Kyber may be the Great Lockdown’s hottest token project. 

According to the analytics firm Flipside Crypto, the Kyber Network is one of the fastest-growing token projects so far during the coronavirus-led recession (in terms of developer contributions, social media chatter, blockchain records, wallet addresses and corresponding apps).

This decentralized exchange (DEX) protocol is associated with the token KNC, which jumped up in price since 2019, from roughly $0.18 in December 2019 to $0.64 by early May 2020, according to Messari. Traders don’t need to use KNC but in the near future they’ll be able to use it for staking rewards and to vote on development decisions. 

In the meantime, the Kyber Network protocol is essentially the third-most-popular DEX, with nearly $5.4 million worth of reserves in its decentralized finance (DeFi) systems, ranked behind Uniswap and IDEX. It’s estimated the protocol handled $200 million worth of volume in March alone. It was utilized by 13,000 crypto wallet addresses in March out of 62,264 active addresses tallied since January 2019.

Plus, this Asian DEX startup with team members in Vietnam and Singapore is now also part of the first batch of participants in Chicago's DeFi Alliance (CDA), joined by DeFi startups like IDEX, dYdx, Synthetix, Set Protocol, Opyn and 0x. 

Read more: Ethereum’s Top DEX Is Rebooting With New Scaling Features

CDA co-founder Imran Khan of Volt Capital said over 100 teams applied to join the CDA, but only seven startups were chosen.

“Market makers and liquidity providers all need different options based on their trading strategies,” Khan said. “Kyber’s competitive advantage is that it’s a decentralized exchange, they can play regulatory arbitrage and grow quickly.”

So far, the Kyber Network’s liquidity appears relatively healthy. In January 2020, Binance Research estimated the project had 35,000 active users. 

The network survived its first true stress-test in March, when the protocol supported $33 million worth of trading in a single day without any significant glitches despite cataclysmic volatility in broader markets. Khan added the CDA aims to grow the value of assets locked in DeFi systems from roughly $1 billion to $8 billion by 2021. 

“For the space to get real liquidity, we need professional market making,” said Kyber Network CEO Loi Luu.

Most DEXs saw significant gains during the start of the coronavirus crisis, so this doesn’t make Kyber unique. For example, fellow CDA member 0x reached a new all-time high in March with over $100 million worth of volume. What makes Kyber different from startups like 0x is that the former is primarily a liquidity protocol, not just a DEX. 

Read more: Chicago’s Trading Firms Look to DeFi With New ‘Alliance’

The Kyber Network DEX is merely a proof-of-concept, to show the protocol can allow on-chain trading functionality. Many wallets and DeFi platforms, like Uniswap and Trust Wallet, are also connected to the Kyber protocol on the backend. 

“On-chain market making is very different from off-chain market making, because you are actually using the blockchain to run all your operations,” said Kyber Network advisor Ming Ng. “Smart contracts can only talk to other smart contracts.” 

In short, in order for ethereum to become a global financial platform, something like Kyber Network (although not limited to it) would have to translate smart-contract functionality throughout all the layers of a trade.

Even if trades are settled on-chain, usually order books are off-chain, which is precisely the gap the Kyber Network wants to bridge. 

Stepping back, liquidity generally means the ability to move money around and actually use it, while a “smart contract” is just software that automatically triggers business activity. So, for example, if a trader wanted to build a tool that queried for the price of a specific asset across integrated order books, he could use the Kyber Network to do it. Then his smart contract could execute a trade or change the amount or price. 

“They are providing a different way to trade and some of the market makers will be more comfortable working with them,” Luu said of fellow CDA members IDEX and 0x. “You can have the full-fleshed decentralized stack [with Kyber], from the domain name and code to the smart contract as well.”

Getting more professional market makers to experiment with on-chain trading will be a challenge, but Luu’s staff of 55 still has more than half of its original token sale funds, Luu said. The KNC initial coin offering (ICO) reportedly raised 200,000 ether (ETH) in 2017. Plus, the team has been dogfooding their protocol by using it for market making and the above-mentioned DEX, turning a modest profit so far. 

“Market makers should be able to make a profit using Kyber,” Ng said. “We’re building a fully sustainable ecosystem where all the players in the ecosystem can make money.”

A new protocol upgrade coming in late June, called Katalyst, will allow KNC token holders to participate in a proof-of-stake system to earn rewards for helping maintain this DeFi network.

Read more: Kyber to Offer Delegated Token Staking After Coming Network Upgrade

When the token sale proceeds run dry, the namesake startup could also use this mechanism to earn money, just like other stakeholders. For now, demand for the token is surging across exchanges as more teams use the Kyber protocol for unique trading strategies related to stablecoins like dai, USDC and tether.  

Some traders may prefer a more familiar exchange and settlement model. For those who want to experiment with quasi-decentralized models, the CDA now offers the old guard a structure for getting hands-on experience working on-chain. Likewise, Volt Capital’s Khan said his fund plans to participate in staking on the Kyber Network. 

“The goal for Kyber Network as a DEX is that assets being traded should not exit the protocol,” Khan said. “Deeper liquidity enables more efficient markets and new ways to onboard retail traders.”