Kaia D2I Program Report

The D2I program is an incentive initiative tailored to Kaia(formerly Klaytn). It aims to swiftly rebuild Kaia’s DeFi ecosystem and establish a financial infrastructure for new DApps onboarding before the chain merge.

During the DeFi Summer of 2021, Kaia saw an influx of liquidity through mining. However, the on-chain bubble burst in 2022 led to a significant contraction of the on-chain economy. Kaia’s competitiveness weakened somewhat, as its ecosystem primarily consisted of DApps that had relatively low synergy with other services.

Initially, the ecosystem revolved around KAIA and KCT (Kaia Compatible Tokens). However, the depegging of bridged assets earlier this year distorted the on-chain value of KCT. This created bad debt across various DApps offering liquidity borrowing services (such as Lending, CDP, and Leveraged Yield Farming) and left general DApps struggling with accurate asset pricing. As a result, DeFi became challenging for users to engage with on Kaia.

The program’s immediate goal is to revitalize this underutilized ecosystem and build a financial infrastructure for new DApps after the merge. Its long-term objective is to reinvigorate Kaia’s DeFi ecosystem.

In the first half of 2024, three DEXes were selected as D2I partners: two v3 AMM (Spot) DEXes — Dragonswap and Kaiaswap — and one Coverage Ratio AMM (Spot) DEX, CapyBara. Despite Kaiaswap’s recent departure, the remaining two teams continue to build within the ecosystem.

Since their launch, these teams have collectively achieved impressive results: over $710 million in swap volume, more than $39 million in TVL, 3.1 million+ swap transactions, 260,000+ cumulative users, and over 245,000 KAIA burned. Notably, for $KAIA, the on-chain DEXes now generate trading volumes comparable to Binance.

Detailed metrics are available through each team’s analytics page and various on-chain data providers:

Analytics Pages

• Dragonswap
• CapyBara Spot

Onchain Data Providers

• https://dune.com/whale_hunter/dragonswap
• https://flipsidecrypto.xyz/lano/kaia-d2i-dashboard-SO9iyD?tabIndex=1
• https://flipsidecrypto.xyz/pepperatzi/capy-bara-dex-overview-un1pCZ
• https://dune.com/kaia_foundation/kaia-overview-dashboard
• https://defillama.com/protocol/dragonswap#information
• https://defillama.com/protocol/capybara-exchange#information
• https://swapscanner.io/dashboard

Moving forward, D2I builders are evolving beyond simple DEXes into comprehensive platforms. They’re continually adding features such as Launchpads, Meme Platforms, Liquidity Managers, Raffles, and Perpetual Futures.

This robust infrastructure now allows all Kaia ecosystem DApps — including those on the upcoming Line Miniapp platform — to easily establish on-chain ecosystems by leveraging these features.

• Launchpad: Capy IDO, KnightFury
• Liquidity Manager: KibbleFarm
• Raffles: Capy Raffle
• Perpetual Futures: Capy Perp

Additionally, both teams are actively collaborating with partners to enhance synergies. These partnerships include Lair Finance (LSD & LRT), Superwalk (M2E), KnightFury (Launchpad), Smart Layer (Token as Apps Platform), Fusionist (Gaming), and Kaiafun (Memecoin Platform). Strong integrations with the Miniapp ecosystem are also expected.

Future Directions for Kaia DeFi

With two Spot DEX teams selected through the D2I program in the first half of the year, Kaia plans to onboard Avalon Finance, a Money Market, and — if necessary — an additional major DEX team capable of handling institutional liquidity.

The DeFi landscape is evolving. It’s shifting from complex “money legos” (such as Yield Aggregators and Leveraged Yield Farming) towards derivatives primarily based on native coins and stablecoins. This change aligns with growing institutional demand.

As the core financial infrastructure (Spot DEX and Money Market) stabilizes, we’ll focus on creating derivatives based on native coins and stablecoins (e.g., LSDfi, LRTfi, Yield Stripping Derivatives). Our primary goal is to increase exposure to LSD and LRT, enabling Kaia’s native coin to play an active role in the DeFi ecosystem.

Appendix: Introducing Avalon Finance

What is Avalon?

Avalon Labs stands as the leading Bitcoin-focused lending ecosystem, uniquely positioned at the intersection of DeFi, CeDeFi, and RWA (Real-World Asset) lending. By bridging these three key areas, Avalon Labs has established itself as a cornerstone in the rapidly evolving landscape of decentralized finance. Formerly known as Avalon Finance, the platform has become the largest lending marketplace dedicated to Bitcoin Layer 2 solutions and liquid staking derivatives (LSDs).

Avalon Labs pioneers the integration of overcollateralized Bitcoin-backed loans, offering seamless access to fiat liquidity using Bitcoin as collateral. Focused on unlocking Bitcoin’s full potential, Avalon Labs is not only transforming how digital assets are leveraged in DeFi but also spearheading innovation in CeDeFi to meet institutional needs — particularly Bitcoin-backed loans for fiat. Through its dynamic platform, Avalon Labs is shaping the future of Bitcoin finance, where decentralized and centralized models converge to create more efficient, scalable, and secure lending solutions.

Why We Are Building on Kaia Chain

Avalon Labs is building on the Kaia chain to leverage its focus on community, sustainability, and simplicity — values that align with Avalon’s vision for decentralized finance. Kaia’s emphasis on fostering inclusive ecosystems and promoting blockchain adoption through user-friendly, open-source technology makes it an ideal platform for Avalon to expand its CeDeFi and BTC LSDFi initiatives. By streamlining blockchain experiences for users worldwide, Kaia offers Avalon Labs the opportunity to engage a broader audience while building products on a foundation that prioritizes long-term impact and growth.

The Kaia chain’s collaboration with leading DeFi projects and strategic partnerships, including the integration of global blue-chip DeFi protocols, provides Avalon Labs with a robust ecosystem to enhance liquidity and security for its lending products. Kaia’s commitment to simplifying DeFi, exemplified by its partnership with LINE NEXT, ensures that Avalon Labs can deliver a seamless and accessible user experience — crucial for the mass adoption of their innovative financial solutions. By building on Kaia, Avalon Labs is well-positioned to expand its footprint in the rapidly evolving blockchain space, capitalizing on Kaia’s strong technological infrastructure and forward-thinking approach.

What have we achieved so far?

Avalon Labs is pioneering CeDeFi lending with the industry’s first Bitcoin-backed loans for fiat at a fixed 8% APR — an industry low. Since our February launch, we’ve achieved exceptional product-market fit, with over $100 million in market value and more than $40 million in active loans. Our growth has been remarkable, with total value locked (TVL) exceeding $725 million, making us one of the fastest-growing lending platforms. Our 15-person team has unlocked significant value across multiple chains, cementing our leadership on Bitlayer BTC L2, Merlin, and other prominent platforms. We remain deeply committed to L1 primitives, actively collaborating on the BNB chain.

A key differentiator is their early adoption of FBTC as collateral, a cutting-edge asset class. Avalon Labs’s close partnership with Babylon validates our approach — we’re among the first lending protocols recognized by Babylon, with plans to list over 8 LSDfi assets within the month. They’re also developing our first collateralized debt position (CDP), drawing comparisons to $DAI in stablecoin innovation. With $725 million in TVL and $225 million in outstanding loans across chains, Avalon Labs ensures no asset sits idle, maximizing capital efficiency and yield generation throughout the ecosystem.

What values will you be bringing to the chain?

Avalon Labs is committed to bringing their 80–90k active users and substantial Total Value Locked (TVL) to Kaia Chain, expanding its visibility beyond the Asia-Pacific region into niche markets worldwide. Their efforts will drive Kaia Chain’s global reach, positioning it as a key player in the blockchain ecosystem. By leveraging Kaia’s seamless Web2 touchpoints, Avalon Labs will play a pivotal role in onboarding millions of users, ensuring widespread adoption. They will also actively engage with their partners to advocate for Kaia Chain, introducing and integrating those who align with Kaia’s vision. Together, Avalon Labs aims to support Kaia in reaching its full potential on the world stage.