operations, and 10% for the legal department. ^[13]

KyberDAO

KyberDAO is a community platform that allows KNC token holders to participate in governance. KNC holders can stake KNC to vote on important proposals. In return, they receive rewards in ETH from network fees collected from trading activities in Kyber Network. ^[11]

KyberDAO Partners

Reputable projects are supporting the KyberDAO, either by providing an easy way to stake KNC tokens or participating in Kyber governance.

1. ParaFi Capital
2. #Hashed
3. Hyperblocks
4. imToken
5. Protofire
6. RockX
7. Signum Capital
8. Stake Capital
9. StakeWith.Us
10. Trust Wallet
11. Unagii
12. xToken

Team

Loi Luu is both the CEO and founder of Kyber. He has been a researcher working on cryptocurrencies, smart contract security, and distributed consensus algorithms. Yaron Velner is the CTO of Kyber. He holds a Ph.D. in Computer science from Tel Aviv University. His research is focused on game theory incentives in blockchain protocols and the formal verification of smart contracts.

Pandia Jiang is an advisor for Kyber Network. She is the Founder of LinkTime and an organizer of several Ethereum workshops.

Investors

Kyber team has partnered with Pantera Capital, Hyperchain Capital, Fenbushi Capital, Kenetic Capital, and several other investment firms. Additionally, thousands of investors participated in the Initial Coin Offering (ICO), in which Kyber raised about 50 million dollars.