Kinesis can be hard for people to wrap their heads around – it took me about a week to really understand it, but I didn’t have a primer like this page.
The Fifteen Second Summary
Kinesis is an asset-backed digital currency that combines the distributed ledger with physical gold and silver — allocated, insured, audited, and deliverable on demand — and it does so in a way that gives all participants a yield and the ability to use their physical metal for payments.
- The native tokens on Kinesis are KAU and KAG. One KAU represents digital ownership of one gram of gold, and each KAG represents one troy ounce of silver. These can be divided into hundred-thousandths, so 1 KAU is represented as 1.00000 KAU.
- Kinesis doesn’t own any of the metals in their vaults; all gold and silver is owned by the users, tracked on the blockchain. If Kinesis goes bankrupt, we own the metal and the vault owners will need to coordinate with us to distribute the metal Kinesis stored in the vaults on our behalf. As I write this Kinesis is increasing transparency by creating an independent bailee company to hold all the vault receipts; this will be pre-funded for years of expenses, with detailed directions signed off on by a magistrate to clearly explain the process to get our metal should Kinesis fail. Stay tuned.
- Kinesis vaults are audited four times each year to insure the quantity of metal on blockchain matches the quantity metal in the vaults. These audits are performed by Inspectorate/Bureau Veritas, and the audit reports are available here.
- As users, we can buy bullion at wholesale prices from the Kinesis mint and it will arrive in our Kinesis wallet as KAU or KAG in seconds. From there we can transfer it to others, spend it with entities that accept KAU and KAG, spend it on a debit card and use it wherever MasterCard is accepted (not currently to those of us in the US), spend it on vouchers with over 200 companies and earn an immediate 3% reward paid in metal (only for US users, currently), or take possession of the metal by redeeming it. Redemption can be done in chunks as small as 100 grams of gold or 200 troy ounces of silver, and costs $100 plus shipping and insurance. A member of the Reddit /r/wallstreetsilver community did this with 200ozt silver and ended up with a total cost that was 8.1% over spot — much less than online retailers were charging at the time. 1,000 ounce bars of silver cost a bit more than 2% above spot all-in.
- Something you can only do in Kinesis is purchase gold and silver at wholesale prices, have it stored securely at zero cost, and see it actually produce a yield. The longer you store it, the more it grows.
- Everyone who participates in Kinesis (and complies with Know Your Customer rules) gets a yield. See the next section – this is the most exciting part of Kinesis, and it’s also the most confusing.
- The Kinesis blockchain was forked from the Stellar blockchain. In part, this was chosen because testing showed that this blockchain would allow Kinesis to handle twice the average global transaction volume that VISA processed in 2018. Kinesis was designed from the beginning as a global currency backed by gold and silver. Transactions of KAU and KAG generally are completed within 3-5 seconds; transactions that involve other cryptocurrencies take a bit longer.
- Kinesis is working to build public-private partnerships to provide banking services to the world’s under-banked or un-banked population. The first of these is with Indonesia — this has been plagued by delays by governmental decision-makers, but the first component of the Indonesian integration went live in mid-August 2022, with the remainder should be online by the end of 2023. A Latin-American nation is going to use Kinesis as legal tender, and should be announced shortly. All of these services feed Kinesis yields.
A brief note on yields
Kinesis is different, and it’s hard to get your head wrapped around it (hence, this site.) Traditionally, in all of finance, for all of financial history, in order to get a return you had to take a risk. The greater the risk, the greater the reward. If you want zero risk, then you pay storage fees.
Kinesis yields are different, and are only possible because of the blockchain. Every transfer from one wallet to another (or on the exchange, or to a debit card, etc.) has an associated fee – either 0.22% or 0.45%. That fee is assessed by the blockchain and set aside in something called the Master Fee Pool, and then the following month the Master Fee Pool is paid out to recipients.
Minters (those who bring new metal into the system) get a perpetual minter’s yield. Everyone who had Kinesis currencies in their account for more than a day in the previous month get their proportional share of the Holder’s Yield. If you referred people to Kinesis, you get a yield too. Did you spend or buy in Kinesis last month? You get a share of the velocity yield. Kinesis raised money by selling 20% of its future yield payouts to buyers of KVT tokens rather than by selling stock; if you’ve got KVTs your yields should be implemented soon as well.
Overall, 57.5% of the yields go to users of the system. Kinesis takes 17.5% of the yield to pay for servers and vaulting and insurance and staff and all that. Large partners (eg PT-POS, the post office in Indonesia) qualify for a 20% yield as well based on the transaction fees that their customer base generates. This is innovative and different and it might take a while to understand it intuitively. Here’s a PDF that explains it better than I just did.
The important part here is this: the more people transact (that is, the higher the velocity of money) the greater the yields that everyone will see. How much yield will a holder receive on their assets, as a percentage of their value? That totally depends on the velocity. And that’s the trick: Kinesis found a way to motivate people to use gold and silver as a medium of exchange, rather than just as a store of value, which is why it’s kinesis.money. If you buy and spend with it, you qualify for yields (minter’s yield if you minted, holder’s yield for the time KAU and KAG were in your account, velocity yield for spenders). We all get a yield of some sort or another. So don’t just put your portfolio’s metal allocation in it – deposit your spending money as well – protect yourself from inflation and earn a yield. Mint and earn a perpetual yield.
It’s kind of ingenious.
Why Use Kinesis?
Not only does Kinesis not charge you a fee to safely store your metal, they offer a yield on the metal you store in their vaults. KAU earns a yield in grams of gold (additional KAU), and KAG earns a yield denominated in ounces of silver (KAG). It might make sense to think of this as something similar to a traditional savings account, denominated in gold or silver, with a yield payable in the same metal.
You can buy silver and gold at competitive rates on the Kinesis Exchange, but you can also mint KAU and KAG at the Kinesis Mint, buying it at wholesale prices. Once you “mint” bars of physical metal into KAU or KAG you earn the same Holder’s Yield shown above, but you are also eligible for the Minter’s Yield should your choose to spend or transfer it:
Unlike metal you buy and hold at home, with Kinesis you can:
- Store the metal securely in an audited and insured vault.
- Redeem the metal from Kinesis and have them ship it directly to you, wherever you like, whenever you like. Just note than if you redeem your metal it is removed from the blockchain and you will no longer receive your minter’s yield from it.
- Transfer it directly to another Kinesis user in any fraction. People imagine bartering with gold and silver, but with Kinesis there is no need to round a purchase to the nearest Mercury Dime – you can transfer 12.23756 KAG (or any other fractional amount) to another user within seconds, anywhere in the world. This does cost 0.45% of the transferred amount as a fee, however, which goes back into the master fee pool to be distributed as yields. This means a $100 purchase incurs an additional $0.45 in fees; a $10,000 purchase costs $45. (For clarity, these fees are taken in KAU and KAG rather than the dollar equivalent.) When evaluating the fairness of this fee, consider that you purchased your KAU or KAG at or near spot, not paying the premium you pay to buy precious metals at retail. All things considered, this is a bargain.
- Spend your Kinesis metal in the real world on the MasterCard network. It’s a lot easier to purchase from Wal-Mart, McDonald’s, or Amazon using Kinesis KAU than it is to make the same purchase with Krugerrands, because you can’t spend fractional Krugerrands on a debit card like you can with Kinesis.
- Receive velocity yield each time you spend with Kinesis:
You can transfer US Dollars to your Kinesis account, then convert your Dollars to digital Gold or Silver, and spend as you like on your Debit card, or transfer it back to your traditional bank account as you require.
This allows you to act as your own central bank — storing your wealth in precious metals instead of fiat currency. If you choose to mint KAU or KAG you will be entitled to the Minter’s Yield once it’s spent, and the Holder’s yield as long as you’re holding on to it. If you are simply converting Dollars/Euros/Pounds to KAU or KAG on the exchange you will still be generating a Holder’s Yield as long as you’re holding it in your account, and the purchase/sale of Kinesis coins will qualify for Velocity Yield.
In these inflationary times many will find comfort in the fact that their money is stored in gold and silver, rather than fiat. We have some Turkish Kinesis users – when Turkey revalued their currency by 90% in early 2023 Kinesis users retained their wealth, and their purchasing power improved over all their peers.
Cryptocurrency Holders looking to lock in Gains
Cryptocurrencies are volatile, and you may eventually look to lock in your gains by transferring your _______coin to a stable-coin to secure your gains. You might be concerned that Tether isn’t as stable as you’d like, but what’s more stable than precious metals?
You can create a Kinesis account and transfer digital assets into the Kinesis Monetary System and convert them to KAU or KAG on the Exchange. Your online Kinesis account is secured with 2 factor authentication, and Kinesis uses the premier third-party custodian for the digital assets held in the Kinesis wallet, but there is a hardware wallet for you “not your keys, not your crypto” types. Note that right now the only hardware wallet that supports KAU and KAG is the Coolwallet S, and transfers of KVT to your hardware wallet will cost 0.005 ETH as a gas fee. Please see the Getting Started page for details on the hardware wallet.
Kinesis’ current weaknesses
There is no perfect solution out there – there are only differing sets of trade-offs that we as consumers need to manage when making purchase or investment decisions. This applies to choosing where to store your metal as much as it does to choosing a car to buy.
With Kinesis, there are some issues you should be aware of.
Kinesis is still incomplete. We are in that weird point where a disruptive technology company is transitioning from start-up to industry leader. While Kinesis has the best model, at this time (March 2023) the following components of the model are still incomplete:
- United States users are currently without a debit card. We had one previously, but that provider has now exited the crypto-space entirely and we are still waiting on new providers to come online. This has been plagued by delays, as you might expect in a time when all on- and off-ramps to crypto are being attacked by the current administration.
- Users in the UK and Europe have access to a virtual debit card which works, but has a higher fee associated with it than the physical card that has not been released yet. The physical card will have a 0.22% fee; the current virtual card has a 1.95% fee attached. Kinesis’ 1% of that fee is all put into the yield pool so you get some of it back as velocity yield, but it’s an imperfect solution. The physical card is coming, but it’s not sure when.
- On-ramps aren’t easy like they should be. There’s been a bit of whack-a-mole going on with crypto-friendly bank accounts, and right now that means to for North American users to get funds into Kinesis means buying crypto somewhere else and transferring it in, or sending an international wire. Neither option is as simple as ACH, and it should be. A solution is forthcoming.
- Not all yields are being paid – namely the KVT yield. This will be moved from the ERC-20 blockchain (which isn’t as appealing as it was when the tokens were created) to the Stellar blockchain, and Kinesis planned to pay yields once the move was complete, but the current plan is to pay the accrued yields this quarter. Stay tuned.
There are attacks on ‘crypto’ by the powers that be everywhere, but especially in the United States. Kinesis isn’t ‘crypto’ by the normal definition – it’s vaulted physical metal that has its ownership tracked on a distributed ledger – but the use of any blockchain means banks are sometimes wary about the way their regulators might react if they provide services to Kinesis. This sucks, but it’s a reality in our current regulatory environment.
Partnerships aren’t yet fully online. Kinesis is designed to be a sound money monetary system, and the Kinesis business model is to partner with nations to provide physical gold and silver as a payment mechanism and savings alternative to big chunks of the world population. So far two nations have signed on – Indonesia, and a yet-to-be-named nation in Central America. These will boost the velocity of money in the Kinesis system significantly, but Indonesia has been frustratingly slow to roll out the system. Once these partnerships go live the yields should increase significantly and Kinesis’ success will be much more certain, but as of now we’re still waiting.
So, what now?
If you’d like to sign up, I’d appreciate it if you’d use this link to do so. If you do then 57.5% of the fees you generate will go to users (and 7.5% of that will be me); if you’d rather sign up directly with kinesis.money then only 50% of your fees will go to users. I’d rather you sign up than not sign up, so do what you’re comfortable with, but I believe there’s a 0.5 ounce of silver reward for using my sign-up link once you pass some threshold in Kinesis.
Once you’ve opened your account you can see my getting started guide for more of the nitty-gritty details of using the system.
If you’ve got more questions, Kinesis now has a Community Forum. Join up and ask away.