The prosperity of DeFi relies on incentive mechanisms, but incentives often come with high inflation, making it difficult for many ecosystems to sustain themselves.
Kava's approach is different; it shifts the incentive model from 'continuous issuance' to 'precise allocation' through a zero-inflation mechanism.
This mechanism is significant for DeFi applications.
For example, in lending protocols, the interest rewards users receive on high-inflation public chains may be diluted by newly issued tokens. But in the Kava system, the value of $KAVA is more stable, and incentives come from precise allocations from the strategic treasury, which can more effectively support real liquidity needs.
This also gives developers more confidence to build applications, as they know that incentives won't become ineffective due to inflation but can be sustained in the long term.
In this way, Kava has truly established a healthy DeFi ecosystem.
