This is a guest post by community member Samz.
Looking for needles in a haystack.
I think that’s an accurate way to describe my experience researching various cryptocurrency projects today. I’ve been revisiting the framework I have used to determine a project’s legitimacy, promise and utility by asking myself a simple question:
What is the real purpose of this crypto-token?
A quote from notable crypto-investor and advisor William Mougayar has helped me keep things in perspective:
The killer app for the blockchain is not tokens, but it is the creation of private economies or ecosystems. Tokens are just enablers to that.
Under this lens, projects are viewed as economies, each with different rules, characteristics and participants. But a great economy cannot function without its tokens. This way, tokens are viewed as tools that enable participants to perform certain behaviours within an ecosystem. It is the way in which these behaviours all align, for the good of the economy, that leads to value creation and ultimately, growth in value for the token.
Based on William’s framework, I put together my own criteria for assessing a potential investment:
- Utility of The Token — what is the token used for in the economy.
- Supply and Allocation — how is token supply structured and distributed.
- Incentive Systems — how are different kinds of participants rewarded.
- Platform — where do users go to access the economy and use the token.
I’d now like to use this framework to show you why I think Kin will be a top 10 crypto-asset. Not because of market speculation (that can certainly help), but because of real fundamental truths about the token and its economy.
The Power Behind Kin’s Digital Economy
What is Kin?
Kik is a billion dollar¹ mobile messaging app company. Their goal is to build a digital economy in their app, where people can access digital services for their daily lives. The token that will power this economy is called Kin.
Note: Below, I use Kin to denote the economy, and KIN to denote the currency.
Examining Kin’s Economy
There are 3 key participants in the Kin economy, each with their own goals and behaviours. Users, developers and capitalists. When we apply the framework above, we get a macro-view of this system:
- Utility of The Token — accessing digital services.
- Supply and Allocation — Fixed. 10% liquid, 60% reserves, 30% for Kik.
- Incentive Systems — Kin Rewards Engine.
- Platform—Kik mobile app (initially).
Kin has a fixed total supply of tokens.² For comparison’s sake, Bitcoin’s fixed total supply³ has arguably been a large part of its dollar-value appreciation over the years. But in the case of Kin, you might ask: If the dollar-value of KIN were to grow over time, how will Kik encourage users to spend it? Why wouldn’t they just hold KIN, like many have with Bitcoin?
The answers lie in how the Kin Rewards Engine (KRE)⁴ will lead to value creation, and ultimately, drive user behaviour.
The Kin Rewards Engine (KRE)
At a high-level, the KRE is an incentive system that rewards developers with KIN for creating valuable digital services in the economy. Each day the KRE will pay out a ‘daily reward’ to each digital service that exists, based on the transaction volume it enabled in proportion to the entire economy. The interesting thing about the KRE is that it rewards developers for building services that are truly valuable. If a lot of people use your service to exchange value, you’ll get a big reward.
As digital services create more value, the Kin economy becomes more valuable for everyone.
If the KRE is a catalyst for value creation, then users are the reactants. A user is anyone that interacts with the digital world today. They want digital services that provide them with the most day-to-day utility. Since users can earn KIN inside of Kik, they will have the opportunity to spend KIN on services that matter to them.
As the number of valuable digital services grows, demand for KIN will grow as well, and so KIN becomes more valuable.
Therefore, the KRE creates a powerful feedback loop of creation, usage and reward in the Kin economy.
This loop aligns everyone to grow the ecosystem together. The developers build services, users transact with each other on those services, the KRE rewards developers, and demand for KIN grows. Capitalists then hold their KIN, distribute the currency on secondary markets and provide liquidity.
And the cycle continues.
For Kin to achieve massive growth, this loop can be fed in two ways:
- Drive mass user adoption → this attracts developers to build more stuff.
- Facilitate real value creation → which attracts users to use that stuff.
Adoption feeds value creation, and vice versa. If Kin can get things right, then the possibilities for a new economy, let alone KIN’s price level, are endless.
Can Kik Do It?
In app-currencies aren’t new for Kik. They ran a test from 2014 to 2016, to see if users would spend a currency in their app.⁶ The results?
Kik Points generated an average monthly transaction volume nearly three times higher than the global transaction volume of Bitcoin between 2014 and 2016.⁷
With a team of over 150 people and 8-year company history, I believe Kik are more equipped to execute on their vision than most crypto projects. Not only that, but with 15 million monthly active users on Kik, they will be one of the first crypto projects to truly bring cryptocurrencies to the masses.
The recent alpha release⁸ introduced the first Kin earn and spend experiences for Kik users. With more just around the corner, this is a token that surely deserves your attention.
Appendix
¹ https://www.bloomberg.com/news/articles/2015-08-18/kik-messaging-gets-1-billion-valuation-with-tencent-investment
² https://kin.kik.com/papers/Kin_Whitepaper_V1_English.pdf
³ https://bitcoin.org/bitcoin.pdf
⁴ https://kin.kik.com/papers/Kin_Rewards_Engine_RFC.pdf?ver=1
⁵ https://medium.com/kinfoundation/kin-an-investors-perspective-c0762be197bb
⁶ Kin Whitepaper, page 10.
⁷ Kik internal data and QUANDL: https://www.quandl.com/data/BCHAIN/NTRAN-Bitcoin-Number-of-Transactions.
⁸ https://medium.com/kinfoundation/first-kin-earn-and-spend-experiences-live-in-kik-762b5760b103
Resources & Further Reading
- Kin Official Website
- Kin Ecosystem Website
- Kin Whitepaper
- Kin Rewards Engine Documentation
- Kin Foundation — Medium Account
- Official Telegram Groups: Kin Currency, Kin Foundation, Kin Technology and Kin Announcements
- /r/KinFoundation Subreddit
- William Mougayar’s Startup Management Blog
- Tanner Philip, Strategy @ Kik — Aligning Incentives in a Deflationary Economy
