Kwenta is a DeFi project built on Optimism, providing users with perpetual futures services based on Synthetix's synthetic assets. We rate Kwenta B with a positive outlook.
What is Kwenta?
After FTX went bankrupt, the market's concerns about fund security have gradually intensified. Compared with the opacity of centralized exchanges, users' demand for decentralized exchanges has gradually increased. Among them, perpetual contract derivatives protocols are undoubtedly one of the most popular tracks at present. Kwenta, a perpetual contract exchange launched by the Synthetix team, has attracted the attention of a large number of traders.
Kwenta is a decentralized synthetic asset derivatives exchange developed by the Synthetix team and deployed on the Layer2 network Optimism. It currently supports spot and perpetual futures trading.
Kwenta's main product is perpetual futures, and currently supports perpetual contract trading with a maximum leverage of 25 times. Users can choose to trade using full margin or isolated margin. The order types supported by Kwenta include market orders, limit orders, and stop market orders.
Kwenta is based on the Synthetix protocol, and its trading liquidity is provided by Synthetix's synthetic asset debt pool. In addition, since the synthetic assets on Synthetix use Chainlink oracles for price feeds, there is no slippage in transactions on Kwenta.
$KWENTA is Kwenta’s governance token. It is used to incentivize coordination and growth within the Kwenta DAO. The main functions of the token include staking and governance.
What is TokenInsight's rating for Kwenta?
TokenInsight rated Kwenta’s current performance with a result of B and a positive outlook.
The specific analysis and scoring of the rating results are as follows:
Underlying technology and security 53.6%
Roadmap and progress 66.3%
Token Economy 49.47%
Ecological development 53.5%
Token secondary market performance 31.93%
Team, partners and investors 61.33%
Underlying technology and security (53.6%)
Unlike traditional exchanges that use order books, AMMs, and other mechanisms, Kwenta is based on the Synthetix synthetic asset protocol, and its trading liquidity is provided by Synthetix's synthetic asset debt pool. Since its launch in October 2020, Kwenta has not experienced any security-related attacks or crisis events that are harmful to the development of the project.
In addition, according to the smart contract audit report disclosed by it, Kwenta's smart contract code has 1 high-level, 1 medium-level, and 3 low-level security issues. However, according to the summary in the audit report, these problems have been resolved.
Roadmap and progress (66.33%)
Kwenta updated its development progress and plans from July 2022 to the end of the year in the document. According to the disclosed roadmap, in the third quarter of 2022, Kwenta mainly focused on enriching its product range and launched the Beta version of limit orders, stop-limit orders, and full-position margin trading mode. After that, Kwenta launched its native token $KWENTA on November 17.
In the following month, Kwenta plans to start research and development on hybrid strategies. As of December 18, 2022, Kwenta has not yet released its development plan for 2023.
Token Economy (49.47%)
$KWENTA is the governance token issued by Kwenta. According to disclosed information, it is mainly used to incentivize coordination and growth within the Kwenta DAO. Currently, the functions of $KWENTA include staking and governance.
The initial supply of $KWENTA is 313,373. In the first week, 14,463.37 will be issued, and the issuance will drop to around 200 per week (1% APY) at the end of the 4th year (2026). According to calculations, the total supply at the end of 2026 should reach 1,009,409.43.
According to the token distribution details disclosed by Kwenta, 15% of the initial supply of $KWENTA is allocated to its core team, which is relatively unconcentrated. In addition, the initial supply of $KWENTA only accounts for 30% of the total supply, and 80% of the additional supply will be distributed to $KWENTA stakers. This has a positive incentive effect on the long-term value of the $KWENTA token. Kwenta also set up a vesting lock mechanism to encourage users to lock tokens for a long time.
Ecological development (53.5%)
After expanding its order types and launching a new full-margin trading model (all completed in September), Kwenta has seen an increase in daily trading volume and the number of traders. According to Kwenta’s official statistics, Kwenta’s trading volume on September 15 was approximately $89 million, the highest daily trading volume since the all-time high on April 20.
At the same time, according to Kwenta's official data, it is not difficult to find that its daily transaction volume and the number of traders have achieved a significant leap in growth since the second half of September and have not shown any signs of fatigue so far. On December 14, Kwenta's daily transaction volume and the number of traders both hit a record high, reaching 4,937 and 2,213 respectively.
As of December 8, Kwenta has opened official accounts and operated communities on Twitter, Discord, and Medium. Twitter has the largest number of followers, exceeding 70,000.
Token secondary market performance (49.47%)
$KWENTA is currently only traded on Uniswap (Optimism). $KWENTA has a 24-hour trading volume of $23,630 (12-19), and liquidity is relatively scarce.
Regarding on-chain data, Kwenta issued its token, $KWENTA, on November 17, 2022. $KWENTA currently has 344 addresses holding coins and has made a total of 21,932 on-chain transactions. Due to its recent launch date, its overall on-chain data currently performs relatively poorly.
In terms of token price, the price of $KWENTA when it was first launched was $257.82. On November 22, the price of $KWENTA fell to a low of $70.65. However, as of December 19, 2022, the price of $KWENTA has now recovered to about 70% of the initial launch price, about $182.47.
Final Thoughts
Kwenta has attracted many users with its Synthetix team background, liquidity mechanism based on Synthetix lending pool and zero slippage advantage. It is currently focusing on enriching order types and trading products to enhance user experience and attract more users. From the rating results we obtained, it can be seen that although Kwenta currently performs well in some modules such as roadmap and progress, team, and token economy. However, its token has just been launched, and there is a lack of on-chain activities and poor liquidity. This has affected Kwenta's rating results to a certain extent.
Based on the above information, TokenInsight gives Kwenta a rating of B with a positive outlook.
Read the full article here: https://tokeninsight.com/en/research/analysts-pick/kwenta-project-rating-and-analysis