diff --git a/Makefile b/Makefile
index 79aa31e8..d5aa3912 100644
--- a/Makefile
+++ b/Makefile
@@ -118,6 +118,21 @@ format:
 	find . -name '*.go' -type f -not -path "./vendor*" -not -path "*.git*" -not -name '*.pb.go' | xargs goimports -w -local github.com/kava-labs/kava
 .PHONY: format
 
+###############################################################################
+###                                Localnet                                 ###
+###############################################################################
+
+build-docker-local-kava:
+	@$(MAKE) -C networks/local
+
+# Run a 4-node testnet locally
+localnet-start: build-linux localnet-stop
+	@if ! [ -f build/node0/kvd/config/genesis.json ]; then docker run --rm -v $(CURDIR)/build:/kvd:Z kava/kavanode testnet --v 4 -o . --starting-ip-address 192.168.10.2 --keyring-backend=test ; fi
+	docker-compose up -d
+
+localnet-stop:
+	docker-compose down
+
 ########################################
 ### Testing
 
diff --git a/cmd/kvd/main.go b/cmd/kvd/main.go
index 769a7549..65c1c245 100644
--- a/cmd/kvd/main.go
+++ b/cmd/kvd/main.go
@@ -67,6 +67,7 @@ func main() {
 			app.DefaultCLIHome),
 		genutilcli.ValidateGenesisCmd(ctx, cdc, app.ModuleBasics),
 		AddGenesisAccountCmd(ctx, cdc, app.DefaultNodeHome, app.DefaultCLIHome),
+		testnetCmd(ctx, cdc, app.ModuleBasics, auth.GenesisAccountIterator{}),
 		flags.NewCompletionCmd(rootCmd, true),
 	)
 
diff --git a/cmd/kvd/testnet.go b/cmd/kvd/testnet.go
new file mode 100644
index 00000000..1a897a7e
--- /dev/null
+++ b/cmd/kvd/testnet.go
@@ -0,0 +1,376 @@
+package main
+
+// DONTCOVER
+
+import (
+	"bufio"
+	"encoding/json"
+	"fmt"
+	"net"
+	"os"
+	"path/filepath"
+
+	"github.com/cosmos/cosmos-sdk/client/flags"
+	clientkeys "github.com/cosmos/cosmos-sdk/client/keys"
+	"github.com/cosmos/cosmos-sdk/codec"
+	"github.com/cosmos/cosmos-sdk/crypto/keys"
+	"github.com/cosmos/cosmos-sdk/server"
+	srvconfig "github.com/cosmos/cosmos-sdk/server/config"
+	sdk "github.com/cosmos/cosmos-sdk/types"
+	"github.com/cosmos/cosmos-sdk/types/module"
+	"github.com/cosmos/cosmos-sdk/x/auth"
+	authexported "github.com/cosmos/cosmos-sdk/x/auth/exported"
+	"github.com/cosmos/cosmos-sdk/x/genutil"
+	genutiltypes "github.com/cosmos/cosmos-sdk/x/genutil/types"
+	"github.com/cosmos/cosmos-sdk/x/staking"
+	"github.com/spf13/cobra"
+	"github.com/spf13/viper"
+	tmconfig "github.com/tendermint/tendermint/config"
+	"github.com/tendermint/tendermint/crypto"
+	tmos "github.com/tendermint/tendermint/libs/os"
+	tmrand "github.com/tendermint/tendermint/libs/rand"
+	"github.com/tendermint/tendermint/types"
+	tmtime "github.com/tendermint/tendermint/types/time"
+)
+
+var (
+	flagNodeDirPrefix     = "node-dir-prefix"
+	flagNumValidators     = "v"
+	flagOutputDir         = "output-dir"
+	flagNodeDaemonHome    = "node-daemon-home"
+	flagNodeCLIHome       = "node-cli-home"
+	flagStartingIPAddress = "starting-ip-address"
+)
+
+func testnetCmd(
+	ctx *server.Context, cdc *codec.Codec, mbm module.BasicManager, genAccIterator genutiltypes.GenesisAccountsIterator,
+) *cobra.Command {
+
+	cmd := &cobra.Command{
+		Use:   "testnet",
+		Short: "Initialize files for a local kava testnet",
+		Long: `testnet will create "v" number of directories and populate each with
+necessary files (private validator, genesis, config, etc.).
+
+Note, strict routability for addresses is turned off in the config file.
+
+Example:
+	$ kvd testnet --v 4 --output-dir ./output --starting-ip-address 192.168.10.2
+	`,
+		RunE: func(cmd *cobra.Command, _ []string) error {
+			config := ctx.Config
+
+			outputDir := viper.GetString(flagOutputDir)
+			chainID := viper.GetString(flags.FlagChainID)
+			minGasPrices := viper.GetString(server.FlagMinGasPrices)
+			nodeDirPrefix := viper.GetString(flagNodeDirPrefix)
+			nodeDaemonHome := viper.GetString(flagNodeDaemonHome)
+			nodeCLIHome := viper.GetString(flagNodeCLIHome)
+			startingIPAddress := viper.GetString(flagStartingIPAddress)
+			numValidators := viper.GetInt(flagNumValidators)
+
+			return InitTestnet(
+				cmd, config, cdc, mbm, genAccIterator, outputDir, chainID,
+				minGasPrices, nodeDirPrefix, nodeDaemonHome, nodeCLIHome, startingIPAddress, numValidators,
+			)
+		},
+	}
+
+	cmd.Flags().Int(flagNumValidators, 4,
+		"Number of validators to initialize the testnet with")
+	cmd.Flags().StringP(flagOutputDir, "o", "./kavatestnet",
+		"Directory to store initialization data for the testnet")
+	cmd.Flags().String(flagNodeDirPrefix, "node",
+		"Prefix the directory name for each node with (node results in node0, node1, ...)")
+	cmd.Flags().String(flagNodeDaemonHome, "kvd",
+		"Home directory of the node's daemon configuration")
+	cmd.Flags().String(flagNodeCLIHome, "kvcli",
+		"Home directory of the node's cli configuration")
+	cmd.Flags().String(flagStartingIPAddress, "192.168.0.1",
+		"Starting IP address (192.168.0.1 results in persistent peers list ID0@192.168.0.1:46656, ID1@192.168.0.2:46656, ...)")
+	cmd.Flags().String(
+		flags.FlagChainID, "", "genesis file chain-id, if left blank will be randomly created")
+	cmd.Flags().String(
+		server.FlagMinGasPrices, fmt.Sprintf("0.000006%s", sdk.DefaultBondDenom),
+		"Minimum gas prices to accept for transactions; All fees in a tx must meet this minimum (e.g. 0.01photino,0.001stake)")
+	cmd.Flags().String(flags.FlagKeyringBackend, flags.DefaultKeyringBackend, "Select keyring's backend (os|file|test)")
+
+	return cmd
+}
+
+const nodeDirPerm = 0755
+
+// Initialize the testnet
+func InitTestnet(
+	cmd *cobra.Command, config *tmconfig.Config, cdc *codec.Codec,
+	mbm module.BasicManager, genAccIterator genutiltypes.GenesisAccountsIterator,
+	outputDir, chainID, minGasPrices, nodeDirPrefix, nodeDaemonHome,
+	nodeCLIHome, startingIPAddress string, numValidators int,
+) error {
+
+	if chainID == "" {
+		chainID = "chain-" + tmrand.NewRand().Str(6)
+	}
+
+	monikers := make([]string, numValidators)
+	nodeIDs := make([]string, numValidators)
+	valPubKeys := make([]crypto.PubKey, numValidators)
+
+	kavaConfig := srvconfig.DefaultConfig()
+	kavaConfig.MinGasPrices = minGasPrices
+
+	//nolint:prealloc
+	var (
+		genAccounts []authexported.GenesisAccount
+		genFiles    []string
+	)
+
+	inBuf := bufio.NewReader(cmd.InOrStdin())
+	// generate private keys, node IDs, and initial transactions
+	for i := 0; i < numValidators; i++ {
+		nodeDirName := fmt.Sprintf("%s%d", nodeDirPrefix, i)
+		nodeDir := filepath.Join(outputDir, nodeDirName, nodeDaemonHome)
+		clientDir := filepath.Join(outputDir, nodeDirName, nodeCLIHome)
+		gentxsDir := filepath.Join(outputDir, "gentxs")
+
+		config.SetRoot(nodeDir)
+		config.RPC.ListenAddress = "tcp://0.0.0.0:26657"
+
+		if err := os.MkdirAll(filepath.Join(nodeDir, "config"), nodeDirPerm); err != nil {
+			_ = os.RemoveAll(outputDir)
+			return err
+		}
+
+		if err := os.MkdirAll(clientDir, nodeDirPerm); err != nil {
+			_ = os.RemoveAll(outputDir)
+			return err
+		}
+
+		monikers = append(monikers, nodeDirName)
+		config.Moniker = nodeDirName
+
+		ip, err := getIP(i, startingIPAddress)
+		if err != nil {
+			_ = os.RemoveAll(outputDir)
+			return err
+		}
+
+		nodeIDs[i], valPubKeys[i], err = genutil.InitializeNodeValidatorFiles(config)
+		if err != nil {
+			_ = os.RemoveAll(outputDir)
+			return err
+		}
+
+		memo := fmt.Sprintf("%s@%s:26656", nodeIDs[i], ip)
+		genFiles = append(genFiles, config.GenesisFile())
+
+		kb, err := keys.NewKeyring(
+			sdk.KeyringServiceName(),
+			viper.GetString(flags.FlagKeyringBackend),
+			clientDir,
+			inBuf,
+		)
+
+		keyPass := clientkeys.DefaultKeyPass
+		addr, secret, err := server.GenerateSaveCoinKey(kb, nodeDirName, keyPass, true)
+		if err != nil {
+			_ = os.RemoveAll(outputDir)
+			return err
+		}
+
+		info := map[string]string{"secret": secret}
+
+		cliPrint, err := json.Marshal(info)
+		if err != nil {
+			return err
+		}
+
+		// save private key seed words
+		if err := writeFile(fmt.Sprintf("%v.json", "key_seed"), clientDir, cliPrint); err != nil {
+			return err
+		}
+
+		accTokens := sdk.TokensFromConsensusPower(1000)
+		accStakingTokens := sdk.TokensFromConsensusPower(500)
+		coins := sdk.Coins{
+			sdk.NewCoin(fmt.Sprintf("%stoken", nodeDirName), accTokens),
+			sdk.NewCoin(sdk.DefaultBondDenom, accStakingTokens),
+		}
+		genAccounts = append(genAccounts, auth.NewBaseAccount(addr, coins.Sort(), nil, 0, 0))
+
+		valTokens := sdk.TokensFromConsensusPower(100)
+		msg := staking.NewMsgCreateValidator(
+			sdk.ValAddress(addr),
+			valPubKeys[i],
+			sdk.NewCoin(sdk.DefaultBondDenom, valTokens),
+			staking.NewDescription(nodeDirName, "", "", "", ""),
+			staking.NewCommissionRates(sdk.ZeroDec(), sdk.ZeroDec(), sdk.ZeroDec()),
+			sdk.OneInt(),
+		)
+
+		tx := auth.NewStdTx([]sdk.Msg{msg}, auth.StdFee{}, []auth.StdSignature{}, memo)
+		txBldr := auth.NewTxBuilderFromCLI(inBuf).WithChainID(chainID).WithMemo(memo).WithKeybase(kb)
+
+		signedTx, err := txBldr.SignStdTx(nodeDirName, clientkeys.DefaultKeyPass, tx, false)
+		if err != nil {
+			_ = os.RemoveAll(outputDir)
+			return err
+		}
+
+		txBytes, err := cdc.MarshalJSON(signedTx)
+		if err != nil {
+			_ = os.RemoveAll(outputDir)
+			return err
+		}
+
+		// gather gentxs folder
+		if err := writeFile(fmt.Sprintf("%v.json", nodeDirName), gentxsDir, txBytes); err != nil {
+			_ = os.RemoveAll(outputDir)
+			return err
+		}
+
+		appConfigFilePath := filepath.Join(nodeDir, "config/app.toml")
+		srvconfig.WriteConfigFile(appConfigFilePath, kavaConfig)
+	}
+
+	if err := initGenFiles(cdc, mbm, chainID, genAccounts, genFiles, numValidators); err != nil {
+		return err
+	}
+
+	err := collectGenFiles(
+		cdc, config, chainID, monikers, nodeIDs, valPubKeys, numValidators,
+		outputDir, nodeDirPrefix, nodeDaemonHome, genAccIterator,
+	)
+	if err != nil {
+		return err
+	}
+
+	cmd.PrintErrf("Successfully initialized %d node directories\n", numValidators)
+	return nil
+}
+
+func initGenFiles(
+	cdc *codec.Codec, mbm module.BasicManager, chainID string,
+	genAccounts []authexported.GenesisAccount, genFiles []string, numValidators int,
+) error {
+
+	appGenState := mbm.DefaultGenesis()
+
+	// set the accounts in the genesis state
+	authDataBz := appGenState[auth.ModuleName]
+	var authGenState auth.GenesisState
+	cdc.MustUnmarshalJSON(authDataBz, &authGenState)
+	authGenState.Accounts = genAccounts
+	appGenState[auth.ModuleName] = cdc.MustMarshalJSON(authGenState)
+
+	appGenStateJSON, err := codec.MarshalJSONIndent(cdc, appGenState)
+	if err != nil {
+		return err
+	}
+
+	genDoc := types.GenesisDoc{
+		ChainID:    chainID,
+		AppState:   appGenStateJSON,
+		Validators: nil,
+	}
+
+	// generate empty genesis files for each validator and save
+	for i := 0; i < numValidators; i++ {
+		if err := genDoc.SaveAs(genFiles[i]); err != nil {
+			return err
+		}
+	}
+
+	return nil
+}
+
+func collectGenFiles(
+	cdc *codec.Codec, config *tmconfig.Config, chainID string,
+	monikers, nodeIDs []string, valPubKeys []crypto.PubKey,
+	numValidators int, outputDir, nodeDirPrefix, nodeDaemonHome string,
+	genAccIterator genutiltypes.GenesisAccountsIterator,
+) error {
+
+	var appState json.RawMessage
+	genTime := tmtime.Now()
+
+	for i := 0; i < numValidators; i++ {
+		nodeDirName := fmt.Sprintf("%s%d", nodeDirPrefix, i)
+		nodeDir := filepath.Join(outputDir, nodeDirName, nodeDaemonHome)
+		gentxsDir := filepath.Join(outputDir, "gentxs")
+		moniker := monikers[i]
+		config.Moniker = nodeDirName
+
+		config.SetRoot(nodeDir)
+
+		nodeID, valPubKey := nodeIDs[i], valPubKeys[i]
+		initCfg := genutil.NewInitConfig(chainID, gentxsDir, moniker, nodeID, valPubKey)
+
+		genDoc, err := types.GenesisDocFromFile(config.GenesisFile())
+		if err != nil {
+			return err
+		}
+
+		nodeAppState, err := genutil.GenAppStateFromConfig(cdc, config, initCfg, *genDoc, genAccIterator)
+		if err != nil {
+			return err
+		}
+
+		if appState == nil {
+			// set the canonical application state (they should not differ)
+			appState = nodeAppState
+		}
+
+		genFile := config.GenesisFile()
+
+		// overwrite each validator's genesis file to have a canonical genesis time
+		if err := genutil.ExportGenesisFileWithTime(genFile, chainID, nil, appState, genTime); err != nil {
+			return err
+		}
+	}
+
+	return nil
+}
+
+func getIP(i int, startingIPAddr string) (ip string, err error) {
+	if len(startingIPAddr) == 0 {
+		ip, err = server.ExternalIP()
+		if err != nil {
+			return "", err
+		}
+
+		return ip, nil
+	}
+
+	return calculateIP(startingIPAddr, i)
+}
+
+func calculateIP(ip string, i int) (string, error) {
+	ipv4 := net.ParseIP(ip).To4()
+	if ipv4 == nil {
+		return "", fmt.Errorf("%v: non ipv4 address", ip)
+	}
+
+	for j := 0; j < i; j++ {
+		ipv4[3]++
+	}
+
+	return ipv4.String(), nil
+}
+
+func writeFile(name string, dir string, contents []byte) error {
+	writePath := filepath.Join(dir)
+	file := filepath.Join(writePath, name)
+
+	err := tmos.EnsureDir(writePath, 0700)
+	if err != nil {
+		return err
+	}
+
+	err = tmos.WriteFile(file, contents, 0600)
+	if err != nil {
+		return err
+	}
+
+	return nil
+}
diff --git a/docker-compose.yml b/docker-compose.yml
new file mode 100644
index 00000000..62ebd1ec
--- /dev/null
+++ b/docker-compose.yml
@@ -0,0 +1,67 @@
+version: '3'
+
+services:
+  kvdnode0:
+    container_name: kvdnode0
+    image: "kava/kavanode"
+    ports:
+      - "26656-26657:26656-26657"
+    environment:
+      - ID=0
+      - LOG=${LOG:-kvd.log}
+    volumes:
+      - ./build:/kvd:Z
+    networks:
+      localnet:
+        ipv4_address: 192.168.10.2
+
+  kvdnode1:
+    container_name: kvdnode1
+    image: "kava/kavanode"
+    ports:
+      - "26659-26660:26656-26657"
+    environment:
+      - ID=1
+      - LOG=${LOG:-kvd.log}
+    volumes:
+      - ./build:/kvd:Z
+    networks:
+      localnet:
+        ipv4_address: 192.168.10.3
+
+  kvdnode2:
+    container_name: kvdnode2
+    image: "kava/kavanode"
+    environment:
+      - ID=2
+      - LOG=${LOG:-kvd.log}
+    ports:
+      - "26661-26662:26656-26657"
+    volumes:
+      - ./build:/kvd:Z
+    networks:
+      localnet:
+        ipv4_address: 192.168.10.4
+
+  kvdnode3:
+    container_name: kvdnode3
+    image: "kava/kavanode"
+    environment:
+      - ID=3
+      - LOG=${LOG:-kvd.log}
+    ports:
+      - "26663-26664:26656-26657"
+    volumes:
+      - ./build:/kvd:Z
+    networks:
+      localnet:
+        ipv4_address: 192.168.10.5
+
+networks:
+  localnet:
+    driver: bridge
+    ipam:
+      driver: default
+      config:
+      -
+        subnet: 192.168.10.0/16
diff --git a/go.sum b/go.sum
index 0e043c7b..42e636b3 100644
--- a/go.sum
+++ b/go.sum
@@ -414,6 +414,7 @@ github.com/tendermint/iavl v0.13.2/go.mod h1:vE1u0XAGXYjHykd4BLp8p/yivrw2PF1Tuol
 github.com/tendermint/tendermint v0.33.2/go.mod h1:25DqB7YvV1tN3tHsjWoc2vFtlwICfrub9XO6UBO+4xk=
 github.com/tendermint/tendermint v0.33.3 h1:6lMqjEoCGejCzAghbvfQgmw87snGSqEhDTo/jw+W8CI=
 github.com/tendermint/tendermint v0.33.3/go.mod h1:25DqB7YvV1tN3tHsjWoc2vFtlwICfrub9XO6UBO+4xk=
+github.com/tendermint/tendermint v0.33.5 h1:jYgRd9ImkzA9iOyhpmgreYsqSB6tpDa6/rXYPb8HKE8=
 github.com/tendermint/tm-db v0.4.1/go.mod h1:JsJ6qzYkCGiGwm5GHl/H5GLI9XLb6qZX7PRe425dHAY=
 github.com/tendermint/tm-db v0.5.0 h1:qtM5UTr1dlRnHtDY6y7MZO5Di8XAE2j3lc/pCnKJ5hQ=
 github.com/tendermint/tm-db v0.5.0/go.mod h1:lSq7q5WRR/njf1LnhiZ/lIJHk2S8Y1Zyq5oP/3o9C2U=
diff --git a/networks/local/Makefile b/networks/local/Makefile
new file mode 100644
index 00000000..7ab650be
--- /dev/null
+++ b/networks/local/Makefile
@@ -0,0 +1,4 @@
+all:
+	docker build --tag kava/kavanode kavanode
+
+.PHONY: all
diff --git a/networks/local/kavanode/Dockerfile b/networks/local/kavanode/Dockerfile
new file mode 100644
index 00000000..fae6dd0a
--- /dev/null
+++ b/networks/local/kavanode/Dockerfile
@@ -0,0 +1,23 @@
+#FROM alpine:3.10.2
+#
+#RUN apk update && \
+#    apk upgrade && \
+#    apk --no-cache add curl jq file
+
+# Changed from Alpine to Ubuntu because the keyring PR is linking to libc
+# Alpine uses muslc instead of libc
+
+FROM ubuntu:18.04
+
+RUN apt-get update && \
+    apt-get -y upgrade && \
+    apt-get -y install curl jq file
+
+VOLUME [ /kvd ]
+WORKDIR /kvd
+EXPOSE 26656 26657
+ENTRYPOINT ["/usr/bin/wrapper.sh"]
+CMD ["start"]
+STOPSIGNAL SIGTERM
+
+COPY wrapper.sh /usr/bin/wrapper.sh
diff --git a/networks/local/kavanode/wrapper.sh b/networks/local/kavanode/wrapper.sh
new file mode 100755
index 00000000..2ebd9c26
--- /dev/null
+++ b/networks/local/kavanode/wrapper.sh
@@ -0,0 +1,25 @@
+#!/usr/bin/env sh
+
+BINARY=/kvd/${BINARY:-kvd}
+ID=${ID:-0}
+LOG=${LOG:-kvd.log}
+
+if ! [ -f "${BINARY}" ]; then
+	echo "The binary $(basename "${BINARY}") cannot be found. Please add the binary to the shared folder. Please use the BINARY environment variable if the name of the binary is not 'kvd' E.g.: -e BINARY=kvd_my_test_version"
+	exit 1
+fi
+
+BINARY_CHECK="$(file "$BINARY" | grep 'ELF 64-bit LSB executable, x86-64')"
+
+if [ -z "${BINARY_CHECK}" ]; then
+	echo "Binary needs to be OS linux, ARCH amd64"
+	exit 1
+fi
+
+export KVDHOME="/kvd/node${ID}/kvd"
+
+if [ -d "$(dirname "${KVDHOME}"/"${LOG}")" ]; then
+  "${BINARY}" --home "${KVDHOME}" "$@" | tee "${KVDHOME}/${LOG}"
+else
+  "${BINARY}" --home "${KVDHOME}" "$@"
+fi