It’s no longer a debate that cryptocurrency is a strong diversifier to any portfolio – in fact, it’s become extremely commonplace for younger investors to be holding Bitcoin, Ethereum, or other well-known tokens. Millennials are three times as likely to invest in crypto as a long term investment than the previous generation, and it seems that blockchain and the way investors manage their crypto is changing as well.
Perhaps you’ve heard of Web3, the third and most recent iteration of the internet that instrumentally uses blockchain for backend updates that allow web users to connect P2P rather than going through a server. Web3 is inherently safer and more efficient because an individual’s data isn’t shared with a third party, but it also provides an incredibly flexible framework for developers to work with. So, what does this mean for crypto?
Products built with Web3 will change the way the crypto world builds products
New startups surrounding the Web3 innovation have been popping up, most notably the new decentralized platform KIRA. The project is a new DeFi network that may completely change the way users manage their staked assets through the interchain, where interconnected networks communicate with each other. KIRA Network is launching one of their first Defi applications – the Interchain Exchange Protocol (IXP), which allows traders to stake any digital asset using their Multi Bonded Proof-of Stake (MBPoS) native consensus.
Normally, Proof-of-Stake (PoS) is a method of confirming transactions on a blockchain where users are chosen for validating a transaction based on how much of the asset they’re willing to freeze in their own account. This act of freezing their assets is called “staking”, with the amount of an asset frozen usually corresponding to the likelihood of that user being chosen, and ultimately rewarded, for validation. Not only can this lead to a “rich get richer” model, but it eliminates the liquidity of the asset as a user waits to be chosen.
Liquid staking, a key function of KIRA’s MBPoS, looks to solve this problem by creating a 1:1 derivative when a user’s assets are frozen when staked. Interestingly enough, users can stake any digital asset, such as NFTs (non-fungible tokens), digital real estate, stablecoins, and art. They will also be able to engage in trading and other investing activities using the KIRA’s 1:1 staking derivative – users are issued a proportional derivative representing their staked token. For example, if Bitcoin (BTC) is staked, users are given sBTC to maintain their liquidity. “The goal of KIRA is very narrow and simple: provide the market access to any asset in the interchain ecosystem and let users utilize 100% of their capital,” said KIRA co-founder Mateusz Grzelak, “Any digital asset in the ecosystem.”
Ethereum’s shift to PoS shows that it’s time for new tech to help with crypto’s liquidity problems.
A recent upgrade on the Ethereum network involved a massive transition to staking; a stark contrast to the Proof-of-Work model that the network had been using over the past five years. As the world’s second-biggest blockchain, it provides a clear example of the trend towards PoS and a new reliance on a staking derivatives market that will allow holders to maintain liquidity while validating. With Ethereum’s new PoS model, around 30% of ether tokens will likely be frozen, which is potentially a huge blow to the network.
The KIRA MBPoS directly solves this problem by providing more flexibility with their own staking derivatives, and are looking towards utilizing other staking derivative products to enhance their own platform. “We benefit from a growing number of digital assets in the interchain ecosystem, as KIRA provides uncensorable market access to those assets,” said Grzelak.
KIRA’s Exchange Protocol, IXP, works to maintain an environment that is truly decentralized as its governance model rewards members who keep an active role in the community to assure that wealth is not a determining factor in the power of their vote. By providing derivatives and thus better liquidity, KIRA avoids the all-too-common centralization snafu that many decentralized exchanges (DEXes) run into such as staking pools, miners speculation, inability to scale, and dependence on whoever hosts the backend services.
KIRA is setting the bar high for the future of decentralized exchanges. Being able to stake assets while maintaining strong liquidity and utilizing a variety of assets to stake (not just having to load up on a single token to increase chances of being chosen for validation) is an incredibly valuable tool. It also includes a safer and more decentralized model as users can avoid CEXes using KIRA’s trustless, scalable, and permissionless exchange.
Investors have clearly picked up on this as well – KIRA recently closed a $2.2 million private fundraising round, and has the support of popular network Cosmos and the new Web3 platform Polkadot. As the cryptocurrency market and technology evolve to meet new demands, it’s important to keep an eye out for projects that uphold the true spirit of decentralization, community, and financial autonomy.