Kyber’s Automated Price Reserve (APR) allows much more efficient utilization of ‘locked’ token inventory compared to Uniswap, says Loi Luu, CEO and co-founder of Kyber Network. Kyber is an open-source liquidity protocol that uses the blockchain to enable seamless exchange of cryptocurrencies in any application, in a decentralized manner and without the need for any middleman.
Since there are many tokens in the crypto space and token liquidity is scattered across different platforms, Kyber integrates multiple liquidity providers (Reserves) and connects liquidity into one single endpoint for applications and end-users to access, says Luu.
”Uniswap is a great source of pooled liquidity since they allow anyone to contribute any token on-chain—Kyber has already integrated Uniswap as a bridge reserve (also Maker’s OasisDEX and Bancor) to tap into their liquidity as well,” he says.
In general, Kyber is able to provide better liquidity, offer lower spreads, and serve more volume, with the same amount of token inventory, due to how we allow the pricing of tokens in a specific range. Moreover, unlike Kyber’s Fed Price Reserves (FPR), Uniswap’s Automated market maker (AMM) model is also not suitable for professional market makers that require more advanced pricing tools.
Luu’s sees the greatest competition comes from centralized exchanges, which have much higher trading volume than all the DEXs combined. “We have to work together as a community to drive as much innovation, users, and liquidity on-chain as possible,” he says.
Kyber is the most used DeFi (decentralized finance) protocol in terms of a number of users (over 32,000 unique address in 2019) and developers, integrations (almost 100 integrations since inception), and trading volume (Facilitated over $500 million in 600,000 fully on-chain trades in 2019).
Kyber operates fully on the Ethereum blockchain. Such a design allows seamless integration and composability with blockchain applications, a.k.a. decentralized apps (DApps), as well as full transparency and transaction verifiability. This is required by DApps but is not possible with other off-chain or hybrid approaches.
“We foresee Kyber’s protocol being integrated in the majority of DApps and becoming critical infrastructure for decentralized finance, usable on any smart contract-enabled blockchain. With Kyber, developers can focus on building and shipping, without needing to worry about liquidity or integrating multiple systems.”
Luu says he expects to see an increase in the number of examples of financial legos and composability between DeFi DApps. “For instance, InstaDApp has created a Compound to MakerDAO Vault bridge and also integrated Kyber Network for on-chain token swaps. This combines the benefits of various protocols into one single platform and abstracts a lot of the complex processes involved. More professionals and developers from traditional finance will start to understand the value of DeFi and we will see the DeFi space flourish, with a brain drain of talent going towards DeFi startupS.”
Kyber’s swap protocol has already been implemented on other blockchains, including EOS (yoloswap.com) and Tomochain (tomoswap.com). Kyber’s protocol has been successfully deployed on each chain to facilitate token swaps.