The ERC-20 token has been adapted to create thousands of tokens and coins – 119,876 tokens, to be exact. However, the number is growing every day, and the only way to truly use them is to find platforms and use cases that they can be applied. Unfortunately, so many of these tokens and altcoins function solely on a few websites, which means that users have to search wide and far to discover a use case that can help.
According to the CEO and co-founder of the Kyber Network exchange, Loi Luu, it all comes down to their usability in the marketplace. Luu said, “What we observe is that most tokens are used only on exchanges for trading purposes or within their own specific platforms if the platform is live.” On that note, Luu aims to make it possible for all of these types of tokens to be applicable to payments.
In an announcement that Luu exclusively sought out CoinDesk to announce, he and his team are working to extend the platform’s on-chain liquidity smart contract. The contract presently allows businesses to process ERC-20 token payments, regardless of the individual token. Luu expressed the company’s need to “make tokens usable anywhere.” In theory and in practice, the adjustment makes it possible for businesses to be paid with Ethereum tokens. The best part about the token is that, even if somewhere does not accept it, Ethereum tokens can be converted.
Luu has been in the industry for quite a while, so he has some personal experience with this kind of transition. He is responsible for founding Oyente, which is a security tool for Ethereum specifically. He was also part of the development of Zilliqa, which uses sharding to improve the scalability of platforms. Eventually, these projects led him to Kyber Network, which lets users instantly trade out Ethereum for other tokens on their own exchange. However, some investors note that Kyber Network has yet to prove that they are truly a decentralized exchange.
Luu says that the network is already involved in several collaborations, including with Etheremon, MyEtherWallet, and Coinbase. He noted, “With Kyber we aim to connect between ERC-20 tokens and use cases, so tokens can be seamlessly used for payments, as collateral for lending, investing in funds and so on. This will definitely create more use cases for tokens.” While speaking about the way that they want to integrate the protocols they have in place, Luu explained, “Done right, this protocol can be the transaction layer for the decentralized economy, facilitating value exchange across all parts of the decentralized ecosystem.”
Along with the ability to improve the usability of ERC-20 tokens, Kyber network also said that they will have a developer grant that will, “provide financial support to projects built in and around Kyber's on-chain liquidity protocol.” The process has been moving fast, already adding Canal and MoatFund to the startups that will be receiving grant money.
Liquidity and Contracts
One of the biggest issues in the cryptocurrency industry is liquidity, which includes how available it is and how stable tokens are. This has actually been a major topic for Luu’s research, and it has been the catalyst for his founding of Kyber Network in the first place. However, that is not much different than what DEX does, considering that it is just another use case.
Luu elaborated, saying, “In terms of technical architecture, it's not different,” Luu told CoinDesk. “The decentralized exchange was one use case of the on-chain liquidity protocol; it's just one way to utilize the on-chain liquidity protocol that we have been building so far.”
Right now, there are two major parts to the Kyber contract. There is the part that handles the instant conversions, and the other part that holds the liquidity. Everything occurs on the blockchain, and there is not any need to use a middleman for it. As Luu puts it, “These properties are critical to an open protocol since they allow permissionless innovation and trustless collaboration to happen between all the parties seeking the value exchange.”
Anyone that dedicates their tokens to one of the aforementioned pools has the option of withdrawing them whenever they need it. While this might seem like a way to instantly cause prices to drop, there is been a lot of work to make sure the Kyber contract is secure and that funds are safe within the code.
Along with their audits, the Kyber contract leaves liquidity providers in charge of their funds, so there is no risk of loss, despite potential security risks. That is why the technology is enough to push businesses and financial services to accept various payment solutions.
Luu said, “This protocol enables many transactional and payment flows to happen atomically and in a single step between multiple parties. These use cases would otherwise be very difficult or impossible to achieve.” Luu believes that this technology has the potential to support needs for dApps and the Ethereum ecosystem.
At first, Luu said,
“Since the vast majority of interesting payment patterns and financial use cases require multiple token swaps between several parties, this mechanism is critical in enabling innovation in many classes of dApps.” However, summarizing this decision, he said, “It is crucial that we make tokens much more liquid and useful by allowing them to be easily spent by users and integrated into dApps by developers.”