Chapter 3: Nucleus — The Kinetic Lockdrop
The highly anticipated Kinetic launch will start with Nucleus, our lockdrop, on March 30th. In this launch event, users will be rewarded $KNTC tokens for locking up $UST for a specified period of time.
While discussing token distribution designs with Delphi Digital, they released the Astroport token design. We found it inspiring and thought about how we could incorporate some of the learnings.
Although we gave a high-level overview on the lockdrop in our roadmap blog post, we want to go in a little bit more detail here.
When, Where and How?
The Kinetic Lockdrop will happen on March 30th on lockdrop.kinetic.money. There is currently a countdown on the page, which will be replaced with the lockdrop UI on the day of the lockdrop.
This is the only page on which participation in the official Kinetic lockdrop will be available. Any other website that claims to host the Kinetic lockdrop is fake. We recommend bookmarking the page to make sure to avoid any risk of phishing.
The lockdrop will support Terrastation wallet and we recommend accessing it from your desktop browser.
The lockdrop event will be open for 7 days and support $UST deposits. Similar to the Astroport and Mars lockdrops, deposits and withdrawals are going to be possible as follows:
Day 1–5:
Deposits & Withdrawals are possible.
Day 6:
Deposits will be disabled and from here on participants will only be able to withdraw funds once and only up to 50% of the $UST deposited during the initial five-day period.
Day 7:
Each participant’s withdrawal allowance will fall linearly from 50% to 0%. By the end of the day, no more withdrawals will be allowed and Nucleus will conclude.
The more tokens a user locks, the more $KNTC they receive. There are going to be four different lock periods (as shown below) and the longer the tokens are locked, the more $KNTC will be received. The exact amount of tokens a user receives will depend on the total amount of user funds that participate in the lockdrop, as exactly 10,000,000 $KNTC (〜31% of liquid supply at genesis) will be divided among all participants.
Importance for the Kinetic Protocol
Nucleus is going to be a crucial launch event for the protocol in two ways: It will bootstrap liquidity for the $kUST-$UST pair and simultaneously seed the Kinetic Phaser.
Bootstrapping $kUST-$UST liquidity
Once the lockdrop concludes, the locked funds ($UST) will be deposited into the Kinetic Vault and the max amount of $kUST (50% of the amount) will be borrowed against the deposited collateral. Then, the created collateralized debt position (CDP) will be closed immediately, which will leave the lockdrop contract with 50% $kUST and 50% $UST. These funds will be used to bootstrap a stableswap pool on Astroport and converted into $kUST-$UST LP tokens.
Seeding the Phaser
The 50% $UST that the protocol gained by closing the initial borrow position will be used to seed the Kinetic Phaser. The Phaser is a protocol native swap mechanism that allows users to convert their $kUST to $UST over time. Hence it is an important part of the protocol that will guarantee that any user can convert their borrowed $kUST back to $UST at a 1:1 ratio, even if the $kUST-$UST pair trades below peg.
By seeding the Phaser with 50% of the lockdrop amount, it will also contribute to an increased repayment rate for users: The Phaser funds will be deployed into Anchor as well, boosting the repayment rate beyond the regular Anchor rate that is yielded by the users collateral.
As we are starting off the vault with a debt cap due to protocol & peg safety reasons, it is expected that the initial loan repayment rate will be significantly higher than the Anchor rate, which sits currently at 19,5% APY. Once the debt cap is raised to higher levels, the repayment rate might adjust based on the ratio of Phaser funds to Vault deposits.
Withdrawing funds after the lock-period is over
After the user’s lock period is over, the user can withdraw their LP tokens, including any LP fees that the LP tokens generated throughout the lock period. Due to the fact that $kUST-$UST is going to be a stableswap pool, the user can expect minimal to no impermanent loss over the lock period.
The rewarded $KNTC will be claimable much earlier however, with 50% releasing on protocol launch and the other 50% four weeks later.
Guaranteed Vault Access on Day 1 (despite initial debt cap)
Due to the initial debt cap of the protocol (which we will announce immediately before the launch of the Kinetic WebApp), there may be a case where not all users will be able to enter the Kinetic Vault and borrow $kUST at the get-go.
To reward lockdrop participants, there will be a 4 day period where lockdrop participants have pre-access to deposit funds into the vault. A total of 50% of the initial debt cap will be reserved for lockdrop participants. The individual debt cap is calculated by locked funds of user/total locked funds x 50% of debt cap.
After this 4-day period is over, any user can access the vault, until the initial debt cap is hit.
What’s Next?
Prior to launch we are going to release more pieces of content, specifically on the other launch events & the tokenomics of $KNTC. Stay tuned for the next chapter of this series, Chapter 5: Entropy by following us on Twitter and joining our Telegram Channel.
Website: kinetic.money
Twitter: Kinetic Money
Telegram: Kinetic TG Group
