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KRE 3 to use Active User Balances

After evaluating submitted proposals and collecting developer feedback from the KRE Developers Summit, the Kin Foundation voted to approve Kik’s proposal to use Active User Balances as a reward mechanism.

Projected flow of Kin

Active User Balance

The mechanism is summarized below:

On a given day, payout for app i will be:

Payout_i = (AUB_i / AUB_total) * KRE_total

Where:
AUB_i = min(Sum of user balances over all AU in app i, 100000*number of AU in app i)
AUB_total = Sum for all apps j (AUB_j)

A user is an AU in app i if they have spent Kin in app i in the last 30 days.
The monopoly clause from the current KRE would still apply.

Advantages

Using the AUB to reward developers has several advantages:

  1. The mechanism is simple to understand and act on by developers
  2. Apps acting in their self interest will maximize the Kin user experience without being forced to over optimize for transaction count or volume.
  3. The mechanism closes many attack vectors the previous KRE was prone to
  4. This mechanism is the common denominator of other attractive proposals (such as derivatives of the Net Economic Activity)

Ensuring a healthy GDP

One issue pointed out is whether the GDP (volume and size of transactions) in Kin’s economy will drop significantly, if not explicitly rewarded by the mechanism.

The key is to make sure we reward economic activity without explicitly rewarding transactions. From experience, we have seen that forcing apps to increase transaction quantity does grow the GDP, but also affects the quality of transactions in apps.

Since the AUB is a moving 30 day window that is calculated daily, apps will need to keep as many of their users as possible transacting Kin within that window.

The only way to do that is to keep them invested in the experience and interacting with others with Kin. Apps having more users with more Kin in that window will earn more than those with fewer, so there will be competition. It is likely that this will be enough to maintain quality integrations and have good economic activity.

Data driven growth

Kik is working on a dashboard to display economic data generated by the KRE 3. (Expect more data to be added). After observing for one quarter, we will have data we can act on if necessary.

Kin GDP

The key is to make small predictable improvements as we monitor the economy. Note, as apps adjust their behavior to incentives, we may see an initial drop in GDP (following a decrease in spurious transactions as the quality of Kin integration improves).

If we find that transactions/ volumes need to be further incentivized we can implicitly tune the GDP incentive in one of the following ways:

  1. Shorten the window of AUB to 7 days.
  2. Define an Active User based on number and volume of transactions
  3. Use a derivative of the Net Economic Activity as a multiplier to AUB

Tourism

This mechanism does not explicitly encourage tourism, and actually reduces its incentive. While examining the advantages and trade-offs of each proposal, we noted that tourism has been low throughout previous versions of the KRE (so it will not be impacted much). However, we are still looking for ways to reward apps for referrals across apps — although there are challenges to consider such as app store rules.

KRE Cap

The Kin Foundation has not approved a new cap yet. There were plenty suggestions from the community, and additional feedback from developers. Both must be balanced so that developers remain incentivized while the amount of inflation remains manageable. Expect to see an article on our thinking process behind this. We are still going through proposals regarding the cap.

Summary

We are grateful for the massive feedback and ideas we receive from the community and developers. Diversity and competition of ideas is the pathway to success. Every idea must be considered, but only one must be selected in the end. Using a data driven approach will drive us forward, to making the KRE more successful with each iteration.

The next post will examine Kin’s inflation management proposals.

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