Defining a Healthy Economy

Ted recently wrote a great piece that very succinctly articulates the vision for the Kin Ecosystem and why Kin exists.

Kin is a digital sharing economy of equal opportunity where everyone is fairly compensated for the talent they provide through their phones; where creators are fairly compensated for the experiences they deliver; and where collaboration and value creation is at the center.

This is both exciting and impactful because it presents a unique opportunity to create an environment that empowers anyone to participate, and where everyone is compensated fairly for their contributions — regardless of race, gender, or socioeconomic status. This core mission — the core why — is the lens through which everything in the Kin Ecosystem is developed. The economic framework and associated incentives are no different, which was detailed in a piece I wrote about aligning incentives in this economy. As a follow-up, I want to share some of our thinking on how to empower stakeholders to align with the vision of a digital sharing economy of equal opportunity.

There are various drivers that play an integral role in establishing the foundation for the success of Kin, including econometrics, user behavior, and innovation. There are also unique segments of stakeholders that individually contribute to these foundational drivers (consumers, digital services, brands, infrastructure partners, ancillary services, etc.). The only way that the Kin economy reaches a level of sustainability is if the appropriate incentives are in place to align all of these components with a unified mission. Each of these are mutually dependent to the overall success of the ecosystem, but each has its own unique characteristics.

The long-term vision is that of a fully decentralized ecosystem where everyone is compensated fairly for productive participation. However, we recognize that there are requisite steps and necessary course corrections over time to get there. Think of getting a satellite into orbit.

We know the satellite we want to build, and we know what we want it to do, but it needs to be guided to a place of self-sustainability. The questions we need to answer are:

• What are the sequence of switches to flip in order to reach sustainability?
• What are the critical dependencies and failure points?
• What are the leading indicators that we are moving towards or away from sustainability?
• What are the corrective measures?

Given the strong vision, these questions are nuanced in nature. In order to establish the right mechanism design to align the various components will require inputs from different domains. We recognize the incredible thinking going on in the space that traverses expertise in economics, philosophy, product, tech, psychology, and many others. A core value our team holds is to collaborate with the smartest minds to deliver the most impactful work, together.

A strong economic architecture begins with a clearly defined why. This is the guiding principle on which the foundation for everything is built. The how and the what will evolve over time to recalibrate the trajectory of the satellite so that it’s always aligned with the why.

This is the first in a four-part series of posts that will outline:

1. What is a healthy economy (the why)
2. Stages of ecosystem development (the how)
3. Phase 1 strategic thinking (the what)
4. Core KPIs (measuring the how’s and what’s against the why)

All feedback is not only welcomed, but encouraged. Let’s work together to get this satellite into orbit.

Defining a Healthy Kin Economy

A healthy traditional economy in steady state has the following three conditions:

1. Systemic strength: low concentration of wealth, low concentration of commerce (i.e., healthy competition)
2. Stable micro-economic conditions: consistent consumer prices, broad and recursive market participation (e.g. low unemployment)
3. Healthy macro-economic conditions: high liquidity in currency with low volatility

However, a healthy Kin economy is nuanced in its architecture and unique value proposition as a decentralized consumer-to-consumer (C2C) economy. The three traditional measures do apply, but looking at Kin through the broad brush lens of a traditional economy will lead to a divergence from the vision where all stakeholders are both empowered to participate and fairly compensated for their participation. A healthy Kin economy also optimizes for the following three conditions:

1. C2C: Value is exchanged between consumers in a digital sharing economy; digital services are facilitators of value creation.
2. Collaborative: Stakeholders are aligned to maximize total value of the economy, not competing to increase their fractional share of the economy at the expense of total value creation.
3. Decentralized: Consumers move through the ecosystem with little friction; digital services are aligned to promote this behavior.

To move from nascent state to a sustainable steady state, there are steps in between that will require both stimulus and guardrails. This interim period needs to manage two competing forces: a healthy and appreciating value of Kin to effectively provide fair compensation for productive participation in the ecosystem, while still driving transaction growth on the platform (i.e., spending not saving).

The unique challenge is that these two forces are stimulated from opposing economic conditions. Inflation stimulates consumer spending, but in a crypto-economy where the supply is fixed, increased demand for the currency puts the economy in a deflationary state. The Kin Ecosystem has very distinct stakeholders, each of which derives value in different ways. In order to satisfy both conditions of a healthy economy (appreciating value and growing transaction volume), the appropriate design principles need to be in place that satisfy core values, and stakeholder needs.

Core Values

To architect the appropriate incentive mechanisms requires 100% alignment with the core values of the ecosystem. These are the guiding principles by which health and sustainability are measured. The levers implemented in the economy’s mechanism design are used to continually calibrate against these core values. If we deconstruct the mission — the why — of the Kin Ecosystem we can isolate and define what success means:

Kin is a digital sharing economy of equal opportunity where everyone is fairly compensated.

Sharing Economy

The advent of the smartphone has truly made anyone who touches one an entrepreneur. We’re more connected than ever, and in a growing ecosystem of digital services, we all have a unique opportunity to generate value and share that with the world.

The genesis of Kik Points came from a key insight that users were spending around 40 minutes per day on Kik, generating immense value for the community through active and productive participation. However, the value captured by these users was purely intrinsic. What if we could give users their first wallet and empower them to start to capture extrinsic value as well? Kik Points was an opportunity for a user to effectively have their first job — they could opt-in to engage in branded experiences, collect their small paycheck in Kik Points, and go purchase premium content. As an experiment, this proved to be successful, but we know that users have more to offer and have more ways they want to spend. Kik Points was like a mini society with a couple of jobs to pick from and a small corner store; the Kin Ecosystem is analogous to globalization.

In the decentralized Kin Ecosystem, every user is empowered to leverage their unique and special talents anywhere in their digital life, and turn around and spend in the places that give them the most utility. It truly is a borderless consumer-to-consumer value exchange.

Equal Opportunity

The Kin Ecosystem is impactful in that it empowers all levels of stakeholders to participate, generate and capture value.

Participate
First, Kin provides access by facilitating the exchange of value. We’ve now surpassed 50% of the world’s population connected through the internet, and that figure is on a positive growth trajectory. As more and more people get connected, Kin provides an opportunity to exchange value.

Digital services are combining communication, information, and commerce. We are seeing more services move to a collaborative peer-to-peer, shared economy model a la Waze, Airbnb, Uber, etc. What makes Kin powerful is not just that it acts as a secure medium of exchange, but through the Kin Rewards Engine (KRE), anyone who is generating productive value in the ecosystem is rewarded for their contributions accordingly.

Generate
Value is implicitly generated simply by participating. There is inherent value in being an active community member — the KRE rewards communities that are generating transaction volume. In an ecosystem powered by Kin, consumers generate value for their community by being active and engaged.

Value is also explicitly generated by creating. The ecosystem of digital services empowers all participants to become creators. That could be through creating great experiences within the community, like a livestream, or great content like a photo or a sticker. That could also mean creating a marketplace for goods and services — offering some great fashion advice to another member of the community (I know I need that). This value generation comes right down to the fundamental principle of being a good steward in digital communities. Users often don’t get recognized or fairly compensated for being a great community member. Kin is a way to do both.

Capture
The Kin Ecosystem is architected in a way that rewards productive participation. The KRE incentivizes all stakeholders to align and focus on creating great experiences for all participants, regardless of the community in which they operate. The power of a cryptocurrency is that it economically aligns everyone to generate demand for the currency — the Kin Ecosystem effectively empowers anyone to do so. Through the KRE, value is translated explicitly through a daily payout in Kin and implicitly by rewarding the services and communities that generate valuable experiences.

The daily payout of Kin through the KRE is analogous to the Bitcoin block reward for mining. But instead of incentivizing an arms race of computing power, it incentivizes an arms race of value generation for participants of the ecosystem.

Fairly Compensated

The proliferation of digital and mobile has broken down the borders of global collaboration and connection. Right now a few centralized entities act as the gatekeepers to exchange of value and flow of information. Kin is a way to make this truly borderless. In the Kin Ecosystem, the exchange of value is direct, and the appropriate stakeholders are rewarded relative to their contributions to the ecosystem.

In an economy where everyone is fairly compensated for their contributions, it’s imperative that everyone is equal. Traditionally, user-value is mapped against specific characteristics like geography, age, earning potential, etc. — just look at any public company’s quarterly earnings report. In the Kin economy, however, these traditional measures are redundant. Everyone has equal opportunity to generate value. The key design principle is that value is exchanged with a cryptocurrency, where every participant is a stakeholder.

Stakeholder Needs

Consumers

• Fairly compensated for their contribution = purchasing power
• Simple experience to generate and capture value
• Low cognitive burden when making purchase decisions
• Mobility across digital services

Summary
A consumer in a C2C economy cares about the relationship of generated value to purchasing power within the ecosystem. The expectation is that there is a relative quid-pro-quo relationship between generated value and captured value. In order to create sustained transaction volume within the Kin Ecosystem, this condition needs to be maintained. If the opportunity cost of spending becomes too high, users will 1) HODL, or 2) liquidate to fiat. Both of these scenarios will kill sustained transaction volume and the associated network effects. The incentive to spend comes from inflation in the economy.

Digital Services (Developers, Brands, Content Creators)

Core Needs

1. Revenue (grow, engage and monetize their audience)
2. Innovation
3. Industry recognition

Unique Needs

Developer:

• Acquisition: more consumers discovering their app/service
• Retention: consumers engaging with the app/service more often
• Activity: consumers are becoming influencers within their app/service

Brand:

• Relationships: reach and engage consumers in meaningful, authentic ways
• Brand Equity: build brand equity within consumer and industry networks

Content Creator:

• Reach: more consumers discovering content
• Engagement: users actively engaged in content + sharing content

Summary
Digital services have nuanced needs. However, each has some combination of desired: revenue, innovation, and industry recognition. The Kin Rewards Engine presents an opportunity for a digital service to monetize. Their ability to generate transaction volume is the determinant of profitability. Positive momentum in the price of Kin will incentivize digital services to build for the ecosystem — this comes from deflation in the economy. However, the ability for a digital service to capture a Kin Rewards Engine payout comes from their ability to generate transaction volume, which requires consumers to feel inflation.

Kin is a digital sharing economy of equal opportunity. To build an ecosystem that brings this to the masses requires tight alignment on core values and stakeholder needs. The next post will focus on the stages of development to effectively maximize the impact of Kin. This journey is one that requires collaboration and constant iteration. If you have any feedback, please share.