Coin Insights: What Is Kyber

kyber-network-logo

If you’re a fan of the Star Wars saga, you might already know that kyber crystals are special crystals in Star Wars lore. These crystals are used to power the mythical Jedi weapon known as the lightsaber. 

And If you’ve been on the Coinberry trading platform recently, you may have noticed that Kyber Network Crystal is one of the tokens available on the platform. Kyber Network Crystals were named after their rare rocky counterparts from the films because, like the fictional kyber crystals, KNC power the Kyber Network.

However, there is more to discuss here than just the name alone. That’s why in this article we’re going to examine exactly what Kyber Network is and why it’s important.

What is the Kyber Network?

Kyber Network is a DAO (decentralized autonomous organization) that is powered by their native token, the Kyber Network Crystal. The CEO of Kyber Network, Loi Luu, said once, 

“Kyber is working towards a future where any token is available anytime, anywhere.”

The Kyber Network allows users of the protocol to exchange cryptocurrency tokens in a trustless manner. This means that there is no intermediary that can accept or deny transactions. ‘Trustless’ transactions are a core feature of a particular type of decentralized exchange (DEX) which Kyber Network’s DEX is. 

There are different variations of decentralized exchanges. Krystal, the DEX for the Kyber Network, is what’s called a liquidity pool-based decentralized exchange. This is the most decentralized form of a cryptocurrency exchange.

What are liquidity pools and why were they invented?

To understand how liquidity pools work, it’s best to take a look first at what liquidity means. Liquidity simply means how easily one can sell a particular item or asset. The more liquid it is, the easier it is to sell. For example, an old, rusty car isn’t very liquid. But a brand new Tesla is highly liquid. 

We can take this analogy to understand how traditional stock exchanges like Nasdaq, for example, rely heavily on what are known as market makers to make assets and items on the exchange liquid. Market makers use an order book to match buyers with sellers. 

You can think of market makers as individuals or firms which buy and sell securities to ensure that there is always a person to match buy sell orders with buy orders and vice-versa. In the typical order book, say for a stock exchange, the only way for assets to be traded is if a buyer and a seller can agree on a price.

According to finematics.com, market makers are useful, but they don’t work well for a decentralized exchange like Krystal that operates on Ethereum. This is because market makers trace the price of securities in markets by continually adapting their prices. This creates a large number of orders and cancellations. Ethereum, for example, is a digital asset with very high transaction costs and times. Therefore, an asset like Ethereum is difficult for market makers to work in.

That’s why liquidity pools were invented. Liquidity pools are a collection of tokens lent out by shareholders that are secured in the ‘pool’ through a smart contract. 

Unlike traditional exchanges, decentralized exchanges like Kyber Network use automated market makers (AMMs). Because there is liquidity locked in pools like on Krystal DEX, users don’t need a third party to match a buy with a seller. There is not a counterparty needed to execute the trade, or in other words, you’re not trading with a person. Orders are being matched instead by the liquidity that is being staked in the liquidity pool for a given token.

Automatic market makers facilitate the operation of trading on DEXs through smart contracts. They’re called automatic market makers for this reason. Because they’re not really people or entities. They are simply a computer algorithm, so to speak, operated on smart contracts.

However, Kyber Network wasn’t the first exchange to operate liquidity pools. This was  another protocol called Uniswap. This might lead some of you to wonder: “If we already have Uniswap, then why do we need the Kyber Network?”

Why was the Kyber Network created?

As the cryptocurrency market continues to grow, so does the list of tokens available across different exchanges. The ability to convert one token into another represents a challenge for investors as well as exchange operators. Because there are so many new DEXs being developed, many cryptocurrencies are fragmented over many platforms.

This makes finding liquidity on certain liquidity pools challenging. It’s possible that you could have transactions fail on some decentralized exchanges because there was no liquidity available, while others performed flawlessly. This creates a problem for investors as well as the well-being of the cryptocurrency industry in general, if you don’t know where liquidity can be found on the DEXs across the web.

The solution that Kyber network found was to incorporate over one hundred DeFi projects into their system, thereby allowing liquidity to be found regardless of the type of cryptocurrency. With over 6,500 unique crypto tokens in the world, Kyber makes it straightforward and simple for dApps (Decentralized Apps) to integrate with their services. By integrating, Kyber gives liquidity options to both the users of that dApp and the users of the Kyber platform.

Who Created the Kyber Network?

Kyber Network was founded by Loi Luu. Before Kyber, Luu was heavily involved in research — especially on Ethereum. One of Luu’s most notable accomplishments is working with a team to develop the first sharding protocol for public blockchains ever. 

If you’re unfamiliar with this term, ‘sharding’, it’s a mechanism which allows blockchains to be more scalable. It’s a historic accomplishment as this technology has been adapted by protocols like Ethereum and is a major component of Ethereum 2.0. 

The significance of sharding can be likened to the advent of high speed internet in the early 2000s. By making blockchains scalable, this exponentially improves the speed of blockchain networks. 

Luu’s knowledge and insight around sharding helped seed the idea for Kyber’s ability to quickly scale and offer liquidity to users by integrating many dApps in the space.

Why the Kyber Network is Important

With access to the internet, anyone can access the Kyber Network from anywhere in the world. Users can exchange other tokens without permission and intermediaries, which makes the process of exchanging cryptocurrency seamless and fast.

There’s no waiting or registration required to use Kyber. The only thing one needs to do is to download the MetaMask extension (a browser based decentralized cryptocurrency wallet) on mobile or desktop/laptop, or download another decentralized wallet that the Kyber Network integrates with, and they can start using the platform immediately. 

Kyber Network: Where is it today and Where is it Heading?

Kyber Network recently launched their new improved project, Krystal, a “multi blockchain platform that provides you with many DeFi services like token swaps and more.”

According to Cointelegraph.com, Kyber Network will be accommodating their exchange to another blockchain called Avalanche. A quick quote from the article reads,

“Kyber Network is launching its automated market maker (AMM) on Avalanche as part of the base layer’s $180 million incentive program.”

Kyber Network expanding to other networks besides Ethereum is a sign of more developments to continue for the protocol.

Kyber Network Crystal has a circulating supply of 102-million tokens and a total supply of 170-million. KNC ranks regularly in the top 300 tokens on Coinmarketcap.com with a market capitalization evaluation of approximately $440-million CAD at the time of writing this. 

To stay up to date on price, make sure to check out our price page on our trading platform which will allow you to keep posted on the price movements of Kyber Network Crystal.

Kyber Network (KNC) Resources

If you’re interested in learning more about Kyber Network, you can continue to read our educational series. We’ll be releasing more articles on this cryptocurrency, and covering various aspects of it along with other coins we offer on the Coinberry platform.

Kyber Network Website

Kyber.network

Coinberry.com

Kyber Network Price

Kyber Network (KNC) References

The websites, articles, and content that was used to make this article:

Whitepaperr.io/kybenetwork

Kyber Whitepaper: https://whitepaper.io/coin/kyber-network

Decrypt.com

What is the Kyber Network? https://decrypt.co/resources/kyber-network-explained-learn-guide-simplified

Finematics

What are liquidity pools? https://www.youtube.com/watch?v=cizLhxSKrAc&t=221s