A new DeFi protocol is in town, attracting millions of dollars worth of crypto assets within days of its launch. KLAP, which stands for Klaytn Lending Application, is a new offering on the Klaytn blockchain that has grabbed more than $79.3 million in total value locked within a week of its launch.
It’s an impressive start that puts KLAP in second place on the entire Klaytn blockchain in terms of its TVL, behind just KlaySwap, which has been around for years.
While DeFi is widely considered among the most promising innovations in the digital asset space, recent weeks have given investors good cause to be worried. DeFi intends to replace traditional banking, providing financial services for users – such as lending and borrowing – without using an intermediary such as a bank. Rather, it relies on automated smart contracts that give full control of the protocols to its communities of users.
DeFi shot into the limelight last year amid a crypto bull run that saw the likes of Bitcoin, Ethereum, and other popular tokens hit all-time highs far over their previous heights. However, with the sudden collapse of the LUNA ecosystem and its stablecoin terraUSD and the failure of the linked Anchor protocol, confidence in the DeFi space took a big knock. The LUNA debacle resulted in millions of dollars of crypto investors’ cash and accelerated a wider downturn in the crypto space that has seen most tokens fall far from their all-time highs.
Further incidents over the last month have eroded confidence in DeFi even more. Another leading DeFi protocol, Celsius, sparked a further plunge in the crypto market when it suddenly announced it was pausing withdrawals from its platform amid the market conditions. Since then, Bancor Network has made things worse by temporarily halting its impermanent loss insurance, adding to investors’ woes.
Against this backdrop, the swift rise of KLAP deserves a round of applause, breathing new life into a DeFi sector that desperately needs something to smile about.
KLAP’s rise is due to a combination of factors, including its bet on a Klaytn blockchain that the DeFi space has largely ignored. As KLAP explains in its introductory post on Medium, Klaytn has always been notable among blockchain projects for its lack of essential primitives, which has resulted in low efficiency for capital locked on its chain. KLAP intends to engineer that efficiency, giving Klaytn blockchain users a way to put their capital to work by depositing it into decentralized pools that other users can borrow against. It’s promising rewards in both $KLAY and $KLAP tokens, adding to its appeal.
The other reason for KLAP’s accelerating popularity is its transparency, which comes at a time when the DeFi sector has suffered from an alarming shortage. KLAP noted problems around the lack of transparency on other Klatyn ecosystem projects in its first blog post on Medium, saying that the biggest problem it faces is that most source codes are not public but rather very tightly guarded.
“Because of this, each only focuses on selling its product, making it harder for them to collaborate with each other,” KLAP explained.
KLAP makes its tokenomics and value proposition via a series of further blog posts on Medium, helping users understand both the risks and advantages of investing in its platform. Its main promise of a sustainable yield is music to the ears of a DeFi community currently very low on confidence, and it may well have timed its launch just right.
Many investors might feel the DeFi market has all but reached the bottom. If so, the only way from here on in is up, and the refreshing approach taken by KLAP has helped it stand out against many projects that continue to shroud themselves in secrecy.