FinNexus Hosts Kava Labs’ Aaron Choi in its Weekly Chat (2/17/20)
Tags: Tokenization, Blockchain, Recaps, Kava, Defi

FinNexus Hosts Kava Labs’ Aaron Choi in its Weekly Chat (2/17/20)

Participants:

Boris Yang — FinNexus Founder & CEO

Ryan Tian — FinNexus Financial Specialist

Special guest: Aaron Choi — Kava Labs Head of Business Development Asia

Host: Prof K, Nicholas Krapels — FinNexus Strategy Advisor

Section 1: About the KAVA Project

Prof K：Welcome to our humble home, Aaron!

Boris (co-founder of FinNexus)：Hi Aaron, so glad for you to be here.

Prof K：First, we’ll let Aaron talk about KAVA and introduce himself and the project. Then we’ll move into some general questions (including the one u refer to there about what happened this weekend with bZx Team)… then we’ll open it up to the community. Aaron is one of our first presenters for the Insights Summit. He has a great presentation about the history of Defi at https://www.insights.finnexus.io

Aaron, can you tell us about yourself? Where are u from? Where do u live now?

Aaron: Sure! first, thank you, prof K, and Finnexus for the opportunity to be here on this AMA. I’m from North America and I am Kava’s Head of Business Development and Asia.

I’ve been working in the crypto space for a few years now. Mostly on the exchange side of things. I am currently living in Shanghai but travel frequently for work.

Prof K: You might be one of the first people I met in the blockchain industry and one of the nicest. What can u tell us about your experiences in crypto?

Aaron: Sure, personally I’ve been involved in crypto since 2012. I came across bitcoin hearing about it through friends. Living in Asia at the time, I found it quite useful as a cross border settlement tool as well as a very interesting experiment on digital forms of money. In late 2016, I jumped into the industry working at BTCC/BTCChina, one of the first crypto exchanges in the world, also based in Shanghai.

Prof K: Yes, working for Bobby Lee, one of the OG crypto guys.

Aaron: Yes, he was my boss at the time. Super nice, super inspiring person and very humble. Also probably one of the best people to learn crypto from for sure.

Boris: Woah… 2012 you are a veteran in crypto.

Prof K: And then you actually ran/designed exchange for a while and now are at Kava Labs. Can you tell us what kind of project is KAVA?

Aaron: At BTCC, I was VP of our exchange business, and after leaving, I went to found and run GJ.com, another smaller exchange. Afterward, I joined Kava. Kava is building a Defi Decentralized Financial protocol for lending. We want to provide users with a way to trustlessly use and leverage the value out of their crypto assets.

Prof K: Is it on Ethereum?

Aaron: Nope, we are one of the few Defi companies that have chosen to not build on Ethereum. Instead, we have chosen Tendermint/Cosmos as the infrastructure.

This allows us to build our own blockchain with Kava’s security consensus mechanism built-in via our validators. Tendermint is a proof of stake type consensus.

Prof K: So you prioritize interoperability as we do at Finnexus?

Community Member: So KAVA must have a strategic partnership with cosmos, right?

Aaron: Exactly. Cosmos is the chain of choice for interoperability. Our idea is that crypto will evolve to be chain agnostic, and services that provide interoperability services natively will win out in the end.

I would say that we work with Cosmos very closely. We have Sunny Aggarwal, who is a core research scientist, as an advisor and early investor. Also, an early Cosmos Validator — Sikka, is also a large validator for us as well.

Prof K: Besides Sunny, who are your other key investors?

Aaron: We are the first Cosmos-based project to be building Defi services so we do get a lot of support from their team. Particularly their technical team, whom our team works very closely with. Other key investors include Arrington, SNZ, Lemniscap as well as others.

Syrex (community member): As per Kava’s website, Kava has many partnerships with a big project like Ripple, Cosmos, TenderMint, Hash key, etc. What’s the major reason and benefits of these partnerships to the Kava project? What’s the most critical and innovative point of Kava to ensure users that it is the best under the Defi niche? How can you compete with MakerDAO which has done a good number of business with the recent market?

Prof K: The MakerDAO question is certainly apt. How do you see yourself competing with them?

Aaron: Firstly, we want to ensure that we are providing products that are wanted by users. The governance system of our KAVA token will be the basis of setting the priorities of our development. Our KAVA token is a proof of stake token as well as a way to vote for proposals from our community. Secondly, we don’t see ourselves as competing directly with Makerdao at the moment. The Defi space is extremely small and I believe we’re building our products to increase the size of the Defi market in different ways. MakerDAO is still very much an Ethereum user-based product. While we want to reach out to users that might not be within the ETH space at first.

Cool Hi (community member): it can be said that KAVA is one of the big names leading to DEFI

Prof K: I certainly think so! If Maker has $500m worth of ETH locked up, Kava has a big opportunity all by themselves to lock up non-ETH assets.

Prof K: So is there a roadmap as to what assets will be used first to back your USDX stable coin?

Aaron: Sure, our rough timeline is so: We are currently running our CDP platform on testnet and hope to release it to mainnet within 6–8 weeks. Once on Mainnet, we will be supporting BNB and ATOM as collateral types. Over the next 3 to 6 months, we will be working on supporting XRP and BTC also.

Ryan (co-founder of FinNexus): Looking forward to what BTC will contribute to the Defi world.

Aaron: As for other assets, we are always considering any top major coin that has usage and liquidity. As always, if our community wants to put forth a proposal and it passes as a vote, we will have to get it done!

Cool Hi: I chose BNB ATOM first, I think this move is quite good because as I think, the investors using BTC will be lower than the investors holding BNB.

Aaron: Yes also we are super excited to be working with BNB. Binance has been a great partner for us. Our tech team has been working with the Binance chain and through the bep3 modules to support BNB for interoperability

Prof K: Would it be wrapped XRP and wrapped BTC? Any idea of how that will work yet?

Aaron: I believe via the cosmos hub, wrapped assets would be the easiest way to proceed, but if IBC and other tender mint upgrades come in time, we might be able to support native atomic swap like mechanisms which would make things much more user-friendly!

Prof K: So after these 4 coins, it will be up to the community to choose the new assets for the CDP?

Aaron: Our team will be proactively looking to add in more coins as well, but if our community wants to provide us input, we will allow it 😁

Prof K: What exchanges does KAVA trade on now? Will all of them support USDX too?



Aaron: KAVA is currently traded on a few different exchanges already. Binance, MXC, Bitmax are some of the larger ones. Today we just listed on Bitrue which has one of the largest active XRP trading communities worldwide.

In terms of USDX support, we are looking for them to integrate our stable coin to increase liquidity when we start minting our USDX soon.

Section 2: About the Latest Trends in DeFi

Prof K: We love Bitrue! Great platform there, especially if you are going to be working with XRP tech. For now, I want to bring in our FNX founding team Ryan Tian and Boris Yang and also ask you, Aaron … I’ve said that I think we could get to $10 billion in Defi total value locked up (TVL) before the end of 2020. Do you think that’s possible and if so how?

Boris: I know you have listed on Bitrue. Congratulations👏

Aaron: I’ll let Boris take the first stab at this! and thank you Bitrue has been great in working with us so far. Looking forward to more cooperation with them in the near future, too.

Prof K: By the way, u can all say u think I’m crazy and that 10b won’t happen. I don’t mind! 😂

Prof K: Kava was a Binance Launchpad project so it trades on Binance. What are the other exchanges at the moment?

Aaron: I think 10B will be quite tough to hit. But things in our space move quickly and move parabolically. If we were to hit 10B, I’d say it would be a combination of large crypto hedge fund/trading funds getting into Defi as well as the price of crypto going sky high.

Mostly the latter would increase the value of crypto being locked up in Defi.

Prof K: Keep in mind that the defipulse number that everyone uses does not include anything not on ETH or BTC Lightning.

Ryan: Though Defi is a newborn, it is developing at a speed few would expect. Recently the lockup value in ETH reached 1 billion USD, with a growth rate of over 360% over the last year. The fast growth of Defi is largely benefited from its composability and interoperability. The DeFiants would call it the Defi Legos. An increasing number of projects have been building on top of each other and more interactions with the protocols and contracts, which creates a virtuous circle, and it is only the beginning. The growth has been increasing exponentially. Also, apart from Ethereum, other chains like Cosmos, Wanchain, Tron, Binance are also striving to create their own Defi ecosystems, and we have been missing the BTC as the most important puzzle piece. With the flourish of the participants, I would expect it is possible to reach $10 billion in Defi's total locked-up value before the end of 2020.

Boris: Bitcoin and other coins have a great percentage of total market cap. I think Bitcoin and other coins are difficult to be locked up by Defi based on tech this year. Maybe around 50 B could be the total amount that could be locked up theoretically. It means 1/5 would be locked to 10 B for the total amount. So I think if the market cap does not increase, it is difficult to get to 10 B. If market cap increases, holders would not being willing to lock their coins.

Prof K：All very good answers! We’ll see who is right in 10 months!

Boris: How many bitcoin to be locked is the most important point in your number.

Prof K: Yeah, I think the combination of lots of new projects like KAVA and FNX, increase in global crypto market cap, and yeah bringing BTC to the party. These all should occur this year or at least start.

Prof K: What are the possible touchpoints between Finnexus and Kava?

Boris: Yeah, AMA today is a good start for KAVA and FNX. It means something in the future.😁

Aaron: For us at KAVA, I am always looking for ways to increase the utility of our KAVA token as well as ways to increase our USDX liquidity and exposure. So definitely will be exploring ways how KAVA and FNX can work together.

Boris: I think FinNexus want to build a protocol to run different assets including tokenized and decentralized. So stable coin is very important for token trading. We will not do it by ourselves. So it is possible to use a stable coin on KAVA. In business, we have a strong relationship with Bitrue too. Maybe we could do something interesting three parties together in future.

The Defi will not only within Ethereum and we will be some good contributors towards the whole blockchain finance eco.

Ryan: FNX is building interoperable clusters to bridge different counterparties, and KAVA is working on the leverage assets with a cross-chain CDP platform. There are lots to connect between the two. Especially the Kava tokens and stable coins.

Aaron: I was thinking along very similar lines as well.

Boris: That is great. I think we could talk more together with Curis. Yeah, AMA today is a good start for KAVA and FNX. It means something in the future.

Prof K: Deeply liquid stable coins are very important to Defi and therefore what everything Finnexus is trying to do to bring traditional finance to the blockchain.

Aaron: For us at KAVA, I am always looking for ways to increase the utility of our KAVA token as well as ways to increase our USDX liquidity and exposure. So definitely will be exploring ways how KAVA and FNX can work together

Boris: I think FinNexus want to build a protocol to run different assets including tokenized and decentralized. So stable coin is very important for token trading. We will not do it by ourselves. So it is possible to use a stable coin on KAVA.

Ryan: FNX is building interoperable clusters to bridge different counterparties, and KAVA is working on the leverage assets with a cross-chain CDP platform. There are lots to connect between the two. Especially the Kava tokens and stable coins

Boris: In business, we have a strong relationship with Bitrue too. Maybe we could do something interesting for three parties together in the future.

That is great. I think we could talk more together with Curtis.

Section 3: Questions from the Community

Syrex: When talking about Defi space, people think about specific terms such as lending, derivative, stable coin, user’s credit score, and smart contract-based asset management right away. Which specific Defi product is Kava offering or are you offering all of them? What is your plan to strengthen and develop the community to persuade more people to look at the product instead of price?

Aaron: Our main focus over the next coming months is working on our product to get that out solidly, as well as education of our potential users on how to use our CDP to mint USDX via collateralizing BNB, ATOM, XRP, BTC, and more as we develop those bridges.

Prof K: You wanted to know how KAVA and FNX could work together in the future, right? My belief is that USDX will be a deeply liquid stable coin and we at Finnexus are always interested in incorporating such assets into our products.

Aaron: We are also working on ways to increase early USDX liquidity and support by incentivizing early minters.

David Prince: Can you explain how Decentralized Leverage works, especially in Defi? Can other dApps associated with your services be built from your Defi?

Aaron: Yes our KAVA protocol is built with the idea that other Dapps can be built on top of our blockchain. We want to support an entire ecosystem of different types of Defi Dapps that utilize our chain, governance model, security model, USDX, etc.

Khoidarelest: The market today has a lot of development projects on the Blockchain platform. One of the factors that make the platform appealing to many users is its special features. So, what are the outstanding features and advantages of Kava to attract users and investors?



Aaron: I think the most important piece that we’re doing is that we are building Defi on a protocol that natively supports interoperability. This has huge strategic implications that really drive to the heart of Crypto adoption.

Other things like our partnership with Binance, and providing them, BNB, and all of their millions of users with Defi services is huge for us.

Also, our voting/governance system, while still in the early stages, sets us apart from other types of chains. I believe our POS model will drive higher interaction/voting rates that other chains.

Prof K: We are at our 1-hour limit. But I have just 1 important question I’d like to ask about the bZx/Uniswap/Kyber/Compound exploit that netted somebody $350k worth of risk-free ether in less than a minute this weekend. What do we think of this!!!???

Boris: It is interesting. We took the last weekend to understand how they to do it.

Aaron: I believe this could have a damper on Defi, at least a very short term one. As we saw with TheDAO hack, that had a pretty big impact on the reputation of smart contracts that even to this day still reverberate.

But I think there will be a lot of learning, and a lot of soul searching for better implementations of Defi and we’ll quickly get back on our feet as an industry.

What I’d say is that we are very early in this journey.

Ryan: That’s the most eye-catching even right now. Well, it can be good and bad at the same time. It is a bad thing for the specific platform as they lose money and it may raise some doubts about the security of Defi, which is claiming to be one of the good things in itself. But, this attack really draws our attention to the interoperability problems in Defi. We may need to think about all the positives and what we are over-confident in before once again.

With increasing varieties of projects and the swelling of the ecosystem, the bonds with the tokens and projects become tighter. The greater value when an industry creates or embraces, it is likely to be regarded as a target. The attacker precisely and smartly maneuvered the contracts among different platforms as well as their interoperability nature. And It may not be the last one targeting Defi.

Prof K: I think we’ll see more of these exploits in the future, but that it will eventually be a good thing, in the long run, to make the whole Defi crypto ecosystem stronger. As an engineer, how can DeFi projects protect themselves from these types of edge cases?

Boris: I think it is good for Defi. Next time developers will pay more attention to their contracts, especially connections with each other. Everyone knows finance products are something derivative from others. This is one of the most important risks in traditional finance. For Defi, there is no difference in nature. Different products are connected by contracts. So everyone could use it to do something if this connection is not perfect or developers ignore the influence when connecting with others' contracts. I have to say guys who did it are very creative and have a deep understanding of logic relations for the contracts.

Ryan: It is important for us to learn from this very accident, especially to reevaluate the effectiveness and security themselves, and more importantly to jump out to look at the bigger picture, with the interactions of others and chain reactions.

Aaron: I wouldn’t rule that out. Exploits rely both on human weaknesses and human ingenuity, which both have no limit! 😂

Ryan: Very true.

Prof K: And on that note… I think we can wrap it up. Thank you, everyone, for joining us here tonight!

Thank you Aaron for your time and we hope to see KAVA CDP’s minting USDX securely and efficiently in the near future!

Aaron: thank you, everyone, for your time! also thank you, Finnexus team, for having me here and Prof K for moderating.

Ryan: Thank you!

Aaron: I am looking forward to working with Boris and Ryan to create a great partnership between KAVA and FNX!!

Boris: Thank you for joining. We have got lots of good opinions from you.

About FinNexus

FinNexus is building an open finance protocol to power hybrid marketplaces that trade both decentralized and traditional financial products. The FNX token will live on the Wanchain blockchain to take advantage of the most robust cross-chain capabilities currently available in the industry. The first products FinNexus plans on releasing will be innovative tokenized assets (available Q1 2020) with value based on real-world cash flows.

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