Kyber Network Aims to Improve DeFi Liquidity With ‘Katalyst’ Protocol Upgrade

Kyber Network, the ethereum-based protocol focused on aggregating liquidity and facilitating swaps for ERC-20 tokens, is about to launch a major upgrade.

Planned to go live in the second quarter of 2020, Katalyst is said to be a major upgrade to the Kyber protocol to better meet the liquidity needs of the decentralized finance (DeFi) ecosystem.

Currently, the Kyber Network (KNC) design allows for any party to contribute to an aggregated pool of liquidity within each blockchain while providing a single endpoint for takers to execute trades using the best rates available.

Katalyst aims to reduce friction in liquidity contribution, introduce rebates for high-performing reserves (liquidity providers) and allow DApps integrated with Kyber to add a custom spread for flexible rates.

Simon Kim, CEO of Hashed, a blockchain venture capitalist firm based in Seoul and California's Silicon Valley, said the introduction of Katalyst would be able to grow the network exponentially by providing greater incentives for its contributors.

“The Kyber Network has proven its utility as the most reliable liquidity pool for all the participants in the DeFi ecosystem on ethereum,” Kim said.

On top of liquidity optimization, the Katalyst upgrade will include a new staking mechanism and the launch of the KyberDAO, a community platform that allows KNC token holders to participate in governance for the first time.

Joshua Green, head of trading at Digital Asset Capital Management, a cryptocurrency trading firm based in Sydney, Australia, said as the DeFi space continues to move from its development phase to focus on users and transaction execution, liquidity becomes a more prominent driver of continued growth.

“We are excited by a number of projects and the disintermediating models they have developed,” Green said. “Higher levels of liquidity now need to follow to make them more efficient for the widest user base and make their value proposition as strong as possible against centralised peers.”

Trading on centralized exchanges is currently not compatible with DeFi applications since it is technically infeasible to bridge between decentralized applications and centralized servers without compromising the trust model.

KNC is currently up 27 percent over the last 30 days and is up 78 percent year-to-date making it one best-performing crypto assets for 2019. It is currently changing hands for $0.22, according to data provider Messari.

Kyber supports over 70 different tokens and powers close to 100 integrated projects including popular wallets MEW, Trust, Enjin, and the HTC Exodus smartphone.