Kyber Network unveils major protocol upgrade

Kyber Network developers announced the transition to version 3.0, which will turn the decentralized exchange (DEX) into a “hub of purpose-driven liquidity protocols for various DeFi use cases”

We’re excited to announce Kyber 3.0 transitioning Kyber from a single protocol to a hub of purpose-driven liquidity protocols catered to various DeFi use cases. This is the biggest change to Kyber’s architecture incl. the new DMM & a KNC Migration proposal https://t.co/pgffnUKjsx

— Kyber Network (@KyberNetwork) January 21, 2021

Diagram of the proposed liquidity protocol hub. Data: Kyber Network.

During the upgrade, developers will launch the so-called dynamic market maker (DMM). It is expected to mitigate the so-called “impermanent loss”, arising from price swings, and the capital allocation inefficiencies typical of DEXs operating on the automated market maker (AMM) model.

Advantages of DMM over AMM. Data: Kyber Network.

In the DMM, the algorithm will adjust taker fees and liquidity-provider fees in response to changing market conditions. To boost capital efficiency, a programmable pricing-curve mechanism will be employed.

Programmable pricing-curve mechanism. Data: Kyber Network.

“Kyber DMM will give unlimited access to anyone to provide and receive liquidity placed in pools (dapps, aggregators, users),” the project blog states.

To quickly adapt to emerging DeFi trends, the architecture will be redesigned so that liquidity pools better meet the needs under various token-use scenarios. The current version of the protocol enables on-chain scanning of available liquidity providers.

The Kyber 3.0 architecture is designed to reduce overall gas costs. Takers will be able to source liquidity directly from their chosen protocol or filter out sources they do not need in the network.

ETH will no longer be the sole quoted cryptocurrency. A range of pairs will appear, with direct token-to-token and stablecoin-to-stablecoin exchanges. The developers also promise to preserve the ability to access the best available liquidity offers at a single point.

Diagram of liquidity pool formation and the interaction between takers and liquidity providers. Data: Kyber Network.

There are plans to upgrade KNC, which in July saw the launch of staking, and to strengthen the role of KyberDAO. Through voting, the community will be able to influence changes to the native token’s functionality that will increase its value.

The transition to KyberNetwork 3.0 will occur in three stages—Katana and Kaizen. The first stage is expected in the first half of the year and includes the launch of KyberDMM and proposals for changes to KyberDAO and KNC. The transition is slated for completion in the third quarter of 2021.

Back in October, Kyber Network developers launched a platform for creating an on-chain market with the participation of professional liquidity providers.

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