According to Brian Kerr, CEO of Kava Labs, the main reason decentralized finance or DeFi has not yet reached mainstream is that “93% of owners will never touch their own keys.”
Kava is a non-Ethereum based DeFi platform that allows users to earn interest in the cryptocurrencies they hold. The investors Kerr wants to reach are those who have used a ramp like Coinbase or Binance to buy cryptocurrencies that are now on the exchange. They are “concerned about” fat fingers “and losing their money on a wire transfer or something,” he says. These investors are used to keeping their money in a bank account and prefer to keep their cryptocurrencies on a crypto platform rather than in a hardware wallet.
Kava’s platform connects lenders directly to borrowers, but the real challenge is “not just building the log on the platform, but making integrations available right in the places where people currently live,” he says, referring to on exchanges and payment processors.
Going forward, he anticipates that large companies like PayPal and Fidelity, both of which are adopting cryptocurrency solutions, may want to be integrated with the Kava API to extend “interest-bearing products” directly to their users.
“We really believe you need to meet users where they are. I think of them as distribution centers, but they’re really retail apps that have relationships with their customers.”
Kava has already integrated with a number of platforms – including Binance, Huobi, and Bitmex. “These platforms are directly available not for the listing of our tokens, but for the savings products and loan products from Kava.” Kerr assumes that many more Kava services will be integrated into their platforms. “Basically, with any app that stores crypto, we can expand custody of Bitcoin, XRP or Ethereum or whatever with financial services to get this capital up and running.”
The vision is to enable a user holding a currency like Bitcoin to simply click on the interest product they want and use a slider to adjust the amount of BTC they want to earn interest on. The user experience is simple, says Kerr, as they don’t even see the Kava UI or website. “Everything is done in the backend.”
“I think that’s really the direction things are going. People don’t need to know DeFi is there.”
A haven when playing
32-year-old Kerr describes a rough childhood raised by his grandmother in an ethnically diverse working class neighborhood where “all of the neighbors used different forms of drugs, more the hard stuff like meth and heroin. It was very different from your white, middle-income suburbs that most people think of, ”he recalls, adding that for as long as he can remember he feels like one of the few whites out of place in his school felt.
It was also a scary environment. “Every day at lunchtime there was big fighting and the police came in with protective shields,” he recalls of his underfunded high school, which was like a prison – full of gangs and often unable to teach. With this in mind, it attracted a group of students “who enjoyed playing video games.” That was how he got into gambling, which would define much of his career.
The competitive environment at the university, where he first started in software development, was an unexpected challenge because in high school “I could do this without any real guidance or good habits.” He dropped out.
He soon resumed classes and was finally accepted into San Francisco State University in 2007, where he chose the business because he saw it as a generalist degree for an uncertain future. “I changed my major about eight times,” he recalls.
After graduating in 2011, he was hired by Sierra Circuits, a circuit board manufacturer, where he “worked as a sales engineer with technicians at Boeing and Raytheon on their prototypes for things that would go into space.” Although he gained confidence in working with technology, he soon dreamed of leaving the family-run entrepreneurship company where he could be his own boss.
“All leaders and those promoted were like family, and everyone else was treated almost like second-class citizens. That was my first training on how companies shouldn’t be run. I also realized that I have to do my own thing. “
Kerr left the company and came to a fork in the road. On the one hand, there was a well-paying job at chip maker Nvidia. “It was kind of a fast lane to a CMO [chief marketing officer]This is definitely a great life and experience opportunity, ”he says, adding that the work would have been focused on the company’s major gaming product lines.
The other option was to move to London where he would work for Fnatic, a three-person esports startup, to “fulfill my business desires, take this enthusiastic esports team and make something real out of it”. The idea was to “build a Beats by Dre, but for gaming equipment,” with celebrity gamers and influencers helping design things like keyboards, headsets, and mice.
“I had these two options. One was a very reliable corporate job that would teach me a lot about how a big company works – that would be really good for my career. On the other hand, this was a pretty questionable opportunity. “
He asked various friends who held senior positions at different companies what they would do, and all of them saw Nvidia as the obvious choice. “Zero people said they would take the role at Fnatic and try to build hardware. “That’s absurd,” they said. He decided not to take the advice and moved to London. The work also took him to Gothenburg in Sweden before returning to the San Francisco Bay Area in 2015.
At Fnatic, Kerr helped grow the team from three to over 100 people and learned to run an international business with manufacturing in Asia and partnerships with players around the world. Business boomed as esports entered the mainstream through things like Twitch, a streaming platform marketed to gamers. Early on it was just a hobby between friends and family to have an esports team that occasionally got sponsorships – and then: “All of a sudden these teams are worth hundreds of millions of dollars and the lines of business are huge and there are media rights and everything else . “
In San Francisco, Kerr met Alexander Kokhanovskyy, a Russian esports founder who launched DMarket, a decentralized in-game item market. Owning digital assets like character skins or gold for multiplayer games like World of Warcraft seemed natural and intuitive to Kerr, which is why he joined the project as a consultant.
“I was blown that these people could raise $ 20 million for a PowerPoint in about three weeks because it was really difficult for a legitimate company like mine with millions of dollars in real sales.”
DMarket’s success in raising investment capital was Kerr’s wake-up call for blockchain and prompted him to dig deeper into the growing industry.
“I was fortunate to be able to ping my network and get in touch with the likes of Joseph Lubin and executives at Ripple and others within four weeks of making the decision to jump into crypto next, and that was history since then, ”he says.
“I just knew that I would dedicate at least the next five to ten years of my life to this industry because there would be so much disruptive technology involved. It was just the best opportunity for me and then to influence the world. “
Kerr says his Kava co-founders came from the poker world and gained respect for the idea of censorship-resistant money as online poker sites were often shut down by regulators due to gambling laws. In this case, all of the money held by the companies would be confiscated, meaning that “my co-founders’ money was only locked up for years and they had no access to it. They couldn’t earn an interest in it. It was just floating. “As a result, much of the online gambling industry switched to cryptocurrency.
Kerr expresses amazement at the different ways that cryptocurrency has attracted people. Whether through poker, games or through encounter or learning, there are many ways to blockchain. “I just leaned very heavily on the gaming site.”
Kava Labs actually started on an entirely different mission, he explains. “We started Kava Labs and we actually thought that cross-border payments with digital currencies would be the biggest game changer. The volume of foreign exchange trading is one of the largest in the world, according to TAM [total addressable market] seemed so big that you could make a difference there. “
The company’s original goal resulted in the team working with Ripple to expedite transactions. One of the solutions that was worked on was the implementation of “unsteady wallets on Lightning Network with Ethereum payment channels and Dai payment channels with Dai stablecoins,” he says.
Between 2017 and 2019, the crypto payments industry “wasn’t in the billions – it was still at $ 100 million,” Kerr said the business was not scalable at that volume. With the team down $ 500,000 on their own money by June 2019, a change of course was necessary.
“At that time, we checked all of our skills and built up this vast wealth of knowledge about the various blockchains – how they work, what requirements are required for them to interact with one another.”
They decided to develop Kava as a platform to access DeFi services without relying on Ethereum. The first step was to write a blog post. After that, the project “attracted a total of $ 8 million in just a few weeks.”
In October 2019, Binance Launchpad hosted a KAVA token sale and airdrop. A stroke of luck which, according to Kerr, resulted in a widespread distribution of tokens, which is widely viewed as evidence of investor confidence. “It’s been kind of a gangbuster since we started the Kava blockchain,” which happened the following month.
Despite the hype, the initial product with minimal viability lasted until June 2020. This product was a platform that first offered secured loans for Binance’s native Binance Coin before expanding to Bitcoin, XRP, and others.
Kava has grown significantly since it started. Kerr states that the platform now has roughly $ 300 million in deposits and $ 80 million in outstanding loans among roughly a quarter of a million accounts.
“I expected it to keep growing, but it’s the largest non-Ethereum DeFi platform and application in production today. I’m very proud of that fact and I think it’s just kind of up here as we add more assets, and beyond that, more financial services. “
Despite its apparent success, it was not an easy path. “I’ve always had a bit of Cheat Syndrome,” he says, referring to the feeling that my successes or positions have not been achieved. The fact that the industry is full of scams and hacks is undoubtedly adding to the pressure, and many bitcoin maximalists and no-coin types have been known to ridicule the DeFi industry as just a Ponzi scheme. The high returns can also paradoxically turn away users who see DeFi’s odds as too good to be true.
Kerr is very much hoping for Kava’s newest feature, a “hard protocol money market,” which was originally due to be released on March 31st for users to earn interest in Bitcoin. “It will be very early, that’s all I can really say, but it will probably start in the APY of over 20%,” he says with confidence. However, due to the increasing competition between DeFi platforms, he does not expect such high returns as borrowers seek the lowest interest rates.
“I think all DeFi services will become commodities over time. Everything can be squeezed in terms of prices as people chase returns. “