I am happy to take the time to prepare this as I believe this is a story that not only needs be shared but looked at from a standpoint on how the world’s central banks are both constructed, compromised and corrupted. Regardless of whether you are a participant or curious onlooker it’s important to note that during this next wave of “decentralizing things”, we as a community need to be able to freely and openly discuss the impact that successful projects bring to the global sustainability and consensus model in which we are all a part of. As we move closer and closer to massive commercial adoption and institutional acceptance of our token economy, it is our opinion that companies like Kinesis, who are well on the way of achieving what they set out to do, can help the entire community via a community voice.
As a matter of disclosure, our company was brought in to help drive both awareness and conversation on not only the project and the value it can create, but one that can be scaled to prudentially run a sovereign banking system in a decentralized world. As we are on the front lines of this process, I decided to curate an open Q&A on the project which I hope at a minimum gets you to unlock your own thought process on this colossal shift in today’s current monetary systems encompassing the entire crypto economy.
Q&A Interview by Bryan Feinberg
Q: On issuances of KAU & KAG will Kinesis be releasing information as to the acquire silver and gold before token release? I’m thinking creators will be long on Bitcoin hence this could be used to manipulate Bitcoin prices in their favor, as with Tether?
A: Gold and silver is required to be stored in the vault network prior to KAU and KAG being ‘minted’ into existence. This can be done by the minter introducing physical gold and silver into the ecosystem or from existing liquidity providers on the ABX. This information is not broadcast to the market ahead of time. Please reference: https://medium.com/@kinesis/kinesis-announces-liquidity-partnership-with-finemetal-asia-cf8da18a986e
Q: Do they hold the gold & silver themselves or outsource security? Or is the physical gold and silver digitalized and used as per the persons wishes who digitalized? Could a consumer use this currency in place of a pawn-shop, in that if I had a gold necklace and needed cash, instead of pawning it, I could trade it with Kinesis for coins?
A: All Kinesis currency holders have allocated title to the physical gold or silver underlying their respective currencies. Allocated title means the gold or silver is stored on your behalf at the vault. Neither Kinesis, the vault, or any other party has a proprietary interest in the gold. This removes the often-significant counterparty risk which is presented in many other forms of precious metal investment. Indeed, subject to minimum withdrawal amounts, Kinesis currency holders are able to redeem their currencies for the physical bullion. This allocated ownership via Kinesis can be contrasted with unallocated gold or silver investments, whereby the metal remains the property of the company selling the gold or silver contract, with the purchaser merely becoming a creditor of that party. The seller may not actually own sufficient metal to fully back all metal sold, presenting counterparty risk to the purchaser.
Metal introduced to the ecosystem is subject to the ABX Quality assurance framework. It is done in the form of recognized gold and silver bars, not necklaces or otherwise. This ensures liquidity for the underlying metal. Requirements for depositing can be found here: https://www.abx.com/d/QualityAssuranceFramework.pdf
Q: Do the debit cards work with existing merchants card processors?
A: Yes, Visa and Mastercard.
Q: As a competitor of Bitcoin etc., how does your marketing strategy differ from any other alt-coin? I appreciate this is asset-backed crypto so there is a difference, however in terms of adoption, I don’t see alt-coins doing enough of the right type of marketing in the space. I think criminals and computer programmers drive demand in Bitcoin which is followed by Libertarians and speculative investors.
A: Precious Metals: Precious metals and many other physical assets have no yield attached to them – they instead typically cost money to hold securely. Precious metals stored in vaults have no liquidity – they cannot be used as they currencies they once were. Kinesis gives yield to these precious metals, incentivizing their use and velocity by attaching multiple types of yield for varying degrees of passive or active participation. The Kinesis debit card allows for instant conversion of KAU and KAG into fiat currency anywhere in the world where Visa / Mastercard is accepted, even allowing Kinesis currency holders to withdraw funds at an ATM.
Cryptocurrency market: Cryptocurrencies suffer from severe price volatility, limiting their utility as a currency. Slow speed of transactions and high, fixed processing fees limit the everyday use of existing cryptocurrencies. There is a big use case for those invested in existing alternative ‘stable coins’, too. The high transaction speed, percentage-based fee model, physical asset stability and yield associated with KAU and KAG are incentives for crypto traders and holders to replace questionably-backed and non-yield-bearing stable coins with the Kinesis currencies.
Fiat Currency: With global low to negative interest rates, bail-in provisions, depositors’ insurance being removed, and with banks holding legal title to their customer deposits, it makes little sense to choose risk and nil-to-negative return over the alternative Kinesis system with negligible risk and high potential for return.
Investment Assets: high valuations and comparatively low yields for stock market and property investment make the Kinesis currencies an attractive alternative investment with a passive yield attached.
Q: In relation to the acquisition of the underlying gold and silver asset linked to the yield bearing token. How is value established?
A: 1 KAU represents 1 gram of gold and 1 KAG represents 10 grams of silver. These underlying commodities form a base value for the currencies. Subject to minimum withdrawal amounts, KAU and KAG holders will be able to redeem their KAU and KAG coins and take withdrawal of the underlying bullion on which these coins are based. This could act as a floor on the price of the KAU and KAG coins. While arbitrage between KAU/KAG coin prices and the underlying ability to redeem for underlying bullion would keep the prices closely aligned, there are potentials for deviation. For example, the KAU and KAG coins have a yield attached, which may cause them to trade at a premium to a physical asset which in normal circumstances includes a cost of carry (storage plus insurance costs). In turn, a price appreciation could attract more minters, introducing more supply and acting to re-align the pricing.
Q: Secondly about Liquidity? Are you prepared to become your one Market Maker to start with and how have you factored this in?
A: Gold is among the most liquid investment assets in the world; only three currency pairs (USD/EUR, USD/JPY and USD/GBP) exhibit higher daily trading volume. According to the GFMS Gold Survey 2015, global trading volume amounted to 550,000 tons of gold, or USD 22tn, in 2014. This was higher than the annual trading volume in Dow Jones Industrial Average stocks, S&P 500 stocks or the entire German stock market (Erste Group Research, Goldreport, 2015). As our currencies are based on these very liquid commodities, it allows for plenty of liquidity.
We have already signed liquidity partnerships, such as the following with Finemetal Asia. https://medium.com/@kinesis/kinesis-announces-liquidity-partnership-with-finemetal-asia-cf8da18a986e
Q: Because Ethereum runs at 15 transactions per second, who will run your nodes?
A: We have developed a proprietary fork of the Stellar blockchain for these currencies, resulting in extremely fast transaction speeds and scalable global use. Kinesis will run the nodes.
Q: Who is mining the tokens? How are they consumed and issued?
A: Kinesis coins in the KAU and KAG currency systems are minted into existence from the Kinesis Currency Exchange or KCX. Kinesis currencies are a representation of physical precious metals which back the cryptocurrency 1:1. The existence of the physical precious metal results in the availability of the Kinesis coins themselves. Please refer to the following link for better insight. https://medium.com/kinesis/how-are-kau-and-kag-coins-created-47e084180bec
Q: How will you deal with secondary market activities?
A: We are already engaged in advanced conversations with a number of secondary exchanges for the listing of the KVT. For KAU and KAG currencies we are similarly advanced conversations across multiple segments for the acceptance of the KAU and KAG Kinesis currencies as forms of payment.
Project Link: https://kinesis.money/en/kinesis-etheralabs
Kinesis Explained: https://www.youtube.com/watch?v=uFB3k15AVwE
About Kinesis: (Whitepaper Extraction)
Vision. The vision for Kinesis is to deliver an evolutionary step beyond any monetary system available in the world today. A system that through participation, enhances money as both a store of value and as a medium of exchange, for the benefit of all. Much the same as our sun unconditionally delivers an indiscriminate share of energy to planet Earth that stimulates life, we see Kinesis as a comparative energy system to stimulate the movement of money, assets, commerce, and economic activity in a fair, honest, and rewarding process.
Mission. The mission of the Kinesis monetary system is to deliver an internationally fungible ecosystem designed to give back to those who participate, and thus, create a solution for the global need for sound, reliable money. It is understood that for sound money to be a successful global transaction currency against legal tender currencies, Sir Thomas Gresham’s economic principle that “bad money drives out good” must be defeated. This is an observation of human behavior and money where people who value one currency over another will hold onto and hoard the more valued tender, while spending the currency they value less. Similarly, given cryptocurrency market volatility, it is often a crypto-holder’s view that their crypto-assets will rise in value or that they must hold on to them to wait for prices to recover. As a result, there is no incentive for that token to be used as a medium of exchange, thus promoting hoarding behaviour.
Kinesis Monetary System. Kinesis, in its world changing mission, embraces and rewards the use of its own currency, stimulating the movement of capital, acting as a system that encourages commerce and economic activity. Core to the mechanics of the system is the perpetual incentive and stimulus for money velocity. Outside capital is attracted into Kinesis via a very attractive risk/return ratio and then put into highly stimulated movement. This is achieved through giving money 1:1 direct allocated asset backing and then attaching a unique multifaceted yield system that promotes exchange and fairly shares the wealth generated by the Kinesis Monetary System according to participation and capital velocity. Kinesis’ primary currencies are backed 1:1 with allocated physical gold & silver, the greatest stable and definable stores of value for use in commercial and private transactions and investment. The full direct title to the bullion used for the 1:1 backing of KAU and KAG coins is allocated to the owner of the respective coin with a perpetually recurring yield generated from economic activity, not from debt-based interest like fiat currency. This comprehensive monetary system encompasses (1) the Kinesis currencies, which can be sent and received via the Kinesis eWallet, (2) the Kinesis Blockchain Exchange, providing liquidity for the Kinesis currencies and other cryptocurrencies and (3) the Kinesis debit card, allowing for instant conversion of KAU and KAG into fiat currency anywhere in the world where Visa/Mastercard is accepted. The Kinesis currencies offer a unique yield system to encourage adoption and stimulate use. When KAU and KAG are transferred between holders the network collects a 0.45% fee that is then accumulated and distributed monthly, in varying proportions, to participants in the Kinesis Monetary System as a ‘yield’. The company has developed a proprietary fork of the Stellar blockchain for these currencies, resulting in extremely fast transaction speeds and scalable global use. Holders of the Kinesis currencies have allocated legal title to the underlying physical bullion holdings so that they can exchange their currencies for physical gold and silver if they wish, subject to a minimum withdrawal amount. Kinesis was founded by the Allocated Bullion Exchange (ABX) which is the world’s leading electronic institutional exchange for allocated physical precious metals and in our eyes is showing quite a bit of innovation in terms of building highly liquid, stable and yield bearing crypto assets.
About Bryan Feinberg
Bryan Feinberg is the CEO and Founder of Etheralabs, a NYC-based Blockchain Advisory and Venture Accelerator. Bryan brings nearly two decades of serial technology & media focus and solid track record of both identifying and participating across the startup universe. Bryan is a Licensed Investment Banker, holding series 7, 63 & 79 FINRA licenses. Bryan is both deeply passionate and active across both the blockchain and crypto landscape and has been involved in early stage venture capital for the past 15 years. A serial entrepreneur, Bryan’s key-focus areas encompass both investment banking and early stage company development and drives his expertise across multiple areas including Banking & Regulatory Compliance, Syndication, Intelligence, Wallet Security, Search, Machine Learning and Big Data. Bryan has completed over $ 200M in financial transactions including taking a startup from scratch to over $ 130M in revenues Bryan is also CEO and Founder of Zephyr Financial Technologies and on the Advisory Board multiple emerging blockchain companies.
Modular by Design. Driven by Experience. Our corporate culture is about innovation. Etheralabs is New York City based venture lab / ecosystem that invests in, builds, and deploys disruptive technologies across the Blockchain landscape. Our acceleration model lays the foundation for taking promising IP from both concept to company and from revenue to profitability. Our processing cycle culminates with a fully functioning portfolio venture that is ready to attract follow-on funding, an acquisition partner, or operate as a standalone company. We follow an intensive model, premised on a fundamentally different approach to IP development. Etheralabs fast-tracks ideas into solutions that help high-growth companies with a focus on capital appreciation and scale via early stage identification and accelerated resource deployment.