Will Coffee turn the corner after upgrading Coffee 9?

On December 16, Kava held a test event for Kava 9, which will test the carrying capacity of the new main network.

Since Kava first reviewed the mainnet upgrade a month ago, many have held their breath to see how it will affect the price of KAVA, as previous events on the testnet have caused the price to go up to $ 8.

The protocol has also generated interest in upgrading through a range of GameFi partnerships, cloud services, security and more.

Ultimately, Kavin’s main goal is to attract more developers into its ecosystem – a key point for an interchain lending protocol whose TVL consists mainly of its own projects.

Will the upgrade manage to generate the interest needed for Coffee to regain its ever-diminishing momentum?

A brief history of Coffee

In 2019, Coffee was strongly launched by winning the Binance Launchpad project of the year award for its potential to shake up the blockchain industry.

While most DeFi applications are limited within a single chain ecosystem, Coffee has gained popularity as the first major platform to offer interchain lending.

Both the Coffee Protocol and its lending platform, the HARD Protocol, support the deposit and lending of cross-chain assets. This allows investors to borrow, lend and deposit interchain assets from the Coffee ecosystem.

Since 2019, Coffee has become a decentralized Layer 1 hub that supports interchain DeFi applications and services, providing an accessible and durable financial services infrastructure for developers.

Imprint Analytics - Coffee TVL
Imprint Analytics – Coffee TVL

Key milestones:

  • June 11, 2020: The upgrade of the Kava 3 main network is completed and the first CDP interchain lending platform is launched, supporting BNB investment and USDX withdrawals.
  • October 15, 2020: The upgrade of the main network of Kava 4 gateways is completed and the HARD Protocol cryptocurrency market for multiple chains is launched.
  • On April 9, 2021, the Coffee 5 mainnet was officially launched.
  • On August 30, 2021, the Kava DeFi platform completed the upgrade of the main Kava 8 network.
  • The upgrade of the main network Kava 9 is expected to start live in the first quarter of 2022.

As we can see from TVL growth, Coffee TVL has grown gradually after each major iteration and upgrade, raising its token price with it. However, his token price did not maintain the same steady growth trend as his TVL. The current price of the COFFEE token has fallen by almost 60% since its peak since the last iteration.

Imprint analysis - COFFEE price
Imprint analysis – COFFEE price

The reasons become clear when we take a closer look at Kava’s ecosystem protocols and token economics.

Coffee ecosystem

Coffee has two obvious problems:

  • A weak ecosystem largely maintains Kavin’s own protocol package
  • Unstable token economy

Lack of ecosystem breadth, with TVL-supported Coffee protocols

Coffee currently consists of 3 main projects:

  • Coffee mint, which allows users to use their assets as collateral to obtain USDX.
  • Plan your flight, which allows users to earn rewards by offering and borrowing assets from the cryptocurrency market.
  • Coffee Swap, which allows users to buy and sell tokens in the Coffee chain and earn rewards by providing liquidity to the mining pool.
Fingerprint analysis - Coffee Ecosystem Project TVL Trends
Imprint Analytics – Coffee Ecosystem Project TVL Trends
Fingerprint analysis - Coffee Ecosystem Project TVL
Imprint Analytics – Coffee Ecosystem Project TVL

Kava Mint consists of almost 70% of the total TVL Kava.

There are not many funds and trading pairs available for borrowing in the project, and there is a lack of liquidity in the ecosystem, which revolves only around borrowing and swapping within the Coffee ecosystem. Coffee Swap, for example, provides a very high APY reward, but its liquidity pool only supports USDX core trading pairs.

Coffee tokens

Token price in the Coffee ecosystem it fluctuates greatly this year.

Let’s take a look at Kavin’s stable USDX coin and its KAVA management token.

Limited application scenarios for USDX

USDX is a stablecoin that has been extremely volatile, largely due to a lack of application scenarios. Currently, its primary use is a pledge on Coffee Landing.

The price of the USDX stabilized after the launch of the cross-chain AMM application Kava Swap. Coffee also plans to increase its liquidity and usage scenarios by listing on multiple exchanges.

Imprint analysis - price Stablecoin USDX
Imprint analysis – the price of a stable coin in USDX

Assigning a management token carries the risk of selling

KAVA is a token used to manage the Kava blockchain, while KAVA also acts as a system lender of last resort. If there is not enough collateral for the entire system, COFFEE is minted to buy back USDX until the system reaches a sufficient amount of collateral again.

The COFFEE award is controversial. 40% COFFEE was sold in 3 big private sales, which makes it very consolidated in several hands.

Coffee - distribution of COFFEE tokens
Coffee – distribution of COFFEE tokens

Will Coffee 9 solve these problems?

One of the biggest highlights of the upcoming Coffee 9 upgrade is that it will officially enable the Inter-Blockchain Communication Protocol (IBC), which allows blockchains to talk to each other. This will have two major impacts:

  1. More inclusiveness: The upgrade will allow all IBC-supported projects and communities to integrate their products into the Coffee chain. DeFi projects will have access to multiple functional scenarios in the Kava cross-chain DeFi ecosystem.
  2. Multiple application scenarios: Given the inter-chain structure of IBCs, USDX can be used in Ether’s DeFi projects through IBCs and become a unit for settling decentralized exchanges. Therefore, Kavina’s token economy is expected to become more stable.

The Kava 9 upgrade also includes the completion of the Ethereum cross-chain bridge, Kava Launchpad, support for the Keplr wallet and other infrastructure, all of which set the stage for the growth of the Kava ecosystem in the years to come.

While Kava has successfully launched a cross-chain solution for DeFi lending, projects in the Kava family alone are not enough to maintain a public chain.

The success of Kava’s ecosystem will later depend on whether it manages to attract developers to implement projects on the protocol, which a new upgrade could do.

This report was brought to you by Footprint Analytics.

What is Footprint

Footprint Analytics is a comprehensive analysis platform for blockchain data visualization and insight detection. It cleans and integrates data in the chain so users of any level of experience can quickly begin researching tokens, projects, and protocols. With over a thousand dashboard templates and a drag-and-drop interface, anyone can create their own custom charts in minutes. Discover blockchain data and invest smarter with Footprint.

Published in: Analysis, DeFi
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