KAVA has been slipping ATH since September – can the Kava 9 upgrade save the price?

On December 16, Kava hosted a testnet event for Kava 9 – testing the capacity of the new mainnet.

Since Kava considered the first mainnet upgrade a month ago, many have been waiting for a positive impact on the KAVA price, as previous testnet events drove the price to $ 8.

Kava has also drawn interest in a number of partnerships in the areas of GameFi, cloud services, security, and more.

Ultimately, Kava’s main goal is to attract more developers to its ecosystem – a sticking point for its Total Value Blocked Credit Protocol (TVL), which covers most of its own projects.

Can the upgrade help Kava get going again when prices fall?

Story of kava

In 2019, Kava made a formidable debut by winning the Binance Launchpad Project of the Year Award for its potential to shake up the blockchain industry.

While most DeFi applications are limited to the single-chain ecosystem, Kava has grown in popularity as the first major platform to offer cross-chain lending.

Both the Kava Protocol and its Hard Protocol lending platform support cross-chain asset sending and lending, allowing investors to borrow, borrow, and deposit cross-chain assets from the Kava ecosystem.

Since 2019, Kava has been a decentralized Layer 1 hub that supports cross-chain DeFi applications and services and offers developers a permanent and accessible financial services infrastructure.

Kavas TVL

Important milestones from Kava:

• June 11, 2020: Kava 3 mainnet upgrade completed and first cross-chain credit platform CDP launched, supporting BNB staking and USDX withdrawals.
• October 15, 2020: Kava 4 gateway mainnet upgrade completed and cross-chain crypto market, HARD Protocol is live.
• April 9, 2021: Mainnet Kava 5 officially launched.
• August 30, 2021: The Kava DeFi platform completes the Kava 8 mainnet upgrade.
• The mainnet upgrade from Kava 9 is expected to go live in the first quarter of 2022.

In terms of total locked value, Kava’s TVL has steadily increased with every major iteration and upgrade, which has also increased the KAVA price. However, the price has not been able to maintain the same steady upward trend as TVL, which has been nearly 60% below its high since the last iteration.

KAVA price table. Source: TradingView

The reason for the price slide can be found by looking at Kava’s ecosystem logs and token economy.

Kava ecosystem

Kava has two obvious problems:

• A weak ecosystem is largely supported by Kava’s own protocols.
• The token economy is not stable.

In the absence of the breadth of the ecosystem, TVL is supported by Kava protocols

Kava currently comprises 3 main projects:

• Kava Mint: allows users to use assets as collateral in exchange for USDX.
• Kava Lend: enables users to earn rewards by offering and borrowing assets from the crypto market.
• Kava Swap: Allows users to buy and sell tokens in the Kava chain and earn rewards by providing liquidity to the mining pool.

TVL trend of the kava ecosystem project

TVL of the Kava Ecosystem Project

Kava Mint makes up almost 70% of all Kava TVL.

There aren’t many assets and trading pairs available for lending in the project and there is a lack of liquidity in the ecosystem that revolves around lending and exchanging in the kava ecosystem. For example, Kava Swap offers very high APY rewards, but its liquidity pool only supports USDX base trading pairs.

Token Kava

Token prices in the Kava ecosystem have fluctuated a lot this year.

Let’s take a look at Kava’s stablecoin USDX and its governance token KAVA.

Restricted application scenarios for USDX

USDX is a stablecoin known for its instability, mainly due to the lack of application scenarios. Currently, its main use is for taking on kava loans.

USDX price has stabilized after the launch of the cross-chain AMM app Kava Swap. Kava also plans to increase liquidity and usage scenarios by listing on additional exchanges.

Stablecoin price USDX

The assignment of governance tokens creates a sell-off risk

KAVA is the token used to manage the Kava blockchain, while KAVA also serves as the lender of the last instance of the system. If there is insufficient collateral for the entire system, KAVA is used to redeem USDX until the system regains sufficient collateral.

The allocation of KAVA is controversial. 40% of KAVA was sold in 3 large private sales, which resulted in a large percentage of the tokens being held in the hands of a few people.

Distribution of KAVA token tokens

Will Kava 9 fix these issues?

One of the biggest highlights of the upcoming Kava 9 upgrade is that it officially enables the Inter-Blockchain Communication (IBC) protocol, which enables blockchains to communicate with each other.

This has two main effects:

1. More comprehensive: The upgrade will allow all IBC-enabled projects and communities to integrate their products into the Kava chain. DeFi projects will have access to many functional scenarios in the cross-chain Kava DeFi ecosystem.
2. Further applications: With the cross-chain structure of IBC, USDX can be used via IBC in Ethereum DeFi projects and become the payment unit of a decentralized exchange (DEX). As a result, Kava’s token economy is expected to become more stable.

The Kava 9 upgrade also includes the completion of the Ethereum cross-chain bridge, Kava Launchpad, support for Keplr wallets, and other infrastructures, all of which lay the groundwork for the Kava ecosystem to grow in the years to come.

Although Kava has successfully implemented a cross-chain solution for DeFi lending, the Kava line’s projects are not enough to maintain a public chain.

The success of the Kava ecosystem will then depend on its ability to persuade developers to deploy projects in addition to the protocol that the new upgrade can enable.

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