Kava Flips Solana As New Lending Protocol Boosts TVL

New DeFi applications on Kava, an Ethereum-compatible blockchain in the Cosmos ecosystem, have sent user deposits soaring over the past month.

Since March 1, the total value locked (TVL) on Kava has risen almost 80% to $350M, leapfrogging popular Layer 1 blockchain Solana, according to Defi Llama. TVL is a measure of the value of crypto deposited on a platform.

The surge has been driven by a pair of new applications – Mare Finance, a lending protocol, and to a lesser extent Équilibre, a decentralized exchange. The network’s KAVA token is up 60% since the beginning of the year.

“Kava on-chain usage has been through the roof,” Kava Labs CEO Scott Stuart wrote on Twitter on March 11. Thank you @EquilibreAMM and @MareFinance.”

Solidly Forks Gain Traction

Mare’s founding team has re-created the success it found on Optimism with the Sonne lending protocol. That success is, in part, a vindication of the increasingly popular ve(3,3) token exchange model pioneered by controversial DeFi developer Andre Cronje. Worth less than $100M at the beginning of the year, forks of Solidly, the first exchange to use the ve(3,3) model, are now worth a combined $555M, according to Defi Llama.

Solidly clone Velodrome has been critical to Sonne’s success on Optimism. Similarly, Velodrome clone Équilibre has been key to the success of Mare.

New Lending Protocol Boosts Optimism TVL

Deposits in Sonne Finance Have Quintupled Since Mid-February

The Defiant

Mare debuted at the beginning of the month, and users have plowed more than $130M into the protocol. That influx accounts for more than 80% of Kava’s TVL growth in that span. Équilibre debuted at the end of February, and its TVL on Thursday stood at just under $20M.

“Alongside with Équilibre, Mare basically revived the entire EVM chain of Kava,” Mare’s pseudonymous founder, IntroToDefi, recently wrote on Twitter.

ve(3,3) Tokenomics

Like Velodrome, Équilibre incentivizes trading fees, rather than simply providing liquidity. It does this by first rewarding liquidity providers with VARA tokens.

People who lock those VARA tokens can receive two things: yield from trading fees and voting rights to direct incentives, denominated in VARA, toward certain liquidity pools. Other protocols can then ‘bribe’ VARA voters with additional incentives to vote for their token trading pairs. The system is meant to drive liquidity to the most valuable trading pairs.

Mare has taken advantage of that to drive liquidity to its own token on Équilibre, directing rewards to those who provide liquidity on the MARE/USDC pool.

As a provider of MARE liquidity on Équilibre, Mare also earns VARA rewards, which are then distributed among MARE stakers. On a live forum last month, IntroToDefi called it a “medium-to-high-risk and high-reward” model due to its reliance on Équilibre.

KAVA Incentives

Due to its rapid growth, Mare is also set to benefit enormously from an incentives program intended to lure developers to the Kava ecosystem.

The Kava Rise Incentives Program, announced in May 2022, set aside KAVA tokens, worth $750M at the time, that would be distributed to teams building on Kava over a four-year period.

Incentives rise along with protocol TVL, and, according to one estimate, Mare could earn $280,000 worth of KAVA per month beginning in April — tokens that Mare will distribute among MARE stakers, according to IntroToDefi.