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Kyber Network: Katalyst Upgrade

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Kyber is implementing a dynamic token model where profits can be allocated in 3 different ways:

  1. Burn.
  2. Distribute to active token holders.
  3. Accumulate profit in LP pool.

What does the protocol update mean?

Liquidity providers (“reserve managers”) do not need to hold KNC to earn fees.

Currently: LPs need to maintain a KNC balance for fees.

Dapp integrators using Kyber’s API can set their own take rate on Kyber’s network fee.

Currently: Dapp integrators get automatically 30% of 0.25% Kyber’s network fee.

How do KNC holders earn fees?

KNC holders get protocol earnings through burn AND/OR for staking.

Currently: KNC holders are rewarded via burn. 70% of the 0.25% network fee is burnt in KNC.

After the upgrade, KNC holders vote on what portion of profits will be:

  1. Paid to active KNC holders (only active participants share profit — case Augur);
  2. Burnt (all token holders share profit — case MakerDAO);
  3. Left in pool (distributed to LPs — case UniSwap).

Conclusion

This is elegant. In a well-designed protocol, tokens give their owners both economic and governance rights, similar to traditional company shares. We are looking forward to Katalyst!

Token Terminal provides financial and business metrics on crypto protocols — metrics we’re used to seeing applied to traditional companies, e.g the P/E ratio. Crypto protocols operate like traditional businesses, only they do it directly on the Internet.

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