OIP-4: OKExChain & Kava Partnership proposal

Author Kava Labs (@Kava-Labs)
Status Draft
Type Standard Track
Category Core
Created June 2, 2020

Introduction

Kava is a multi-asset DeFi platform that offers stablecoins, loans, and other financial services for users of major cryptocurrency assets including BTC, XRP, and ATOM to name a few. The Kava platform has two types of tokens, the KAVA token and the USDX stablecoin where the KAVA token is the native token of the Kava blockchain integral in the security, governance, and mechanical functions of the platform. Users can collateralize their crypto assets in exchange for Kava’s stablecoin, USDX. USDX is the highest earning USD denominated account available for modern investors, offering superior yields without additional risk, compared to traditional alternatives like checking and savings accounts that only deliver miniscule returns.

Like OKExChain, Kava is based on the Cosmos-sdk and is built using Tendermint, a BFT (Byzantine fault-tolerant) consensus engine. This design not only helps Kava to achieve free transfer of collateral assets across chains, but also makes Kava a powerful platform that seamlessly solves cross-chain interaction and data transfer issues for different ecosystems.

Kava’s DeFi platform is currently in its final testing phase and about to launch the DeFi lending functions of the platform. The aim is to support major digital assets entering the DeFi space. With a connection between Kava and OKExChain, any assets on OKExChain can access the Kava DefI services such as lending, stablecoins, and Chainlink oracle price reference data.

Integrating Chainlink’s world-class oracles strengthen the Kava DeFi platform with secure price data, now made available for the first time to all Cosmos-sdk blockchains. Kava’s scalability combined with Chainlink’s oracles provide the Cosmos ecosystem with the highest-quality data to make secure, truly reliable decentralized financial products. After partnering with OKExChain, Kava will also provide reliable and efficient data transfer for the DEX on OKExChain, ensuring the security of OKEX DEX decentralized transactions and enabling it to offer new financial products such as options and futures.

With eliminating the need for centralized exchanges and any other type of intermediation, Kava will help OKExChain create and trust-minimized and highly autonomous financial system.

OKExChain: https://www.okex.com/okexchain

Kava Labs:

  • https://www.kava.io

  • https://github.com/Kava-Labs

Partnership Proposal

1. Cross-chain DeFi for OKExChain via Kava

1.1 Overview

OKExChain and Kava will integrate together. This will enable assets to flow between the two blockchains such as OKB, KAVA, USDX and others. In addition, the integration will make Kava’s DeFi services like its lending facility and Chainlink data available for OKExChain and its ecosystem.

Kava proposes OKExChain to stake a sizable amount of OKB on Kava’s DeFi platform, and further continue to develop broader cross-chain DeFi applications with Kava. Kava can provide a stable store of value for OKB which is a top market cap asset with a large userbase. Kava is very excited to make USDX loans available to its users.

KAVA, the native token of the Kava blockchain and its decentralized stablecoin USDX will be listed on OKExChain DEX.

1.2 Integration Details

Unlike other blockchains created by exchanges, OKExChain is fully open source, allowing users to get all the benefits of a public blockchain such as self-custody of asset eliminating counterparty risk and trust minimized applications. Both Kava and OKExChain are developed with the Cosmos-SDK and feature a Tendermint consensus. This similarity enables both blockchains to seamlessly integrate with each other. The partners plan to implement IBC (Interblockchain Communication Protocol) to enable blockchain interoperability between OKExChain’s DEX and Kava’s DeFi platform.

Interoperability between the two blockchains will enable Kava’s assets (KAVA and USDX) to be used on OKExChain’s DEX and enable assets from OKExChain, such as OKB, to be used in Kava’s DeFi platform as collateral for loans.

Kava is the first DeFi product and service provider partner selected by OKExChain after its launch. DeFi services such as lending, stablecoins, and accurate market and price data are needed to provide a foundation for an ecosystem of trading and financial applications around OKExChain. For this reason, it is natural for OKExChain to choose Kava as its first partner so that it could create a strong foundation for its users and developers to leverage in its open ecosystem.

After evaluating various DeFi solutions, OKExChain will explore integration opportunities to provide loans, stablecoins, and data to its ecosystem with Kava. The following are reasons:

  1. Superior Technology and Experience – With similar consensus and infrastructure, Kava and OKExChain can easily interoperate and share services via IBC. Whereas DEX trading experiences tend to be sub-par to centralized options, thanks to the scalable and interoperable technology of Kava, OKExChain’s DEX will can have a trading experience similar to what can be found on centralized exchanges. Thanks to the design architecture, users will be able to receive loans from Kava and make margin trades on the DEX in just a few clicks.

  2. Decentralized and Safe – Other DeFi solutions claim to be decentralized and trustless, but under the hood they have private keys that control most of the code. It’s verifiable that Kava’s DeFi platform is not controlled by one party and the network is actively secured by a global network of leading institutions and exchanges already.

2. Data Solution of OKExChain Ecosystem

2.1 Value of Data

Data is useful in many ways, but solving the data problem is difficult. For DeFi applications, it is even harder. While many oracle solutions provide data generally, there are few that can deliver data that is secure and reliable in a decentralized way. Specifically for DeFi, most providers lack credentialled APIs, offer no cryptographic guarantees, economic incentives, or other things that make oracle solutions fail-safe enough for DeFi applications.

Failing to meet the requirements for DeFi apps can lead to catastrophic failures, loss of funds, and the failure of an oracle makes the reputation of blockchain or application at risk.

Because Cosmos is a new ecosystem, there were no mature oracle solutions available for Cosmos blockchains. This is why Kava teamed up with Chainlink, an expert in oracle solutions and data, to create the infrastructure on Kava that can deliver Chainlink data to Cosmos-sdk blockchains in way that is safe, reliable, and meets the needs of DeFi applications.

2.2 Kava’s Solution

Through the integration, the Chainlink oracles on Kava will bring price data to the entire OKExChain ecosystem, helping further drive DeFi application development for OKExChain and the Cosmos ecosystem. Data on Kava’s platform is powered by Chainlink’s industry leading technology featuring higher quality data from credentialed/premium APIs, sybil resistant and security reviewed nodes, and the first Trusted Execution Environment (TEE) for oracles which enables verification of data sources. In addition to the points above, Chainlink oracles on Kava can post price data faster and cheaper than other solutions, alleviating the security concerns around timeliness of oracle data and network congestion thanks to Kava’s faster blocktimes, fast finality, and low transaction fees.

3. OKEx DEX Procedure

3.1 Overview

Making data available to the DEX will enable further financial products to be built on the DEX such as futures contracts, options, and other derivatives. Enabling derivatives is key for OKExChain to build liquidity and attract users to its DEX offering. By doing so, it can lead the crypto industry by creating an expansive DEX offering.

The combination of high quality data, DeFi lending services, and stablecoins to improve the offerings of the DEX make Kava and OKExChain a natural fit for each other.

3.2 Integration

The implementation of the proposal will require close collaboration with the developers of OKExChain and Kava. The major milestones to work towards are:

  • Create a bridge between OKExChain and Kava to freely move assets. This can be done several ways technically. If both chains adopt the IBC module, it will be the easiest but other solutions are available.

  • Kava governance will need to vote to accept OKExChain assets to move onto Kava and OKExChain will need to approve Kava assets to move onto the DEX.

  • Kava and USDX get listed on the OKExChain DEX.

  • Kava governance will need to vote to approve OKExChain assets as collateral for USDX loans.

  • OKExChain builds an interface for OKExChain DEX users to get access to Kava’s USDX loans instantly when trading to enable margin trading on the DEX.

  • OKExChain specifies the derivative products it wants to offer and collaborates with Kava to get the appropriate data it needs.