What are KVT?

KVT are Kinesis Velocity Tokens. These are a special token that only participate in the yield system of Kinesis. 20% of the generated yields are set aside to pay KVT holders, and there is a hardcoded limit of 300,000 KVT. No more than 300,000 KVT will ever exist. Owners of KVT succeed and profit only if Kinesis succeeds and profits, but if Kinesis becomes successful these tokens will become very valuable.

Why do KVT Exist?

When Kinesis started 200,000 of these were sold to raise the initial $200 Million to get this project started. This served the purpose of an IPO — it raised startup capital for what was an ambitious but speculative venture. The founder of Kinesis stated in interviews that he had offers from large funds to buy all of the KVT, but it was his preference that the funding come from the users of the system.

The goal was to create and encourage the use of what is a complete monetary system, and the best way to do this was to spread around the rewards of its success.

How do I get a KVT?

Special Hurdles for Americans

The American Securities and Exchange Commission views these tokens as something similar to an IPO — these are speculative, so if you are an American you will be unable to earn KVT from your minting efforts unless you can document to Kinesis that you are an accredited investor. Basically to stay on the right side of regulatory agencies in America Kinesis requires you to provide them with documentation proving you have suitable earnings, net worth, or have passed a qualifying securities exam. Or you can show these documents to your accountant and forward the letter he writes you to Kinesis Support.

None of the following applies to Americans until you’ve established you are an accredited investor, except purchases directly from C4SM as Kinesis is not involved in these transactions.

Participate in the PMO

The Final Public Minting Offer is running as I type this. This is an opportunity to earn KVTs by minting KAG or KAU and releasing it into the system. Most people do this via a process called “mint cycling,” which consists of:

1. Transferring money into the Kinesis system
2. Sending that money into the Kinesis Mint, where you purchase blocks of 100 grams of gold or 200 ounces of silver at a time. Once purchased, these are automatically transferred into your Kinesis wallet as KAU and KAG.
3. You can now sell these on the Kinesis exchange for cash.
4. Now, you go back to step 2, sending the money back to the mint and performing the process again.

This serves to prime the pump a bit and get money into the system. Indonesia has participated in a public/private partnership with Kinesis, and 200 million unbanked Indonesians are suddenly going to be given the opportunity to save via Kinesis, set money aside for the Hajj, pay their bills via Kinesis (rather than walking to the post office miles away), put money into Kinesis at any post office, etc. The KAU and KAG need to be in the system with tight spreads, and the PMO encourages the minting required to keep up. The gates will open to these potential new users at the end of May, 2021.

For each $75,000 equivalent in KAU or KAG you mint this way during this final PMO:

• You earn a KVT
• You also get triple the minter’s yield you would otherwise be entitled to. Every dollar you mint (whether you qualify for KVT or not) counts as $3 as far as mint yield calculations are concerned. Minting now generates three times the minter’s yield that minting will later.

As I write this in mid-March 2021, users have reported a net cost per KVT of between $750 and $850 via mint cycling. If you are patient you can place buy orders at the mint that are lower than the current market, anticipating the predictable but suspicious dip in precious metals prices each morning, and sell your tokens on the exchange at a higher price you expect the price to see while the markets are open. This minimizes your slippage while mint cycling.

If you’re just trying to mint KVT while they are still available, then you can hit the bid/ask on each side of the process and mint KVT quickly, but at a higher cost. It’s up to you. If you’re minting two blocks of KAU at a time ($12,000 or so) you can probably earn a KVT in 20 minutes, but your all-in cost will be higher because you’re using market orders.

This option is only open to Americans if they have e-mailed Kinesis Support the documentation required to prove accredited investor status. Yes, this is a stupid rule. Yes, Kinesis is choosing not to challenge the SEC. Deal with it.

Purchase KVT Directly from the Kinesis Exchange

KVT are not currently tradeable on the exchange, but Kinesis has a few KVTs they sell from time to time, and the current price is $1,400. This functionality is not available to participants in the USA, whether they are accredited investors or not. Everyone else can (apparently) see it, though.

Purchase KVT from Citizens for Sound Money

(I have invited Jim Forsyth, founder of this nonprofit to participate here to give you more information.)

Citizens For Sound Money (C4SM) is a nonprofit that has discovered the potential that Kinesis has to offer, and it has been minting KVTs with the goal of expanding ownership of KVT, and therefore expanding interest in the system and (hopefully) accelerating acceptance of Kinesis. As I understand it their efforts have brought in over 400 more KVT holders.

C4SM will sell you two KVT for $1,000 each which is about their cost. You can buy additional KVT at the market price from C4SM as well, and the additional cost serves to fund the efforts of the non-profit. Hopefully Jim will participate here and flesh out the details of his organization in more detail, as I suspect they are doing very important work.

This is currently the only way to acquire KVT for Americans who are not accredited investors, or who do not care to prove that they are accredited.

The Upside Potential of KVTs

This is where things get exciting, but this is still a new venture, early in its journey, and you would do well to temper your expectations at this point.

The video embedded at the top of the page makes some projections about the earnings potential of KVTs, under the assumptions that:

• Kinesis takes 1% of the global gold trade
• The velocity of money in Kinesis is 10%

Thoughts on Speculation, FoMo, and Get Rich Quick

I was aware of bitcoin when it was trading below $1, and I’m certainly aware of the impact bitcoin would have had on my life if I’d just invested $100 or $1,000 in bitcoin back then. I’m part of that group that doesn’t see a whole lot of value in a new fiat currency (and that’s how bitcoin was pitched – as a new digital currency) even if its got fancy features, so I missed out. Hugely. A life-changing mistake.

Kinesis is the only cryptocurrency I’ve ever purchased, because it’s backed 1:1 with gold and silver. That means I’m not going to get rich like the bitcoin speculators did on this cryptocurrency, because 1 KAU will always be valued at one gram of gold. I expect KAU to do well as gold outperforms other investments into the future, but not 60,000% gains. My financial benefit from owning 1,000 KAU for a decade is the same as if I’d bought a kilogram bar and sat on it. Except I’d have a yield and all the other benefits Kinesis offers.

Enter KVT: the way to speculate on the success of the Kinesis system. I’ve got a PDF open where someone calculated the yield of KVTs if daily trading amounts in Kinesis matched what we’re seeing at crypto exchanges. If trading matched the largest exchange, then each KVT would be returning more than $49,000 of gold/silver to its owner each year.

That’s life changing, and these numbers get people very excited, and I don’t think it’s realistic or helpful to have those sorts of expectations. Kinesis is about going back to sound money with all the advantages that the distributed ledger brings. And KVT owners own a piece of that success, like owning stock shares that return a dividend paid in gold/silver.

It may be a big deal, but there’s a long way between here and there.

Manage your Expectations

There are other projections online that calculate earnings using 30% velocity which may be a more reasonable estimate for velocity of money. The problem is that as of now there are only

• 726,354.72124 KAU in circulation, valued at $43,523,174
• 1,787,680.66862 KAG, which are valued at $50,358,964

(You can check this for yourself by using the Kinesis Explorer — choose KAG Mainnet or KAU Mainnet from the dropdown menu for the relevant numbers.)

As of May 19th, there is a total of $93.8 million dollars worth of KAU and KAG in circulation. This has been growing at an exponential rate over the past year, and acceptance is picking up even before the first public-private partnership is going live, but the video at the top of the page based its projections on $78 billion in KAU in circulation. The assets in Kinesis’ vaults need to grow by more than 800 times to get to the numbers those KVT projections are based on.

So what’s the growth rate of Kinesis?

I haven’t been able to determine this directly. In the 2021 Kinesis Roadmap video Tom Coughlin (CEO of Kinesis) gave some numbers:

This gives us a starting place. Less than a week ago Andrew Maguire was speaking on another channel and stated that volume on Kinesis in April was around $4 billion. So the progression from these two sources looks like this:

Projections are hard for something like this. As you can see from the chart above, a big chunk of this volume is related to mint cycling for users to earn KVT, and is therefore artificial. Will this continue? The official announcement of the Indonesian partnership comes out on May 28th — how many of those 200 million unbanked Indonesians will choose to participate in a Sharia compliant gold-based banking system endorsed by their government?

There’s simply no way to tell.

The Most Optimistic Projection

If we throw caution to the wind, assume mint cycling will either continue past the PMO offer or will be replaced 100% with “real” transactions in the system, and that the growth rate we’ve seen since 2020 will continue at exactly the same rate, how soon will KInesis grow to the point where the numbers in the promotional video start to look real?

Someone can build a mathematical model for this – I’m going to offer a more back of the envelope calculation here instead.

We aren’t given many consecutive months of data, but we have October, November and December of last year to start from:

• November’s Trade volume was 1.45 times greater than October
• December was 1.69 times greater than November.
• This is an incredible growth rate and is likely not sustainable, but let’s run with it. If we assume each month will see trade volume grow at the average growth rate between October and December of 2020, that means we’re looking at an expected growth rate of 1.57 times. This is clearly unsustainable, but the goal here is to present the rosiest, most optimistic picture. Please don’t e-mail me telling me this is unreasonable.
• So, if we project forward from December to estimate February’s numbers, we get $2.216 billion, which is a bit more than half of what Andrew Maguire said we saw in April. It’s insane, but we live in the age of Dogecoin so let’s continue.
• The video linked above assumed 10% velocity (which I think is low), but we’ll stick with it. They calculated $7.8 billion daily, which they multiplied by 365 to come up with an annual number of $2.842 Trillion. Since our numbers are monthly numbers, we will project forward until monthly volume exceeds $234 Billion.
• Plugging the numbers into Excel shows June of 2023 is the earliest this volume can be expected.

Now I need to reiterate that the growth rate we are seeing in transaction rates is insanely high, is likely artificially inflated by mint cycling so people can earn KVTs, and is almost certain to slow down, which makes this estimate unreasonably optimistic. If you make financial plans based on this estimate you’re a damn fool and deserve what you get.

But with that said, there are reasons for optimism:

• Last month’s numbers were nearly twice what these numbers projected
• Public partnerships may throw a huge number of users into the system overnight. Right now in Indonesia there are 200 million unbanked or underbanked people. Even a low level of adoption boosts the users of Kinesis (and the velocity) considerably.
• We have heard rumors of other partnerships, again targeted at unbanked populations, notably in Africa.
• Word is starting to get out and precious metals purchases are increasing. Reddit has had the WallstreetSilver movement grow out of the WallstreetBets community, and the WallstreetSilver folks are serious about trying to drain the COMEX of its silver while it’s still cheap. As I write this over 41 million ounces of silver have been pulled out of COMEX since the beginning of Reddit’s “silver squeeze.” 22.8% of silver in the Registered category has left the vaults, which represents 10,5% of the COMEX holdings. And folks in the WallstreetSilver community are starting to do their due diligence on Kinesis, and a shocking number are moving their purchases here. Whether they will just hold silver, or whether they will spend as well and actually affect velocity is unknown.

Summary

My take? If you expect a pleasing return before 2024 you’re overly optimistic (and I would be very pleased with significantly less than the video above projects). If you’ll be happy with a return closer to what a 10 year Treasury offers, you might be pleasantly surprised when the yields start getting paid this year.

But the eye popping numbers mentioned in the video above? We’re still a long way off even if things progress perfectly, and things rarely do so.