I see a lot of questions about if KMD doesnt charge any KMD for usage of its platform “why should anybody hodl KMD”. Implicit in the question is that if there isnt some sort of KMD tax, that there is no reason to have any KMD.
This is probably due to all the ICO tokens, many without any purpose and people confusing the value of a token vs. the value of a platform coin. First, a token that is just a value tracked by the underlying blockchain has only the value from having it. It has no power over the underlying blockchain and totally at the mercy of mainchain txfees, new policies, even of being deprecated. So, yes, for such tokens, the only thing that matters is what you get by having that token. Be it a share of revenues, or a discount on trading fees, etc. What that token represents, is 100% of the value as there is no other reason to have that token.
To prove how invalid the premise that there needs to be some direct transactional payment for usage of a coin, lets look at a few of the top marketcap coins like: BTC, XRP, BCH, LTC, XLM, XMR, DASH, ZEC. Is there any benefit at all from holding those coins? None. You just get the ability to use it or sell it. It is true that miners would get more revenues with usage, but we will assume that only a small minority of users are miners.
So if there is no value from having these coins, why do they have any value at all? The answer is the network effect. The more people that have a coin, the more that coin is worth due to the N*N effect of having more users.
Please think about this, it is a critical point. A cellphone network that has all of 3 users in its network, is basically an intercom system and doesnt have much value. But if there are millions of users, then all of them are able to phone any of the other users. This is the network effect, it goes up as the square of the users. That means 10 times more users has 100x the value. A hundred times the users has 10000x the value. Of course, it isnt a mathematically precise formula especially as it is nearly impossible to know how many actual users a crypto has. The important thing to realize that the primary value driver for a crypto coin is the total number of users it has.
There are a few of the top coins, like DCR and KMD that also allow ordinary users to gain coins directly by having them. DCR using a staking mechanism and KMD rewarding active users with 5% APR. This is in addition to the network effect, so it is expected that with similar user growth for KMD and DCR, they will gain disproportionately over other coins.
KMD has another unique and possible the most significant value driver, its ecosystem. The komodo platform offers a mind boggling amount of tech for a new project to use and there isnt a KMD tax to pay to use this. What that means is that a new project can not only jump start their development by starting from the komodo baseline, but once they do, they have created their own independent coin. txfees for using their project are denominated in their coin. Only if some optional services like dPoW or barterDEX atomic swaps are used, will some fee be charged by those services, but it isnt from the komodo platform for using any part of it.
Unlike ETH, where you are charged gas fees in ETH for every calculation your smartcontract does, in komodo, the only fee is whatever txfee you decide to add to your project. komodo doesnt prevent you from charging your own txfees! It just doesnt charge a komodo tax. komodo is a tax free zone and as everybody knows, there is an elasticity of demand based on price.
If you can remember when the BTC txfees go to crazy levels, BCH price starts pumping as people realize that BTC simply cant scale and this gives BCH a stronger role in the crypto universe. High taxes are simply a negative for a coin.
Increasing tax rates might boost revenues temporarily from projects that are locked in, but as soon as the taxes become meaningful, every effort is made to migrate, regardless of the cost to migrate. Isnt it better to start in a tax free zone? To benefit 100% from your efforts than paying a tax to the platform? Having to pay $2+ per tx in the platform coin, maybe it seems like a good idea to accountants who assume that there will be the same number of tx through eternity, the reality is that as soon as possible people will do what they can to stop paying $2 per tx.
Let us project a likely future. Smart projects that want to build a valuable usecase would want to minimize their initial costs to getting to their MVP release. Additionally, all future incremental costs are ideally minimal or zero, like zero tax platform. Since this sounds too good to be true, most maybe dont even imagine it is possible, but the smart projects will analyze these critical details and choose to build on the komodo platform, as this is all a byproduct of the multichain design that allows for unlimited scaling. Another unsolved problem by all the taxation platforms.
Goodwill. this is a significant item on the balance sheet for established companies with strong brands. It isnt anything you can directly see, but the total capitalization doesnt balance if there isnt some entry to account for the disproportionate value that comes from somewhere. I had to build a taxfree platform to build on as I didnt see any such platform out there and it was most likely that if I didnt build it, nobody else would. Now that it is built, it is available for all to take advantage of.
komodo does not want to charge you taxes in KMD. komodo wants to help your project succeed and get lots of users. We have a long term view of years and decades and the goodwill that we will gain and whatever spillover we get from the ecosystem projects, that is enough. Over time, with thousands of projects, KMD will have massive value just from being in the center of the ecosystem. Having default trading pairs denominated in KMD is just one direct benefit. Being known as the cool tech platform that enabled their favorite project to be implemented efficiently and cost effectively, that establishes the KMD brand very strongly and in time I believe that will be the biggest contributor to KMD value.
Of course, with all these ecosystem projects, even if just a small percentage of ecosystem project users also use KMD, KMD benefits. The only way KMD doesnt benefit is if there is 0% crossover. I am willing to take this chance that it wont be 0%.
I cant predict when the market at large will start to value the crypto projects with more of a rational viewpoint, but we are here to stay and we will continue to improve in all areas. While waiting, you are able to get 5% APR by being an active user and this has been achieving negative inflation in recent months, which is fairly unique among crypto due to the typical mining/staking inflation rates.
