Success and challenges for the digital currency Kin
SEC clouds disappear, but challenges lie ahead
After the recent SEC ruling in the Kik case over the Kin ICO back in 2017, the cloud of uncertainty has definitely disappeared, as the Kin Foundation puts it. The $5,000,000 fine merely a slap on the wrist for an ICO over a then-deemed security offering.
As things stand, Kin is one of the only cryptocurrencies out there, with real usage, integrated into 50+ apps and with over 22 million unique spenders and 41 million unique earners. The opportunities are endless.
Due to its own success, Kin has had some scaling issues in the past.
Ethereum didn’t fit the bill, and now the Kin ecosystem has outgrown Kin’s Stellar blockchain fork, which is why a migration to Solana is imminent.
However, some challenges lie ahead.
Kin Rewards Engine
The idea and concept of a Kin Rewards Engine, or KRE for short, is brilliant.
Your users spend and earn Kin in-app for digital items, services or reward other users, and in turn, the app developer gets a payout which is mainly correlated to the users’ spend engagement.
Everyone’s a winner, right? Well, not so fast.
The reality currently (October 2020), is different. For various reasons, which I will try to explain below.
Its success relies on a few things.
If you have app developers that rely on these KRE payments to keep their business running, cover costs, and turn a profit, they will be trying to sell at least some of this payout on an exchange.
However, without neither decent exchanges nor enough volume and liquidity, this downward pressure only leads to a devaluation of the Kin currency.
The problem is blatantly obvious: this cycle of KRE payouts (and their uncontrolled dumping) which especially should help the ‘little guy’ – by banding together against the evil empire and winning together – and seeing their app thrive, instead, leads to less and less money in the bank due to a dwindling currency value of their own making.
As a result, these developers become disconnected with the vision of Kin and ultimately disengage altogether and look for better monetisation options.
It’s a perverse cycle of self-destruction.
It’s all well and good to be against ‘speculative demand’ when it comes to buying Kin, but without current ‘real demand’ (note that real demand here means people buying and acquiring Kin in-app, not user engagements in terms of Kin earns and spends) and no easy way to facilitate this currently in-app, we are left with a woefully imbalanced Kin ecosystem where the ‘KRE payouts supply’ far outstrips real demand and speculative demand combined.
What to do?
So, what could be done to address this? And in which order?
- Tweak the KRE payout ratios to stop the bleeding. Additionally, put contractual obligations in place for controlled percentage-based and date bound release of payout tranches onto the open market.
Offer ‘staking’. The idea is that you effectively earn interest on your Kin currency whilst it is locked up for a period of time. This could be done as part of a big exchange partnership. Both Binance and Coinbase have appealing staking programs.
For any other amount greater than a certain percentage of the current market cap, make app partners go down the OTC route.
- Get listed on bigger exchanges like Binance and Coinbase, so that volume and liquidity improve massively. This will also lead to more speculative demand and an increase in Kin currency value.
Speculative demand isn’t necessarily a bad thing, it puts Kin on the radar and combined with real in-app demand, it’s a killer combo.
- Whilst enjoying the momentum of 2), follow this up with a few big apps or game partners with excellent spend options.
This now should be far easier because of 2). Also, these bigger apps won’t rely solely on Kin payouts to recoup costs or turn a profit.
These partnerships will cause more and more engagement from both users as well as speculative demand on exchanges. This is like a self-fulfilling prophecy for a big partner. The news of integrating Kin will drive the price of Kin up.
- Develop an easy Kin buy module that can easily integrate with existing Kin apps, where users can buy directly on the open market (exchange) but seamlessly and without leaving the app. This will be the real demand.
There are rumours that a Kin wallet app called ‘Code’ is in the works which might help with some of this.
This wallet might also help and encourage the transfer of Kin between apps in the ecosystem, so-called ‘app tourism’.
Not so secret sauce
In summary then, things are definitely looking up for Kin.
With the SEC case well and truly behind them and now as much of an SEC ‘rubberstamped’ digital currency like Bitcoin and Ethereum, but with lots of real in-app usage and engagement, Kin has enormous potential.
The challenges are straightforward and clear. Solving them doesn’t involve secret sauce.
Someone please pass the ketchup.