Kyber Network’s v3 Upgrade Will Transition The Protocol to A DeFi Hub to Compete with Uniswap

  • Kyber Network schedules new protocol upgrades on Kyber 3.0.
  • The new upgrades will be rolled out by Q3 2021 in two stages – Katana and Kaizen.
  • The new upgrade protocol will introduce dynamic market-making (DMM) and a new governance protocol.

A long Medium blog post from the Kyber Network team confirmed the launch of new updates on its new version, the Kyber Network 3.0 upgrade, which will transition the protocol into a decentralized finance hub (DeFi). The new upgrades aim to expand into a network of specialized liquidity pools, introduce a dynamic market maker (DMM) and introduce governance to its platform.

The new architectural changes are expected to be rolled out in two main stages, Katana and Kaizen, which are expected to be done in the “coming eight to nine months,” the report confirmed. The upgrades aim to solve the high gas costs on Ethereum while spurring DeFi products' innovation on Kyber Network.

According to the post, Kyber 3.0 will introduce the dynamic market maker (DMM), which is expected to reduce slippage and high transfer fees while trading on the DEX. DMMs will provide important benefits to liquidity providers too, “allowing fully permissionless liquidity contribution from anyone and access to this liquidity by any taker (e.g., Dapp, aggregators, end-users),” the blog post reads. Additionally, Kyber Network CEO, Loi Lu said in an interview,

“Kyber will become a hub for liquidity innovation and growth, with the new Dynamic Market Maker (DMM) as the first major development for space. KyberDAO's ability to drive and capture value from all the innovation in the network will be greatly amplified as well.”

Using DMMs, liquidity pool creators will be able to customize each asset's weight in the pool and set a custom amplification factor to reduce the chances of slippage while trading.

Kyber 3.0 also introduces changes in trading fees, which will be adjusted dynamically using volumes and price to mitigate impermanent loss risk. It is a common phenomenon in DeFi that sees liquidity providers lose in times of price volatility. The fees will be adjusted higher when market volumes increase and lower when the market volumes are low.

The new improvements will also set better gas optimizations to reduce the cost of trading and providing liquidity to pools on the DEX.

A new KNC governance token?

Notwithstanding, Kyber 3.0 is also set to overhaul its KNC token (Kyber’s native token) to make it a governance token. The new KNC token will be used in voting proposals and generating value propositions to holders, such as receiving a portion of the fees paid.

The launch of KyberDAO brought about new “sources of value accrual” in addition to the DMM platform and custom liquidity pools. The new governance token will play a huge role in maintaining order and consensus across Kyber 3.0, the post further reads.

“The governance utility of KNC will be greatly enhanced as well, given that they now have effective oversight of these various protocols,” the post reads. “KyberDAO will also have the ability to vote in and fund new protocols for the network.”

The new upgrades launch is set to be completed before the close of Q3 2021, with the team announcing two main release stages – Katana, expected in Q1-Q2 2021, and Kaizen, expected to be completed in Q3 2021.

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