What is Kyber Network?
Kyber Network is known to be an Ethereum-based protocol that allows instant conversion and exchange of cryptocurrencies and digital assets with high liquidity. It performs all the actions on the blockchain.
The centralized exchanges are under fire for the slow process times and security vulnerabilities. It could take days to withdraw the funds from an exchange in some instances. Kyber network offers a decentralized and on-chain exchange but tends to remove the order book. With this, the platform gets the ability to exchange crypto instantaneously at minimal cost securely.
How does Kyber Network Work?
Kyber Network is used as a medium for transferring tokens from one person to another, and therefore, it is more than just an exchange. This can be good for the P2P transfers, while the token that one sends should be matching the specific token that the receiver wants to receive.
- Kyber Network roles
The following are the different roles in the Kyber Network.
The users send and receive tokens to or from the network. They could either be individuals, smart contract accounts, or merchants.
- Reserve Entities
They bring liquidity to the platform and can be internal or hosted by a registered third-party. It depends on whether or not the public contributes to their reserves, and they could be public or private.
- Reserve Contributors
They provide funds to the Reserve Entities and are only associated with the public Reserve Entities and share profits from the reserve.
- Reserve Manager
The reserve manager calculates exchange rates, maintains the reserve, and enters the rates into the network.
- Kyber Network Operator
The operator adds or removes the reserve entities and controls which tokens are to be listed.
- Dynamic reserve pool
The dynamic reserve pool helps to maintain Kyber Network liquidity. This pool has all the reserve entities because multiple entities in a pool prevent monopolization and keep the exchange rates quite competitive.
With the help of the external reserve entities, Kyber Network prevents centralization and opens its doors to the low volume token listings. External reserves may not have issues taking on the risk of storing popular tokens that the Kyber reserves don’t list.
Kyber Network Crystal (KNC)
This is an ERC20 token that the Reserve Managers have to purchase for operating a reserve on the network. When the exchange occurs, it charges a small KNC fee to the reserve. The fees are used for the operational costs and reward third parties who can bring volume to the network.
When the promotional amount is used on the two things, then the remaining tokens are burned. This burning causes the circulation supply to decrease, thus making the token deflationary. When combined with the increase in demand, this must ideally cause the price to increase.
Kyber Network is undoubtedly an exciting protocol that brings security, speed, and liquidity to the exchange process of cryptocurrency. This project combines a reserve warehouse with the on-chain exchanges to get the best centralized and decentralized systems. The price of KNC has not reflected it, but the Kyber team has produced results with KyberSwap and KyberDeveloper release and partners with many reputable blockchain companies.