Over the past year, Kyber has been focused on becoming the main liquidity facilitator for the decentralized ecosystem. We have been making a lot of progress towards these goals, with number of users, trade volume and number of integrations growing rapidly. Kyber has already facilitated over US$1 Billion in trades!

Kyber’s Increasing Volume

Today, we are announcing 2 important changes to our bridge reserves (explained below) that we expect will further move us towards the goal of becoming the single liquidity endpoint for DeFi.

Before we explain the changes in detail, let us take a quick refresher on Kyber’s design and the motivation for the bridge reserves.

Refresher on Kyber Reserves

Kyber is a fully on-chain liquidity protocol that integrates a large number and variety of liquidity providers into one single endpoint for takers and users.

Single on-chain liquidity endpoint for takers and DeFi

Each liquidity provider acts as a ‘Reserve’ for Kyber. When a user requests a trade, the protocol will scan the entire network to find the reserve with the best price and take liquidity from that particular reserve.

Kyber’s Design Properties

This fully on-chain design allows for full transparency and verifiability in the matching engine, as well as seamless composability with DApps, all of which are not possible with off-chain or hybrid approaches. The integration of a large variety of liquidity providers also makes Kyber uniquely capable of supporting sophisticated schemes and catering to the needs of DeFi DApps and financial institutions.

Types Of Reserves

Currently, there are over 45 reserves on Kyber, 4 of which are operated by the team. The rest are mostly set up by token teams, individual ‘whales’ / token holders, and professional market makers to provide liquidity on Kyber.

Kyber has 3 main types of reserves to cater to different liquidity providers:

Fed Price Reserves (FPR): Operated by professional market makers that require custom and advanced pricing strategies tailored to their specific needs. Kyber alongside reserves such as Woorton, runs FPRs. These account for the majority of the trades that happen in the network. Automated Price Reserves (APR): Allows token teams and users with large token holdings to have an automated yet customized pricing system with low maintenance costs. Synthetix and Melon are examples of teams that run APRs. Bridge Reserves (BR): These are specialized reserves meant to bring liquidity from other on-chain liquidity providers like Uniswap and Oasis into the network.

The first 2 types (Fed Price Reserve and Automated Price Reserve) work solely with Kyber’s protocol, while the Bridge Reserve takes liquidity from other on-chain providers.

3 Main Reserve Types

Bridge Reserves On Kyber

The main motivation for bridging liquidity from these liquidity providers into Kyber is to ensure that takers and DApps can use Kyber as their single liquidity endpoint, and receive the best possible price (quote) for each trade, versus having to go through the trouble and costs of integrating multiple systems.

Optimizing our Bridge Reserves

Today, we are announcing 2 changes to the bridge reserves, which we expect will help bring much more liquidity and volume to Kyber.

1. Removal Of Fees For Bridge Reserves

Firstly, we are removing liquidity fees for our bridge reserves, namely for our Uniswap and Oasis bridge reserves. This ensures that all users and DApps leveraging Kyber as a liquidity endpoint will enjoy token rates that are always the best on average, due to the aggregated liquidity from these bridge reserves, and the many other reserves on Kyber.

Currently, MKR and DAI are the tokens that will enjoy these better rates. Fees will be 0.01% (due to technical decisions, we can’t make it 0 yet), but we will look into potentially removing it after the next major contract upgrade.

UPDATE: New Bancor Bridge Reserve and Full Removal of Fees for Bridge Reserves

We’re glad to work with Bancor to integrate their liquidity pool, using a Bridge Reserve for the BNT token! This will allow Kyber Network’s users to enjoy enhanced liquidity for BNT .

Following the update on our Oasis and Uniswap bridge reserves, and the introduction of Bancor as a new bridge reserve, KNC fees on all bridge reserves have now been brought down to 0! In the event where Kyber takes liquidity from Uniswap, Oasis or Bancor, takers can expect the same rate as those pools.

2. Upgrading Oasis Bridge Reserve For Large Trades

The Oasis DEX is an on-chain order book based exchange, meaning that while there is a transparent order depth, every maker and taker activity will use gas. Our Oasis Bridge Reserve connects the liquidity available on the Oasis DEX to our takers.

We have improved our Oasis Bridge Reserve to improve the rates for larger token trades, while keeping the gas cost low for smaller trades.

In our earlier design, our bridge reserve simply iterates through all orders on Oasis DEX until it finds the first and best order that is larger than the requested trade amount, and takes that order. This design works for small trades because of the lower gas consumption and we only have to take 1 order. For larger orders however, the bridge reserve has to traverse through a lot of orders in order to find one that’s large enough, and hence the order is often not optimal.

In this new Oasis bridge reserve design (already upgraded), the reserve will iterate through the orders from best to worse, specify the minimum size of an order we can take and start taking orders along the way until we stack up to the requested trade amount. For large trades where Oasis bridge has the best rates, the rates will be greatly improved.

We have also designed the bridge reserve such that the higher gas cost will only be incurred when it is a large trade, ie: gas consumption will only be a very tiny percentage of the trade value.

It is also important to note here that this gas cost only occur when the Oasis Bridge Reserve is selected as the reserve with the best price — our other reserves typically have better rates without incurring the high gas fee.

What These Changes Mean for Everyone

For DApps: Single endpoint to access all major on-chain liquidity sources, with the best rates on average guaranteed. This is because on top of integrating the best rates from Uniswap, Oasis, and Bancor, we have a network of Kyber-specific reserves, which often has the best rates out of all the reserves.

For Reserves: With better rates overall, they can offer a stronger value proposition in general for traders and DApps in the ecosystem.

For End users: Enjoy much more competitive rates for BNT, MKR, and DAI!

For KNC holders: there will be a slight reduction in KNC fees burnt, but we expect the competitive edge gained to be significant.

Moving Forward

We hope that this article is a good refresher of Kyber’s reserve model and bridge reserves, while articulating the rationale for the removal of the bridge reserve fees and the Oasis bridge upgrade.

We expect these 2 changes to further propel Kyber towards being able to provide takers and DApps with the single endpoint for all their liquidity needs, ensuring they receive the best possible price (quote) for each trade, without needing to integrate multiple systems. In general, any DApp that requires on-chain token swaps and is building on DeFi should definitely use Kyber for their liquidity needs!

In the coming months, we will also be releasing more details on how we intend to further improve the reserves, increase reserves education and training, continue growing the network, and updating the protocol to better serve the needs of the decentralized ecosystem. If you are a professional market maker, token team, or a retail token holder who wants to provide liquidity on Kyber, reach out to us anytime!

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