Most Kinesis are familiar with the way yields are mapped out. (If you’re not, the short summary is that there’s a 0.22% – 0.45% fee for purchases/transfers, and that fee goes into the master fee pool, and each month that is distributed to participants in the system.) Today that changed: it was announced in today’s Quarterly Update that the depositor’s yield will be morphed into velocity yield instead.
I think this is Brilliant.
Depositor’s Yield Is Disappearing
Depositor’s yield seems like a good idea that didn’t pan out. The goal as I understand it was to:
- Create a perpetual yield for people who couldn’t afford to mint KAU or KAG
- Encourage a large initial deposit so people jumped in to Kinesis with both feet
Unfortunately, there were misunderstandings about this yield and many (including me) never made a large initial deposit and purchase on the exchange. Instead my deposits all went to the mint.
Worse, the yield was designed to encourage adoption but instead it looks like people were holding off – if this was to be paid forever then it was rational to save up until you could deposit a really large amount into the system.
Depositor’s yield didn’t encourage the sort of behavior it was meant to encourage.
Velocity Yield Will Replace it, at 10% instead of 5%
So, 57.5% of generated fees now go back to the users of the system, which is great.
Velocity yield should encourage actual use of Kinesis in the real world. 10% of the master fee pool will go to users who spent money on the debit card or used the exchange to buy or sell. So the more you use it, the more you get paid.
That’s smart. I think it will encourage exactly the sort of behaviors Kinesis wants to encourage.