Introduction: The Unsung Hero of Crypto
In the whirlwind world of crypto, attention gravitates toward volatility, headlines, and disruption. Everyone talks about Bitcoin reaching new peaks, Ethereum’s protocol upgrades, or the explosive rise of meme coins that mint overnight millionaires. Yet beneath this flashy surface, an often-overlooked layer quietly underpins the entire digital financial ecosystem: stablecoins.
Stablecoins—digital assets pegged to fiat currencies such as the US dollar—have grown into more than just a tool for hedging against volatility. They have become the infrastructure backbone of crypto, powering transactions, enabling DeFi protocols, and connecting fiat systems to blockchain networks. By 2024, stablecoins had processed over seven trillion dollars in on-chain volume, surpassing traditional payment networks like Visa and Mastercard combined.
It is within this quietly dominant sector that Kava has carved out one of its most strategically significant roles. Unlike chains chasing speculative hype or short-term adoption, Kava has positioned itself as the canonical home for USDT in the Cosmos ecosystem. This isn’t just a technical distinction—it is a profound strategic positioning that transforms Kava from “just another blockchain” into an indispensable pillar of stable digital finance.
🔹Why Stablecoins Have Become Critical
To appreciate Kava’s achievement, it is important to understand why stablecoins matter more than ever:
1. Medium of Exchange: In crypto ecosystems, stablecoins function as the primary medium of exchange, facilitating payments, transfers, and trading without the volatility associated with cryptocurrencies like Bitcoin or Ether.
2. Unit of Account: In DeFi protocols, stablecoins provide a reliable baseline for lending, borrowing, and collateralization. Without a stable denomination, measuring returns or creating predictable financial instruments would be impossible.
3. Fiat Bridge: Stablecoins act as a bridge between the traditional financial system and blockchain networks, providing both familiarity for institutional participants and seamless on-chain utility for developers.
The explosive growth of stablecoins reflects this necessity. Across emerging markets, they are replacing traditional bank accounts for remittances and savings. In decentralized finance, stablecoins dominate liquidity pools and act as foundational collateral. Institutions are increasingly studying stablecoins as models for central bank digital currencies, highlighting their significance beyond crypto-native use cases.
Yet, for all their utility, stablecoins only realize their full potential when liquidity is concentrated rather than fragmented. Fragmentation occurs when multiple versions of the same asset proliferate across different chains, creating operational inefficiency, risk, and user confusion.
Before Kava’s intervention in Cosmos, this fragmentation was precisely the problem. Wrapped tokens were everywhere, liquidity was scattered, and developers had to account for multiple versions of the same stablecoin. Users were forced to navigate bridges that introduced counterparty risk. Institutions hesitated to participate because liquidity lacked consistency.
🔹Kava’s Canonical Breakthrough
The turning point came in 2024, when Tether (USDT) selected Kava as its canonical host within Cosmos.
This was not another wrapped derivative or secondary version of USDT. Instead, USDT minted and redeemed directly on Kava carried the same canonical status as its Ethereum or Tron counterparts. The difference might seem subtle, but it was transformative:
For users: It provided clarity and trust. Holding USDT on Kava meant it was authentic, redeemable, and not subject to the risks inherent in wrapped tokens or cross-chain bridges.
For developers: It simplified application design. Teams could build on Kava without accounting for multiple versions of the same stablecoin, reducing complexity and operational risk.
For institutions: It offered predictability and credibility. Large-scale participants could operate on Cosmos with the same confidence they had on Ethereum, but with the added advantages of Kava’s architecture.
The effect was immediate. Liquidity consolidated on Kava, rather than scattering across fragmented pools. Today, over 80% of stablecoin liquidity in Cosmos flows through Kava, making it the central hub for DeFi activity in the ecosystem. Leading protocols like Curve, SushiSwap, and appchains integrated directly with Kava to access this depth. Users, whether retail or institutional, naturally gravitated to the clarity of canonical USDT.
In finance, there is a principle that liquidity attracts liquidity. By becoming the canonical host, Kava created a strategic moat, a self-reinforcing cycle that strengthens its long-term position within Cosmos.
🔹How Kava Enables Efficient Settlement
Kava’s advantage isn’t merely about hosting USDT. Its broader technical and architectural design amplifies this benefit, enabling efficient, reliable settlement at scale:
Co-Chain Architecture: Kava allows Ethereum and Cosmos ecosystems to interact seamlessly. Canonical USDT on Kava can flow to Ethereum-native DeFi applications while remaining accessible to Cosmos appchains through the Inter-Blockchain Communication (IBC) protocol.
Developer Efficiency: Teams can build without worrying about fragmented liquidity. Ethereum-native developers can deploy smart contracts on Kava, assured of access to deep USDT liquidity. Cosmos-native appchains can integrate seamlessly without relying on wrapped tokens.
Institutional Reliability: For large participants, Kava offers predictable settlement, reduced counterparty risk, and regulatory clarity. Its canonical model makes Cosmos a credible environment for institutional activity—something fragmented liquidity could never achieve.
In short, Kava converts liquidity into a strategic infrastructure layer, turning what was previously a liability of fragmentation into a durable advantage.
🔹Kava vs Competitors
To appreciate Kava’s accomplishment, it helps to compare it with other ecosystems:
Ethereum: While Ethereum remains the dominant home of stablecoins, liquidity is increasingly fragmented across multiple rollups, forcing developers to navigate diverse pools.
Solana: Stablecoin volume is growing rapidly, but the ecosystem is siloed, limiting interoperability and liquidity consolidation.
Avalanche: Its subnet architecture disperses liquidity across isolated chains, creating similar challenges to those Cosmos faced prior to Kava.
Before Kava, Cosmos had the same issue. Numerous appchains allowed flexibility, but they lacked a unified hub for stablecoins. Wrapped USDT and USDC proliferated, diluting liquidity and creating operational inefficiency. Kava solved this problem decisively by becoming the canonical host, consolidating liquidity and creating a foundation for DeFi and institutional activity.
🔹Network Effects of Canonical Liquidity
Stablecoins are not merely assets—they are critical infrastructure. Their value is magnified by network effects: the more users, developers, and institutions adopt them, the more indispensable they become.
By hosting canonical USDT:
Every new protocol that requires stablecoins looks to Kava
Appchains tap into Kava’s liquidity without risk of fragmentation
Users gravitate toward Kava for the simplicity and reliability of real USDT
This creates a self-reinforcing cycle: liquidity attracts activity, activity grows adoption, and adoption increases liquidity. Wrapped tokens cannot generate the same gravitational pull—they remain second-class, dependent on bridges and subject to fragmentation. Canonical assets, however, anchor liquidity at scale.
🔹Tangible Benefits Across Stakeholders
Users: No longer question whether their USDT is authentic or subject to bridge risk. Transactions are simple, transparent, and reliable.
Developers: Can standardize around a single stablecoin, reducing complexity and ensuring liquidity for their applications.
Institutions: Gain predictable settlement with reduced operational risk, comparable confidence to Ethereum, but within the Cosmos ecosystem.
Kava’s canonical stablecoin advantage, therefore, is both practical and strategic. It positions the chain as essential infrastructure—the settlement layer upon which the broader Cosmos economy depends.
🔹Navigating Risks and Seizing the Future — Kava’s Strategic Play in Digital Finance
Challenges and Risks: The Price of Being Canonical
While Kava’s canonical stablecoin strategy is groundbreaking, no advantage comes without challenges. Any strategic positioning that relies on external assets or ecosystem dynamics introduces potential risks.
1. Reliance on Tether (USDT)
The first and most obvious dependency is Tether itself. Kava’s moat is built on hosting canonical USDT, meaning the credibility of the stablecoin—and by extension Kava—hinges on Tether maintaining its peg and reputation.
Trust and Transparency: While Tether has a long track record of maintaining its $1 peg, regulatory scrutiny has grown. Questions about reserve transparency or operational practices could indirectly affect Kava’s ecosystem confidence.
Centralization Risk: Even though Kava provides a decentralized settlement environment, its reliance on a centralized issuer introduces systemic exposure. Any disruption in Tether operations, legal challenges, or de-pegging events could have ripple effects on Kava’s network activity.
2. Competition Intensifies
Other chains are actively vying for canonical integration of stablecoins. Ethereum dominates with established liquidity, Solana continues growing its ecosystem, and Avalanche, Terra 2.0, and emerging Cosmos appchains are exploring similar strategies. Kava cannot rest on its early-mover advantage; it must continuously differentiate through infrastructure, integration, and ecosystem growth.
3. Regulatory Uncertainty
Stablecoins globally are under increasing scrutiny. Governments and central banks are debating frameworks for issuance, reserve backing, and usage. U.S. regulations, in particular, are evolving rapidly, and Kava—while U.S.-friendly—must remain agile.
Compliance becomes essential to maintain institutional trust.
Regulatory changes could impose operational or technical adjustments on canonical USDT.
Kava must anticipate these shifts proactively, ensuring that its ecosystem remains a reliable settlement hub.
Despite these challenges, Kava’s strategic foresight—focusing on infrastructure, canonical liquidity, and institutional-ready systems—positions it better than most chains to navigate uncertainty.
🔹AI-Powered Settlement: Preparing for the Next Frontier
The rise of AI and autonomous agents introduces an entirely new layer of complexity and opportunity for digital finance. Stablecoins are not only the medium of exchange for human users—they will become the fuel for machine-driven economies.
Imagine a world where:
Trading bots automatically execute arbitrage between chains
Supply chain AI agents optimize logistics and settlement on-chain
Data marketplaces enable micropayments between AI services
Autonomous applications transact with one another in real-time
In each scenario, canonical stablecoins are critical. Fragmented or wrapped versions create friction and inefficiency, which autonomous agents cannot navigate effectively. Kava, by consolidating USDT, creates a machine-readable foundation for this emerging agent economy.
Kava’s AI-Ready Architecture Includes:
Oros Execution Environment: Provides a secure runtime for automated agents to operate and transact
DeCloud Compute Integration: Ensures scalable computational resources for high-frequency AI activity
Canonical USDT Liquidity: Acts as a reliable, frictionless medium for autonomous transactions
Together, these elements form a full-stack solution for AI-driven digital commerce. Kava is positioning itself not just as a settlement layer for humans, but as the invisible backbone for machine economies—a future-proof play in an evolving Web3 landscape.
🔹Maintaining and Expanding Canonical Advantage
Kava’s early success as the canonical host is impressive, but sustaining and expanding it requires active ecosystem stewardship. The canonical advantage is not self-sustaining; it depends on three interlinked pillars: liquidity, developer adoption, and institutional trust.
1. Liquidity Management
Liquidity is the lifeblood of Kava’s network. Its canonical USDT integration drives concentration, but continued success depends on:
Incentivizing liquidity providers to maintain depth
Supporting high-frequency trading and settlement activity
Reducing slippage and fees across DeFi protocols
2. Developer Ecosystem
Canonical liquidity alone is insufficient if developers do not build on top of it. Kava’s ecosystem strategy includes:
Grants and funding for appchains and DeFi projects
Tools and SDKs to simplify integration with canonical USDT
Developer onboarding programs that highlight the stability and scale of Kava’s pools
3. Institutional Engagement
Institutional adoption reinforces Kava’s network effects. By providing predictable, reliable, and regulatory-compliant settlement mechanisms, Kava attracts:
Hedge funds and trading firms seeking stable liquidity
Payment networks leveraging USDT for cross-chain settlement
Corporate participants exploring tokenized treasury management
Each of these pillars strengthens the canonical feedback loop: liquidity attracts developers, developers attract usage, usage attracts institutions, and institutions reinforce liquidity.
🔹Strategic Implications for the Cosmos Ecosystem
Kava’s canonical stablecoin advantage reshapes the Cosmos landscape in several ways:
1. Liquidity Hub for Appchains: Appchains now have a clear stablecoin hub, reducing fragmentation and simplifying economic modeling.
2. Standardization Across Protocols: Developers and users no longer need to manage multiple wrapped USDT versions, simplifying UX and reducing technical complexity.
3. Interoperability and Scale: Kava’s co-chain architecture allows seamless cross-chain flows, reinforcing Cosmos as a cohesive, high-functioning ecosystem.
4. Foundation for Institutional Activity: By consolidating liquidity and providing predictable settlement, Kava positions Cosmos as a credible environment for large-scale institutional adoption.
In short, Kava is not merely hosting USDT; it is shaping the economic gravity of the Cosmos ecosystem itself.
🔹The Broader Implications of Canonical Stablecoins
Canonical stablecoins are more than a convenience—they are an infrastructure lever. By focusing on clarity, trust, and ubiquity, Kava:
Reduces friction for users and developers alike
Creates defensible network effects that competitors struggle to replicate
Establishes Cosmos as a credible settlement environment for humans and machines
This is why canonical stablecoins matter so much. They are not flashy, headline-grabbing innovations—but they underpin the very functioning of digital finance. Kava’s vision recognizes that the long-term value in blockchain does not lie in speculation alone; it lies in being essential to the economic plumbing that powers everything else.
🔷 Cross-Chain Settlement, Adoption, and Kava’s Role in the Future of Digital Finance
Cross-Chain and Global Settlement — Kava as the Bridge
One of the most profound impacts of Kava’s canonical stablecoin strategy is its ability to act as a cross-chain settlement hub. In the fragmented landscape of blockchain, assets often remain siloed, locked behind bridges, wrapped tokens, or disparate appchains. This fragmentation introduces risk, complexity, and inefficiency. Kava directly addresses these pain points.
1. Co-Chain Architecture and Interoperability
Kava’s co-chain design allows it to seamlessly interact with both Ethereum and Cosmos-native chains. Canonical USDT minted on Kava is not locked to a single chain; it can flow:
Into Ethereum Layer 2 protocols, enabling DeFi activity without bridge risk
Across Cosmos appchains via IBC, ensuring liquidity is unified and accessible
Across other chains through integrations with LayerZero and other interoperability protocols, creating a wide-reaching liquidity mesh
By consolidating liquidity in a canonical form and ensuring it is cross-chain-ready, Kava removes the friction that has historically slowed adoption and usage. Developers no longer need to account for wrapped versions, bridges, or inconsistent liquidity pools.
2. Predictable, Efficient Settlement
For institutions, predictability and efficiency are essential. Kava delivers this in multiple ways:
Low-latency transaction finality, ensuring fast settlement
Consolidated liquidity pools, reducing slippage and trading costs
Interoperable protocols, allowing capital to move freely across chains without added operational risk
In essence, Kava provides a single source of truth for USDT liquidity in Cosmos, while simultaneously enabling participation in Ethereum’s DeFi ecosystem. This dual capability is a major differentiator from other L1 and L2 projects.
🔷Case Studies of Usage and Adoption
Canonical USDT on Kava is not just a theoretical advantage—it is already shaping real-world usage. Several applications, protocols, and ecosystems have leveraged this infrastructure to achieve unprecedented scale and reliability.
1. Decentralized Finance (DeFi)
DeFi protocols like Curve, SushiSwap, and lending platforms have deployed on Kava to access consolidated liquidity. Benefits include:
Reduced slippage due to unified liquidity pools
Simplified contract design, as developers rely on a single, canonical stablecoin
Enhanced UX for users, who no longer need to navigate wrapped token variations
2. Appchains and Gaming Economies
Several Cosmos appchains now integrate with Kava as their stablecoin backbone. Examples include:
Gaming platforms that require real-time, on-chain payments
NFT marketplaces that rely on predictable liquidity
Social and creator apps that leverage USDT for micropayments
By acting as the canonical settlement layer, Kava enables these appchains to operate without worrying about fragmentation or liquidity scarcity, accelerating adoption across the ecosystem.
3. Institutional Adoption
Institutional actors increasingly see Kava as a trusted gateway into Cosmos. Hedge funds, trading desks, and corporate treasuries use Kava to:
Move large amounts of capital efficiently across appchains
Access cross-chain liquidity without relying on multiple wrapped assets
Reduce counterparty risk by dealing with canonical, redeemable USDT
This adoption reinforces Kava’s network effect: the more institutions participate, the deeper the liquidity pools, and the more attractive Kava becomes for developers and users alike.
🔹Preparing for AI and Agent Economies
The next frontier of Kava’s strategy is the emergence of AI-driven economies. As artificial intelligence becomes increasingly autonomous, stablecoins will act as the primary medium of value transfer between human and machine actors.
1. Machine-to-Machine (M2M) Transactions
AI agents will require stable, predictable liquidity to execute:
Automated arbitrage
Supply chain optimizations
Data purchases and micropayments
NFT-based microtransactions
Canonical USDT on Kava ensures that these agents can transact seamlessly, without being slowed by wrapped token inconsistencies or liquidity fragmentation.
2. Full-Stack Integration
Kava’s ecosystem is preparing for this future with complementary infrastructure:
Oros Execution Environment: Provides secure runtime for AI agents
DeCloud Compute Integration: Scalable computational resources for high-frequency AI activity
Canonical USDT Liquidity: Ensures frictionless financial interaction
This positions Kava as not only a settlement hub for humans but also the invisible financial backbone for autonomous digital agents.
🔷 Building a Durable Moat Beyond USDT
While canonical USDT is the foundation, Kava is thinking long-term about ecosystem defensibility. Its moat extends across multiple dimensions:
1. Ecosystem Integration
By ensuring that both Ethereum-native and Cosmos-native projects can leverage Kava liquidity, the chain becomes the natural first choice for developers. Any project that depends on stablecoins will consider Kava before looking elsewhere.
2. Developer Tools and Infrastructure
Kava invests in SDKs, APIs, and integration tooling that make building on the chain faster, simpler, and more reliable. The easier it is for developers to build and deploy, the more sticky the ecosystem becomes.
3. Institutional Confidence
Institutions prioritize predictable settlement, reliable liquidity, and regulatory clarity. Kava’s canonical USDT integration, combined with transparent operational practices, positions the chain as the preferred gateway for institutional participation in Cosmos.
4. Network Effects and Flywheel Mechanics
Every layer reinforces the others:
Liquidity attracts developers
Developers attract users
Users increase transaction volume
Volume generates fees and burns SOMI (if integrated) or reinforces stability
Institutional adoption solidifies trust and expands liquidity further
This flywheel ensures that Kava’s advantage grows stronger over time, making it increasingly difficult for competitors to catch up.
🔹Strategic Vision: Kava as the Settlement Backbone
Looking forward, Kava is more than a blockchain—it is the settlement infrastructure for a multi-chain, AI-enabled digital economy. Its canonical stablecoin strategy is the first step toward a broader vision:
1. Cross-Chain Liquidity Consolidation: Expand beyond USDT to other major stablecoins while maintaining canonical clarity
2. Developer-Centric Ecosystem: Support appchains, DeFi protocols, gaming platforms, and NFT marketplaces with deep liquidity and easy integration
3. Institutional Gateway: Establish Kava as the go-to chain for regulated, predictable settlement across Cosmos and connected ecosystems
4. AI-Enabled Economies: Provide the financial plumbing for autonomous agents, data marketplaces, and machine-to-machine commerce
In achieving these goals, Kava positions itself not just as a Layer 1 blockchain, but as the infrastructure that underpins the next generation of digital finance.
🔷 Governance, Regulation, Community, and Kava’s Roadmap to 2030
Regulatory Positioning — Navigating the Legal Landscape
The importance of regulatory clarity cannot be overstated. Stablecoins, by their very nature, sit at the intersection of digital innovation and traditional finance. As Kava has secured canonical USDT within the Cosmos ecosystem, it has implicitly entered a regulatory spotlight. How Kava navigates this environment will determine whether its stablecoin advantage remains durable.
1. Compliance by Design
Kava has adopted a compliance-first philosophy without compromising decentralization:
Canonical USDT Integration: Tether itself maintains rigorous auditing and reserve verification processes. By partnering directly, Kava inherits these standards, ensuring that institutional participants can operate with confidence.
Co-Chain Architecture: By maintaining clear separation between Ethereum and Cosmos integrations, Kava avoids operational ambiguity, making audits and compliance reporting more straightforward.
Built-In Transparency: On-chain visibility of liquidity flows, stablecoin minting, and redemption events ensures accountability, a feature highly valued by regulators.
2. Preparing for Global Stablecoin Regulation
Countries worldwide are debating frameworks for stablecoin issuance, custody, and usage. Kava’s strategy anticipates these developments:
By anchoring its operations in compliance-ready infrastructure, Kava positions itself as a safe harbor for institutions looking to leverage digital assets without violating local regulations.
Integration with established stablecoins like USDT ensures alignment with global auditing and reserve standards.
Future expansion could include partnerships with regulated custodians, bridging the gap between traditional finance and Web3.
This forward-looking approach reduces regulatory risk while reinforcing Kava’s role as a trusted settlement hub.
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Governance and Community — Decentralization with Direction
Canonical stablecoin integration is powerful, but governance determines whether Kava’s ecosystem remains resilient, adaptive, and community-driven.
1. Multi-Tier Governance Structure
Kava employs a layered governance model:
Core Foundation & Technical Council: Handles early-stage decisions, infrastructure development, and validator onboarding.
Validator Community: Ensures network security and protocol integrity while earning incentives through staking and transaction throughput.
Token Holder Governance: Future DAO-style voting will enable holders to influence network upgrades, validator incentives, and grant allocation.
By gradually shifting from centralized direction to token-holder governance, Kava balances speed and agility with decentralized decision-making.
2. Community Engagement Programs
Kava’s community programs are not just marketing—they are integral to the ecosystem:
Hackathons and Developer Grants: Continuous cycles of innovation encourage the creation of dApps, games, and DeFi protocols.
Ambassador Programs: Community leaders amplify adoption, onboarding users and developers alike.
Educational Initiatives: Ensures newcomers understand stablecoins, canonical assets, and cross-chain settlement.
This strong emphasis on community builds trust, strengthens adoption, and creates a feedback loop where active participants reinforce the network’s growth.
🔷 Expanding the Ecosystem — Beyond Canonical USDT
Kava’s long-term vision extends beyond being a USDT settlement hub. It aims to become the backbone for multi-chain liquidity, AI-driven economies, and immersive digital experiences.
1. Multi-Stablecoin Strategy
While USDT is the cornerstone, Kava can integrate additional stablecoins like USDC, BUSD, or even regionally backed digital currencies. This strategy:
Diversifies liquidity sources
Reduces dependency on a single issuer
Strengthens Kava’s role as a universal settlement layer in Cosmos
2. Gaming, NFTs, and Creator Economies
Kava’s infrastructure is uniquely positioned to power digital experiences:
Persistent Virtual Worlds: Real-time, on-chain game mechanics
NFT Marketplaces: Canonical liquidity simplifies buying, selling, and cross-chain transfers
Creator Platforms: Reliable settlement ensures creators can monetize efficiently and transparently
By supporting these verticals, Kava moves from purely financial infrastructure to cultural and economic infrastructure, enabling adoption from retail, institutional, and creator communities.
3. AI-Powered Financial Flows
AI agents will increasingly automate trading, settlement, and arbitrage. Kava’s canonical stablecoin framework makes these interactions frictionless:
Predictable liquidity supports high-frequency AI transactions
Co-chain architecture allows AI to operate across Ethereum, Cosmos, and appchain ecosystems
Integration with DeCloud and Oros ensures computational scalability for AI-native workflows
This positions Kava not just as a human-facing settlement hub, but as the financial backbone for autonomous digital economies.
🔷 Roadmap to 2030 — Kava’s Strategic Trajectory
Kava’s journey is just beginning. Its roadmap envisions multi-layered growth and ecosystem consolidation over the next decade:
1. Short-Term (2025–2026)
Expand canonical stablecoin integrations beyond USDT
Deploy SDKs and tooling for simplified developer onboarding
Run additional hackathons and grant programs to seed high-impact dApps
2. Medium-Term (2027–2028)
Establish Kava as the primary cross-chain settlement hub in Cosmos
Introduce governance mechanisms to shift greater control to token holders
Integrate AI-powered workflows for institutional and developer use cases
Expand partnerships with regulated financial institutions
3. Long-Term (2029–2030)
Multi-stablecoin interoperability across major chains
Become a universal settlement layer for cross-chain gaming, DeFi, and social economies
Support fully autonomous AI-driven transaction systems
Cement Kava as the invisible infrastructure of digital finance, powering trillions in volume and billions of daily interactions
🔹Strategic Advantages for the Future
Several factors will underpin Kava’s resilience and long-term relevance:
Canonical Liquidity: Anchors the ecosystem in stable, predictable assets
Cross-Chain Integration: Ensures interoperability with Ethereum, Cosmos, and appchains
Community and Governance: Builds a sustainable, decentralized decision-making model
Institutional Alignment: Provides predictable settlement for enterprises and regulated entities
AI-Ready Infrastructure: Prepares Kava for the emerging agent economy
Together, these pillars form a durable moat, ensuring Kava’s advantage grows rather than erodes over time.
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