Hello and welcome to The Ether. Today is Monday, February 7th 2022. This episode of The Ether is brought to you by Talis. Talis Protocol is the NFT platform for independent artists on Terra. Talis helps to provide artists with the tools and resources needed to transition from traditional arts into the NFT world. With their V1 launch coming soon, Talis will be the place to see real world art reflected on Terra. Be sure to join their Telegram and follow Talis on Twitter for updates on their roadmap, validator, and other Talis news. Find your next favorite artist on talis.art. This episode of The Ether is also brought to you by Orbital Command, a community validator on Terra dedicated to educating, expanding, and promoting the LUNAtic community. Take advantage of their Terra Luna Intel Report on Telegram which brings you the hottest news and updates on all things Terra each and every day. Find it using the link in the show notes. You can also support their community efforts by considering them next time you’re delegating or redelegating your LUNA. Find out more at orbitalcommand.io. TerraSpaces appreciates the support from all our sponsors. Today on The Ether we have a Kinetic Money AMA and Updates, hosted by Orbital Command. Let’s take a listen.
Rebel Defi 1:55
Hi, guys, just waiting for a little bit longer. Hayden is going to be asking the questions tonight. I’m just going to be facilitating, bringing people up if you’ve got any questions. And I think it’s Mark from Kinetic that’s on tonight, although I’m not 100% sure. And I think the format is just like standard Twitter Spaces AMA. And I think Hayden’s got a few questions that he will sort of lead off with and then after sort of 25 minutes, half an hour or so, if you’ve got questions for Kinetic, then I’ll bring you up. So I’m really looking forward to hearing more about the Phaser. And if Mark is here, or any of the other guys from the Kinetic team, if you just want to request to speak and we’ll get you up.
Dr. Doscoin 2:44
Good morning Rebel, GM everyone. So can we also grab… Let’s get MoonMan and prickly pants on as well too. They will be who we’re speaking with today. Here we go. Approve MoonMan, and…
Hey, how’s it going, guys?
Dr. Doscoin 3:00
Amazing, how you going there?
Very good. Very good. Unfortunately, Mark, something came up with him. And I’ll tell what in a second. But I’m not sure if he will be making it today. It’s a bummer because he’s the Giga brain behind all of this. But essentially because he’s so focused on our lunch, he forgot his wife’s birthday. And he’s kind of fixing that right now.
Dr. Doscoin 3:25
Tending to bigger problem.
So he got doxxed on danku’s video and now this, so it’s been a rough week for him, I guess.
Dr. Doscoin 3:33
That’s okay. I’m sure that we’ll get through, and I’m sure that there’ll be plenty of great information for everyone here today. Now, as Rebel was saying before, what’s going to happen is this is an Alpha Hours, essentially. I’ve got a few questions, not too many today. I think there’s gonna be a few people, I know that Cephii has expressed interest, he’s got some probably more technical questions that he’d like to ask. I’ll probably cover some of the more general questions to get this ball rolling. We’ll do a little bit of an update on what’s happening on Kinetic, a little bit of a rundown on how it works, try and gather a bit of information about the back end sort of mechanics. And then yeah, we’ll open up the floor probably in about 20 minutes time. It’ll just be question time for a good 40 minutes, and by the end of the hour hopefully everyone comes away from this meeting knowing a lot more about Kinetic than they did before. I know that I actually just listened to the GT Capital episode with RyanLion and LeJimmy and it was very, very informative. And so one of the things I want to do is obviously try not to ask the same questions, but also, for people that are new listening to this, I think it is essential that we also have to cover some familiar things too, so that they are brought up to speed. So does that all sound good with you, MoonMan?
Dr. Doscoin 4:07
Yeah, thanks. Yeah, what’s up? I’m excited. Yeah, we’ve been doing the other AMA with GT but I think a little bit of time has passed now, a couple of weeks and obviously, the space is moving super fast. So yeah, super excited to share what we’re kind of working on, when we are planning to launch, and how that will look like, and all the other things that are interesting for people. So I guess yeah, let’s get started.
Dr. Doscoin 5:08
Fantastic. And just before we do shout out to TerraSpaces, always doing an amazing job recording these Spaces. So MoonMan, are you happy for me to call you that, or do you have another name you prefer to be called?
Yeah, let’s go with MoonMan for now. [chuckle]
Dr. Doscoin 5:23
Fantastic. Let’s just start simple. What is kinetic? If you can just give us a summary? What is kinetic, how does it work and why would we want to use it?
Absolutely. So in a nutshell, what kinetic does is it allows users to take out a loan that essentially repays itself. So the way that works is that the user deposits a yield bearing collateral into Kinetic. And the beginning, this will be UST and aUST, but we can dive into that a little bit later. But this could be technically any other yield bearing collateral later. And then it allows the user to take out the loan that’s denominated, in the case of UST, it’s denominated in kUST, which is our synthetic stablecoin. And the user can take out up to 50% of the collateral, denominated in kUST, out of Kinetic. And then in the back end, what Kinetic does it deposits the UST into a yield pairing protocol, so initially, this will be Anchor, but this could obviously vary depending on the asset that’s deposited. And the yield that’s generated from that is paying back the loan over time. So what’s cool about this is comparing to, for example, a person has a certain amount of UST and now they want to go out, and for example, spend, I don’t know 5k, instead of lowering their collateral, their UST essentially and spending that, and then basically lowering the capital efficiency, because now there’s 5k of his money missing that cannot earn, for example, in Anchor, the collateral stays the same. And essentially, then pays the loan back. So yeah, it increases the capital efficiency. And one beautiful thing about it is that you take out a loan in an asset that’s derived from the collateral, the protocol will always treat these assets one by one, which means you can also not get liquidated in that sense. So I guess that’s in a nutshell. I don’t know, I’m pretty sure everyone has a different level of understanding, but yeah, obviously happy to dive into the different parts. Yeah, if there’s any specific questions.
Dr. Doscoin 7:42
Sure. And so that was one of the parts that excited me the most when I listened to the GT Capital episode is this ability to take out kSOL, kATOM, k… Whatever it may end up being, pay against the original asset that’s been provided as collateral. Because originally, I thought it was just gonna be UST in aUST. And so this really makes things quite interesting. Do you… Well one, actually let’s just slow this down a little bit, as far as the assets that you have in mind to bring on as collateral, what are the top of the pile for you? Is it going to remain specifically within Terra ecosystem, or are you going to go more cross-chain sooner, or what’s that outlook?
Yeah, absolutely. So yeah, we start off with UST and aUST. And that will be the version one that is available at launch. Obviously, I think UST is kind of the most straightforward one. And then we thought aUST, all of us in the team basically had aUST sitting on Anchor where it’s just sitting there and not doing much. So we figured, “Oh, why not just have users also put their aUST into kinetic, so they don’t have to deal with all this swapping it first, and then swapping it later back to aUST. So why not just integrate that?” And then on the immediate roadmap after launch, I think LUNA and then obviously the synthetic would be kLUNA is probably one of the ones on the list that’s kind of one of the first ones. But essentially, we definitely want to have other assets like cross-chain assets on the roadmap as well. Essentially, our protocol will be decentralized from day one. So ultimately, it’s up to the community what they want to add. I’d love to see, yeah, ATOM, SOL, all these kinds of assets on there. But, yeah, I think it will really go to where the demand is and the community can kind of decide on what assets to onboard.
Dr. Doscoin 9:47
Yeah, right. So, okay, so if I’m getting this right, just to be really clear here, this allows… Kinetic will allow people to take out loans that pay themselves back that they don’t have to run the risk of liquidation on.
Yeah, exactly. So yeah, there’s obviously a couple of ways. So what one can do is you take a loan out, and you just wait a certain amount of time until that loan is fully paid back, and then your collateral unlocked. And you can kind of get that out. Or of course, if you want access to your collateral, you just have to kind of pay up the outstanding debt, or just call a function that’s called liquidate, which essentially, basically pays off your outstanding loan amount with the collateral and then you receive kind of the rest. So yeah, but essentially, there’s no way to get liquidated in that sense, because the protocol treats the asset and the collateral always one to one, which yeah, makes definitely for some interesting mechanics there.
Dr. Doscoin 10:57
So the most logical next question is, because it sounds amazing. And I’ve always liked to play the play devil’s advocate, but if something sounds too good to be true, then it might well be. So what are the downsides here? What’s something that we’re not factoring in, if we can take out a loan and there’s not a risk of liquidation, and that loan paid itself down? Amazing, great. But what are we maybe not looking at here?
Yeah, so in my opinion, I think one risk that’s definitely something to keep in mind is kind of the risk of kUST completely depegging from UST. What that would essentially mean is that everyone who has an outstanding loan, yeah, can pay it back for very cheap, because if they have an outstanding $1,000 of kUST and they probably spent it already, but now they can buy, let’s say if in the worst case, kUST goes to 50 cents, then they can now pay down their loan much, much cheaper, right. So I think depegging is definitely one of the biggest risks, but because the protocol, yeah, treats them one to one, then it would be a big incentive for everyone who has an outstanding position to kind of pay down their debt, but also for people to go to the Phaser and convert. So they can buy kUST off the market and convert it to UST via the Phaser. But then that essentially will help bring it up to peg, right. So there’s other couple of mechanisms that will help keeping the peg. One is, of course, liquidity incentives for the kUST-UST pool. But what we’re also doing is we want to build as many use cases around kUST as possible. So that users can actually do stuff with kUST rather than taking out a loan and then swapping it right back, or phasing it right back to UST, but actually do stuff with the kUST, which then kind of further decreases the sell pressure. And I think the other risk, in my opinion is protocol safety in general, which we think through looping in the beginning, this could be an issue. But what we do is we essentially limit the amount you can take out to 50%, which doesn’t eliminate looping completely, but it won’t be allowing in the beginning for degen box situation where, it’s like 90%, and then it can be looped multiple times. So we might raise that limit as we go and we see the protocol gets healthier. But that’s definitely something to keep an eye on in the beginning.
Sure. So there’s a couple of things that I’d love to do here with you MoonMan, it’s just for anyone that may be completely new to all of this news, can you just do a quick 20 second summary of looping and why that can pose a threat?
Yeah, so, of course, one thing is… So if let’s say we had a 90% limit on taking out loans, then what basically could happen as the user starts looping, so essentially, they swapped their UST back to the kUST… Sorry, their kUST that they took out, they swap it back to UST, put it back in the protocol, take more kUST out, swap it again. So on the one hand, that’s a lot of sell pressure generated for kUST that results from basically one deposit in the beginning. So essentially, the sell pressure that that one deposit in the beginning generates can be up to 10x of sell pressure if you let’s say only take out once and then do something else with it. So what we want to… And then the other issue is, of course, more deposits for Anchor, which I guess is a common issue we’re currently facing but essentially limiting how much can be taken out and limits the user of the yield that they can gain from continuously looping and taking out, yeah, they’re their assets.
Dr. Doscoin 15:00
Okay, gotcha. And touching on the kUST uses, obviously you want to incentivize more use cases for UST to help stabilize the peg. And obviously, when we’re talking about that, we’re talking about the synthetic assets or the kUST against the UST. What are some of those plans you put in place for that?
Yeah, so a lot… Essentially what we want to, or the vision we have is that kUST is kind of available for… One thing it’s available for payment everywhere where it currently UST is available. So think about kUST just as another stable in the Terra ecosystem. So this can really be a wide range of use cases. And we actually do have a couple of announcements for kUST integration lined up. So definitely stay tuned for that. But it’s really around, yeah, how can we disincentivize the user from swapping kUST to UST. So we’re really looking at what do users do then with their UST? Do they farm? Do they spend it? Do they just hold it in their wallet? And then we kind of want to take these use cases and also build it in for kUST.
Dr. Doscoin 16:15
Hmm, yeah, that makes a lot of sense. So ideally, you’d have kUST operating in the same way that UST does as the stablecoin part of a pair for liquidity providing. And essentially you can have multiple pools that could be utilizing the kUST as one half of that pair.
Dr. Doscoin 16:36
That’s very cool. I like that. Okay, very cool. And so regarding… We’re talking about ways in which kUST would be used, I’m aware that there’s going to be kLUNA as well, that’s coming, yeah?
That will definitely be something that will be coming after launch. So this is something that won’t be available on day one. Again, day one, the only collaterals that users will be able to deposit is UST and aUST, and the one that they take out is kUST. But yes, the idea is definitely to do a LUNA deposit where then the user can take a loan as kLUNA, that’s definitely something that’s on the immediate roadmap.
Dr. Doscoin 17:16
Right. So if I’m not mistaken, we’re looking at a… The date hasn’t been released yet the exact launch, but it’s going to be Q1. And then somewhere in the next few months after then, maybe later this year, we can expect to probably see kLUNA later this year?
Yeah. Absolutely. So again, it will be partly up to protocol governance. But yeah, that’s definitely the plan.
Dr. Doscoin 17:40
Yeah, that was a really big thing that I enjoyed listening to in another episode as well, is just how this has been done, obviously completely bootstrapped. You guys have been basically funding it all and taking no extra venture capital or anything like that. And really focusing on this decentralization element, which I feel can get a bit lost at the moment. We talk about DeFi a lot, and I’m using air quotation marks in my room right now, but it’s not often we do see true…
Rebel Defi 18:12
Hayden. Seem to have lost you there a little bit. You still there?
While he’s coming back, could you add to the list of question, maybe walk us through the deposit of money into kinetic? Let’s say 10,000 UST and then how much of that do we get to use immediately as… What do we get to borrow of that exactly, and what’s the concept there?
Yeah. So on launch, the limit for taking out a loan will be 50% of the collateral. So if you put 10k in, you will be able to take out 5k kUST. But again, as the protocol becomes healthier, and as we feel like we’ve seen enough, and it’s going well, and there’s, yeah, enough liquidity for kUST-UST and so on and so forth, that’s definitely something that can be raised. But yeah, essentially, in the beginning, you could borrow 5k kUST.
Maybe provide briefly an example of why someone would want to do that exactly.
Yeah. So let’s say you have 10k. And, essentially, I mean, you can just leave the 10k in your wallet and nothing happens to it, right. But let’s assume the minimum of what you want to do is at least you would have it into Anchor. And then assuming the Anchor rate stays as is, of course, that’s all very, very vague assumptions. But let’s assume for now, you have, yeah, you get your 19.5% in Anchor, which means after a year, you have a certain amount, right. But now you decide you want to spend 5k of your 10k collateral essentially. So what you do is you go to Anchor, you withdraw 5k, and then you use that 5k and spend it elsewhere. And then of course, the amount that’s now still earning the 19.5% in Anchor is much lower, because essentially, you only have half of what you had in the beginning. So essentially, the yield will also only be roughly half of what what it would be, if you had the full amount still. With kinetic, what you do is you don’t lower your collateral. So this collateral is still in, yeah, the full 10k collateral is still earning yield in Anchor, for example. But you can take out half of it without lowering it, and then doing whatever you want with the kUST, right. So you can either… As I explained, if there’s enough use case around it, you can go and do something with the kUST or you can just swap it back to UST and then spend the UST. But essentially, the amount that’s still earning yield is higher than it would be as if you wouldn’t use Kinetic and just take half of your money to cover for whatever the expense was. That’s kind of the most basic use case. But then I think with DeFi, and then yeah, with looping and all these sorts of things, and then with the Phaser being seeded with funds, so the Phaser earns extra yield kind of on top of just what the protocol earns on the back end, this could be much more attractive than just putting your funds into Anchor, for example.
So in theory, just for everyone’s understanding here, so this 10,000 is going to generate, theoretically, 2,000 in yield. But if you took out 5000, it’s only generating… If you borrowed half that it’s only generating half that yield. So in other words, how long would it take for this to theoretically pay off? What are the scenarios for paying back? And now how much more extra money do I have as a result of doing all this?
Yeah, so for example, if you put 10k into Kinetic, you can take 5k out. And then your 10k, if we assume 20%, it would kind of pay back 2k per year. So after two and a half years, your whole loan is paid back, and you can take out the collateral, or you can borrow more, or do what you want, essentially, right. So after two and a half years, I have these 5k that I initially spent, I kind of have that paid back. But if now instead, I would take 10k, and now I remove 5k off of it, right, and spend it. Now I only have 5k. So in that same two and a half years, my 5k will only make I guess, roughly 2.5k, right. So instead of with the full 10k that unlock from Kinetic, I would only be left with 7.5k, if I had just deposited it into Anchor for the time being.
Hey MoonMan, hey Cephii, it’s Mike from Angel Protocol. I think it’d be fun to kind of go through that again. And if you’d like, since everyone’s in the AMA, we could give a little alpha here. MoonMan, if you want to kind of talk about how Angel will be potentially using the Kinetic Money protocol to manage endowments for charities, that would be awesome.
Absolutely. So yeah, I think the little alpha is, obviously it’s already known that we’re kind of partnering with Angel Protocol. And we have a piece of our protocol fee that will continuously go to Angel. So we’re big fans of obviously what you guys are doing. But yeah, what’s really interesting is the immediate kind of partnership we’ll be doing on launch is enabling donations in kUST on Angel. So that’s something we’ll probably talk more about or announce in the couple of weeks. But of course, we’ll always kind of brainstorming what could be other ways for Angel to, yeah, essentially leverage Kinetic. And I think one really cool use case is that for the charities, whenever they take out money or for example receive their payments, what actually happens is that they don’t lower their collateral that’s sitting in Anchor and deposited, but they actually take out a CDP through Kinetic. So essentially that covers their kind of monthly or yearly withdrawal, while the collateral is still at the full amount and can basically earn a high rate of yield. So therefore enabling, yeah, a little more capital efficiency and enabling the charities to make a little bit more, yeah, off of their their kind of donations.
Yeah, again, I think this is a complete awesome use case for Kinetic, allowing charities to keep their endowments principle protected and ever growing while also having immediate funds to use if need be. So while Kinetic’s gonna be great for us users, obviously, getting more capital efficiency, it’s going to be great for other protocols to come up with innovative ways to utilize repaying loans. So really awesome stuff what Kinetic’s doing. I just wanted to jump up here and talk about how it is somewhat its own primitive, right. So thank you very much, MoonMan, and Cephii, and Orbital for hosting this.
Absolutely super excited with the partnership we’re having with you guys.
Rebel Defi 26:00
Thanks, Mike. Hayden’s having real trouble getting back into the Space. So the most exciting thing about Kinetic for me is the Phaser. Can you give us a primer on the Phaser for anyone that might not have heard of it yet, please, MoonMan?
Yes, absolutely. This is kind of the place where Mark would be perfect if he would be here, because that’s kind of his little baby. But of course, I’ll give it a shot at trying to explain it. But yeah, if it’s a bit unclear, go back to the video on danku’s YouTube channel, I think they’re explained really, really well. But essentially, what the Phaser is, it’s a mechanism to swap kUST back to UST over time. So the Phaser always creates kUST and UST one by one, and the user can go there to swap their kUST so they don’t kind of have the risk of the liquidity pool. Obviously, liquidity pool might be good enough in most of the cases. But if there should be anything where the peg is not at one, the user can always go to the Phaser and swap their kUST to UST. And the way it works is you don’t swap it right away, it’s kind of more swapped over time. And it’s basically from the yield that is accrued by the Phaser, the kUST gets swapped to the UST. So essentially what happens on Kinetic is when yield is generated, or harvested rather, it pays down to global debt of the vault, and the rest of the amount is going to the Phaser. And with the money that is generated by Kinetic can be higher than just the Anchor rate. Because you don’t only have the collateral earning yield on the back end, you also have the funds that are in the phaser that earn additional yield. So essentially that means then global debt can be paid down faster if there’s of course high yield, which makes this whole thing more attractive than if, yeah, there would just be kind of the linear yield coming from the vault.
Rebel Defi 28:07
Awesome. That sounds like a great way to be making more money. How would you respond to… I mean, there’s been a lot of stuff on crypto Twitter recently, people getting concerned about the Anchor yield reserve. So I mean, if someone came at you and was like, “Kinetic Money, this is just a slightly safer degen box. It’s a parasitic protocol on top of Anchor.” How would you address that?
Yeah, that’s a really, really good question. And we are also talking to a lot of people on the Anchor side, but in general in the community, to really also brainstorm and try to make Anchor safer. So outside of Kinetic, just think how Anchor, yeah, can be improved. So for us, it is really, really important. So that’s also one reason why in the beginning, we want to limit kind of the borrow limit that can be taken out to 50% to really kind of discourage from the looping, which obviously was kind of the main issue that I guess stemmed from the degen box. But yeah, we always have an eye on the yield reserve, on kind of the Anchor forum, what are kind of the things we can improve, what we can help them. So it’s definitely a big, yeah, very important for us. So yeah, I guess we’ll see in terms of how it develops, but we’ll always have a close eye on and try to optimize Kinetic to a way where it doesn’t happen to just exploit the yield reserve from Anchor.
Rebel Defi 29:47
Awesome. Thank you very much for your honesty on that one. We’ve got tripleyak with his hand up. Tripleyak, do you want to come in with your question?
Yeah, sure. Can y’all hear me?
Rebel Defi 29:59
Great. Thanks for doing this, MoonMan. My question is, and I missed the first few minutes of the Space, though, so forgive me if you’ve already… But do you have plans on incorporating XLUNA? or some other form of non UST based yield bearing collateral into Kinetic for people to borrow from? Or is it just gonna be aUST?
Yeah, we’ve spoken about this. So I’ll keep that answer brief. So essentially, yes. We launched with UST and aUST but definitely on the roadmap are other… Okay. But essentially, yeah, it’s definitely on the roadmap. I think LUNA-kLUNA will be kind of the first or immediate one after launch. But definitely any asset that the community feels there’s demand for, obviously, through governance can be kind of voted to be added. I think it’s very important in the beginning to kind of look at the first kUST-UST and see how the protocol kind of evolves in terms of protocol health. But I think yeah, absolutely, we definitely want to add other assets in the future.
That’s awesome. So just to play a little bit of devil’s advocate, if you do end up adding something like a XLUNA or bLUNA, why go to Anchor to borrow UST off of the Borrow area Anchor, when we can have liquidation free almost as good through the Kinetic Protocol?
Yeah, that’s definitely a good point. And that’s why we also want to be a bit careful with the LUNA and really spec it out in a way where we don’t take any demand away from Anchor, but that’s absolutely a valid point where we have been doing some thinking around and yeah, we will have to see how that is going. If we feel like we would take anything away from Anchor from the Borrow side, which then obviously would destabilize the whole protocol, then that’s probably something we have to be very careful in terms of how we design it. But yeah, that’s absolutely a great point there.
One last question… Oh, go ahead.
No MoonMan, I was gonna… Along these lines of multiple collaterals and whatnot. Do you guys envision a person would have the possibility to take multiple loans? For example a slightly different loan on, let’s say, ATOM, and then you would have a slightly different loan with LUNA, based on the yield bearing potential? Or is the loan all one big loan that you’re taking? And all the different collaterals contribute differently to paying that back? Do you understand what I’m saying?
I think I do. So essentially, I think the answer is that it will be asset by asset. So essentially, for example, a kUST loan, if we have the UST in the backend into Anchor, then that would kind of repay the loan at a rate that’s kind of, yeah, relating to the Anchor rate. Obviously, the Phaser could increase that potentially, but let’s say it’s kind of linear to the Anchor rate. But then, for example, if it would be LUNA, but LUNA is only yeah, having 9% or something APY, then of course, the repayment rate there would be different, but then of course, you would still have the exposure to the LUNA price. So essentially, no, there will be not one kind of global pool, but rather asset by asset, yeah, scenario if that answers your question.
Nice. One other quick question, and this is totally a hypothetical. But you know how with Terra, and with what Do’s been talking about, Do Kwon, like how the holy grail is give people one place where they can spend money, use money for payments, save money, invest money, generate a yield, that’s what’s happening in Terra, trying to achieve all of that in one kick ass system. I was wondering, have you had any conversations with the payment apps that are coming out like Alice, Kado, and some of these things to potentially integrate something like Kinetic Money into those apps for people to get liquidation free borrowing potential?
Absolutely. So I don’t want to, yeah, talk any names here because there’s nothing that’s kind of set in stone but we’ve talked to pretty much all of them and I think, yeah, it’s a very, very interesting use case, especially in scenarios where you have a debit or a credit card. Because then what you can do is essentially, integrating Kinetic in a way where the user instead of lowering his collateral, again, takes out a CDP pays, and then kind of whatever he spent is being paid back by the system. So that’s definitely high on our priority list. That’s definitely a super feature that we’re super pumped about. And that’s also why we’ll have a Kinetic SDK that will essentially be available from launch on so any project can kind of come and, yeah, integrate the SDK. It will be as easy as integrating Anchor SDK. So yeah, it will work exactly for these kinds of companies you mentioned, and that’s definitely something we’re heavily working on.
That is super exciting to me, and the marketer in me immediately goes, “What we revolutionize the concept of cashback from after you spend the money to before you spend the money? Get your future cash back today.” That would be so cool.
Absolutely. And it’s ultimately up to kind of the card provider, how they kind of package the whole thing. It could be as simple as, yeah… Or not as simple. That’s probably the hardest for the user. But in terms of Kinetic, it’s as simple as explaining kind of the loan being taken out, and collateral is not lowered, and so on and so forth. But then that’s probably something the users should not want to worry about. So yeah, it’s really up to kind of the card issuer how, if that’s packaged as a cashback or just packaged as a higher yield in the end. But yeah, we are, of course actively brainstorming with them. And there’s definitely a few super interesting ideas like that.
Awesome. Thanks for answering my questions. If there are a lot of speakers that want to come up, feel free to drop me down below. Thank you so much, MoonMan.
For sure. Thanks for your questions.
I love that as a soundbite, tripleyak. Get your future cash back today. Awesome. We’ve got madtomic up. Do you have a question for MoonMan?
Yes, I do. Looking at the Medium article, I see you have an article that say that 35% of the airdrop is going to the, I guess, the three different chains. What is the other 65% it’s going to? Will you have like a paper, updated tokenomics wise before the launch?
Yeah, absolutely. We’ll publish the numbers soon. So we’ve been working on a roadmap right now that we should be able to release in the next week or so. And right immediately after, we’ll have another article around token economics. So that’s definitely all going to come before launch. I would have to look in the specifics. But as far as I remember, these 65% are fairly evenly split between our Lockdrop and our LBP. So these three kind of make up the Genesis allocation. And then there’s also a small percentage kind of for the team and the dev fund. But obviously, that’s locked for two years. And then there will be liquidation incentives along the way. But in terms of the Genesis distribution, most of what’s not the airdrop goes to Lockdrop and LBP event.
All right. Thank you for that.
Rebel Defi 38:36
And brian, do you have your question for MoonMan?
Yeah. Hey, I got a quick question. I heard earlier that you were talking about some downward selling pressure on the kUST and I take it that’s when people get their loan, and they immediately want to swap it to UST. And I guess my question is, is what will be the use cases for kUST to kind of prevent that happening on a constant basis?
Yeah. So what we really want to do is we want to build kind of multiple different use cases around it. So I mean, a simple one that we just mentioned would be donations on Angel Protocol being available in kUST. But essentially wherever there’s UST available for a DeFi product or for payment for something, that’s where we kind of see kUST being integrated. But of course, outside of this, there’s a mechanism in the Phaser to swap kUST back to UST so if people see that the peg is a little bit low, they’re highly incentivized to buy kUST off the market, stick it in the Phaser to swap it to UST at a one to one rate. So obviously if they buy the kUST lower than $1 they would do make some arb profits there. So that’s kind of the different mechanics on top of the liquidity incentives to keep the peg. So yeah, essentially, we want to, yeah, build a multitude of use cases around kUST to kind of prevent users from directly swapping them. Of course, there will always be users, I think especially farmers, that then go for the looping, etcetera, that will do that. But yeah, we’re looking to have quite deep liquidity pools from the beginning as well, and yeah, really seeing how that goes.
Okay, thank you, man.
Rebel Defi 40:44
And we’ve got RIP, do you have your question?
RIP Thich Nhat Hanh 40:49
Hey, yeah. Hey, I guess I got a couple questions. One is, are we going to be able to use an LP token to collateraise against to get our upfront money? Is that going to be possible?
So in the beginning, that’s not something that’s possible. But again, like any kind of yield bearing asset could technically be used for that, but it’s just a matter of, where’s the demand, what do we want to integrate, and then ultimately, it’s up to protocol governance. But theoretically, this would work. But that’s not something that will be available on day one.
RIP Thich Nhat Hanh 41:31
Okay, great. Second question is, if I want to use this kind of like as income, is it possible every month to keep, I guess, reupping the loan or adding additional collateral? Or I’m sorry, continue to borrow kUST, so like, I put up 10 grand, I got 5, and then my collateral obviously goes up in a month, would I be able to generate more income from that? So basically, every month, maybe I’m getting a couple $100. Is that… Do you understand what I’m saying?
Yeah, so essentially, what happens is your 10k are starting to pay down your 5k loan, meaning that maybe after a few months, you only owe 4.5k, but you’re kind of debt cap is at 5k still, so you can take out additional 500 bucks. So essentially, at the rate where the protocol is paying down your debt, that’s the rate where you can kind of take out additional loans. And then of course, at any point in time, if you wish to increase your collateral from kind of outside capital, you can do that and take out more loan as well. But I guess to answer your question, yeah, at the rate that the protocol is generating yield is the rate that you can take out new loans.
RIP Thich Nhat Hanh 42:58
Great, that’s awesome. Third question is, are you guys… I’m assuming you guys are working with Mars and… Can you talk about how your app integrates them and how it benefits Terra users?
Sorry, you cut out a little bit there. Mars and the other one was Prism? Or what was the other one?
RIP Thich Nhat Hanh 43:24
Yeah, Prism, Levana. If you’re working with any of those, or is there any integration that you could speak about with any other protocols in the ecosystem that would benefit people that use your platform?
Yeah, so again, we’re definitely looking to integrate other… Or kind of open other vaults for different strategies in the future. So kind of any asset in the Terra ecosystem that is a yield bearing asset is definitely something that could be integrated. So I think that’s kind of the most straightforward thing we’re kind of talking to most of these. I think with Prism, and again, that’s something Mark and the Prism team loves to kind of brainstorm about is how do we integrate yLUNA into the whole equation. So one kind of way could be obviously to leverage yLUNA as collateral but then it would get a little bit complicated because now then you take probably kyLUNA out or something like that. So that’s definitely something we would have to do some more thinking around. But what could also be really interesting is taking yLUNA as collateral on top of your regular loan, and then just enabling a faster repayment of the loan that has been taken out. So there’s definitely a lot of synergies and a lot of talking going on in the background. There’s nothing that I can publicly tell you that’s definitely a feature that will be in there by X. Currently, we’re focusing on launch and kind of all the features that will be available there. But yeah, absolutely. That’s definitely something we’ve been talking almost on a daily basis to various teams in the Terra ecosystem.
RIP Thich Nhat Hanh 45:15
Great. Thanks, Moon.
Rebel Defi 45:17
Awesome, great questions. Frugal Lunatic, you’re up.
Frugal Lunatic 45:24
Hey, thank you. So I had a question about user risk. So I think somebody asked like, what are the risks associated? And you mentioned, the risk that would be on your side, if kUST loses its peg, the users will buy it for cheap, and then pay it back. So that essentially is I think, I see like a big risk being on your side, but what are the risks that are associated with the users? I don’t think they lose their collateral. But what if something happens to the yield bearing thing? If you can’t generate yield, what happens in that case? Or whatever other scenarios you could think of? I would like to know about that.
Yeah, that’s a really good question. So obviously, there will always be the smart contract risk. And of course, our smart contracts are being audited. And on launch, or shortly after launch, we’ll definitely have the audit stamp on the smart contract as well. And then obviously, for every yield bearing protocol that we’re using, there’s obviously an additional layer of kind of smart contract risk. For that, essentially, I guess that’s a risk that everyone needs to be aware of. But I think that’s a risk that everyone’s been already pretty comfortable taking with kind of all the Terra apps that are out there currently. The other risk is, of course, if one of the yield strategies that we, let’s say, use, basically doesn’t generate yield anymore. So for whatever reason, if Anchor rate, if deposits, let’s say, explode, and it absolutely drops to single digits, or even lower, there’s essentially no user funds at risk. What will happen is that the loan that’s been taken out will be paid down not as quick as initially thought, because the rate of repayment is obviously tied to the yield that is generated. But on top of kind of all these risks, what our protocol will do is, we’ve seen in a lot of other protocols that there’s a certain percentage that goes, for example, to the community pool every month, or every… Let’s say, a certain part of the fee of the protocol goes to the community pool. But then these funds are either not used or very infrequently, but the community pool kind of keeps getting funded. So what we want to do, this is not something that will be live on launch, but definitely something we will look into after, is how can we kind of reroute in a case where the community pool or the dev pool is over funded, and where can we reroute a portion of the protocol fees into kind of an insurance contract or a Treasury, essentially, that can basically then act as safety for the users in case kind of Black Swan event happens. But yeah, that’s kind of the thinking we’ve been doing around. How can we protect users,yeah, the best pretty much.
Frugal Lunatic 48:39
Okay. That’s what I wanted to know. And secondly, besides Mars Protocol and Prism, I think are you guys using any specific vaults? For example, Nexus might be coming out with a few different vaults. And I think Yield Foundry DAO, or Yield Foundry is also building different vaults where you can get stability wise. So are there any… I don’t know whether you can tell it or not, but are there other protocols that you would be using in the background?
So yeah, we initially will only start… Or not only, but will initially start with Anchor, and then kind of see where the user demand comes from. So we’ve definitely been looking at several different strategies, such as the ones that you mentioned, but also outside the Terra ecosystem. So there’s nothing kind of set in stone. And again, that will be very much up to the community. Our protocol will be decentralized from day one. And there will be obviously, every decision as such will go through community governance, and if the community feels there’s another vault that should be added, then I’m sure it will come to that. But yeah, we’re definitely actively exploring kind of all the strategies that are out there.
Frugal Lunatic 50:00
Right. Thank you very much.
Rebel Defi 50:02
Awesome questions. Thanks for that. It feels a little bit strange seeing Cephii as a speaker on a Space, but not really hearing his voice. So Cephii, are you wanting to come back with any big brain, or…
I’m still alive. [chuckle] I was just listening. The other questions were very good. I was kind of just soaking it all in. Yeah, I mean, I think I just think about it from the… How am I going to use this system is how I think of these things. And where can I find utility. And, to me, it seems like I’m much more likely to… Me, personally, would be much more likely to want to use a proof of stake collateral. And then perhaps, that way you are basically invested and have price exposure to that proof of stake collateral similar to LUNA on Anchor right now. And then you borrow your kUST. And then you can decide what other price exposure you want with that. Either you just use the self repaying loan concept, or you maybe invest that somewhere, something that’s gonna go up in value additionally, and then kind of go from there. I was thinking about this a little bit from the perspective of… So different coins have different yields, right. So ATOM right now is 14%, it varies between 10%-14% or so. And then LUNA is 8%-9% or whatever. It seems like if I was using, say, for example, a loan from Kinetic and I deposited something, and maybe I’m comfortable with a longer term loan on it, but then I go and buy another collateral, like ATOM, for example, which has a much higher yield. And then I could use that as a separate loan in theory. So you could sort of loop it in a sense without having to loop UST. Maybe you can comment about some theory there as far as… I don’t know, what you guys envision you would use it for if you have the protocol functioning in terms of multi collateral borrowing, and then maybe some theoretical strategy. Not financial advice, directly but, you know what I’m saying, just kind of… What do you envision is some interesting ideas of utility?
Yeah, that’s definitely a very good question. I’m not the biggest kind of farmer, myself, but I think what I envision is definitely kind of in line with what you said. So wherever I already staked my token, so be it ATOM, be it LUNA, be it who knows, then to be able to still kind of be exposed to the staking rewards, but also to the price fluctuations of the asset to then that put into kinetic, get a loan out, and then just do whatever, right. This can, again, be used to kind of then, as you explained, buy another asset that we can then put back in Kinetic or I loop the same asset, or I just use the… Go to the Phaser, swap it to, for example, UST or some other asset, and do with whatever I want. But I think, essentially and, yeah, maximizing capital efficiency, if I use some of these… Or if I stake in some of these already anyway, I think that for me, personally, is kind of a big use case for sure.
But by stake anyway… Because you’re giving up, technically, the staking yield component, correct? Or most of it? Or some of it? What’s the… In the self repaying component of it, are you keeping some of the… Is Kinetic keeping all the yield? Is it like an Anchor situation? Or is it different?
So essentially, the yield is then paying off your loan, right. So yeah, you’re giving up your yield, but you kind of have it in advance, right. So you can then deploy that yield that you have already somewhere else, or you can do whatever you want. Essentially, the protocol uses the yield to pay down your loan. So yeah, essentially, the yield is not gone. If you obviously just want to have it sit in your wallet, you can do that. But what you can do is deploy, essentially, that future yield, you can deploy that already today. And then essentially, yeah, this will compound and more yield can be kind of farmed that way.
Great. Cool. I think that covers it.
Rebel Defi 54:45
Sounds pretty exciting. We have Cephii for the big brain stuff. You got me for the small brain stuff. I’m just thinking about the Phaser. Is the Phaser going to hold all different kinds of assets and be able to generate yield off all these different assets? Or am I just totally mixed up?
Yeah, no. So obviously, initially, the Phaser will have the kUST and UST. But essentially, the Phaser will also be responsible to kind of facilitate the same mechanic across the other assets as well. Of course, kind of one challenge there is, every time you add a new asset, you also want to make sure that you have enough liquidity around the asset pair. So if we would add LUNA, the LUNA-kLUNA also needs to be made sure that obviously, the peg is stable. So in the beginning, we of course put a lot of focus and a lot of the protocol funds to make sure that the kUST-UST pair is stable, but that’s definitely something that needs to be kept in mind for any kind of collateral that is added later, which is why I also think that we, with a community, can evaluate really carefully what will the next collaterals be. So I don’t envision this as something where there will be three months from launch, now we have 25 different collaterals, but more like really strategically think, which two or three different collaterals will bring the most use to the protocol, but also to the users. And then really be careful around how that is designed. But yeah, back to your question, the Phaser would kind of facilitate the same mechanism for the other pairs of tokens.
I think if you expect to see some depegging between kUST and UST, it’s almost like external investors would be needed to arbitrage that difference. Is the Phaser… Does it function sort of as an investment tool where, for example, let’s say I throw $1,000 in there, and it’s gonna basically arbitrage the difference between those two, or is the Phaser just simply a one to one swapping mechanism?
So the phaser is essentially a one to one swapping mechanism. But then what you obviously would want to do if the peg is below, or if the ratio of kUST and UST is below peg, what you want to do is you want to buy the, essentially, cheap kUST off the market, and then you go to the Phaser to swap it to kUST and UST. So essentially, any user, even if you don’t have an open position in Kinetic… I mean, if you have an open position in Kinetic, of course, what you want to do is buy kUST off the market to close your position at a discount. But even if you don’t have a position opened, which means every user out there can just go to the Phaser, if the peg is below, they just buy the kUST off the market, stick it in the Phaser, and then basically arbitrage that way. So yes, this could be big players in the market, but it’s essentially not limited to them. So any user can kind of take that to their benefit that protocol creates these assets one by one. And that’s kind of the way where we envision that it will be very easy to arb, which means hopefully that, yeah, if the peg gets broken, and hopefully will return to peg quite quickly.
The reason I say that is because I think that would be a pretty good function for White Whale, or in a rebalancer type format, like what Nexus is building for us, that could be a UST-kUST rebalancer pairing, which should be a fairly… Well, presuming that kUST doesn’t go completely berserk in terms of losing peg, it could be a fairly good way for external investors to participate in that peg maintenance and then get the arb yield off of it. So just a thought.
Yeah, that’s absolutely… Yeah, no, that’s a really good point. We’ve been talking to White Whale, about kind of arbing in general, already. So that’s definitely something. we’ve done some thinking around. But yeah, that’s an absolute valid point. And I think that will be really cool to… The easier kind of the arbing is being made, I think, yeah, the better it will be for the protocol.
Rebel Defi 59:27
Awesome. And on that note, we’ve hit just about one hour. So thank you very much for joining us, MoonMan. Is there… Where would you say the best place for us to keep up-to-date on the Kinetic Money alpha, is that your Twitter page?
So I would say it’s definitely the Kinetic Money Twitter page. We have a Telegram which is still closed for messages. And the sole reason for that kind of is that, yeah, because we didn’t raise any money, we have kind of limited manpower that we’re kind of completely focusing on launch. And once we announced our launch sequence, we’ll definitely open our Telegram and really, yeah, be there for questions. But it doesn’t mean you cannot send us questions. So send us questions on Twitter. We will answer kind of anything, yeah, that comes in that’s not kind of a DM asking if we want to do some promotion or something like that. So yeah, we’re genuinely there to kind of answer anything for the community. Obviously, stay tuned to our Twitter, come to our Telegram once we open it before launch. We’ll have all sorts of discussions in there as well. But yeah, I guess that’s kind of the main ways to stay up-to-date for Kinetic. And, again, we’ll have a launch kind of a roadmap explaining our launch and how it will go. And we’ll publish that in the next week or so. So definitely stay tuned for that. And I’m sure we’ll do a couple more of these AMA on Twitter as well.
Rebel Defi 1:01:01
Awesome. Well, I’ll certainly be looking forward to that myself. Yep. So thank you very much for spending time with us this evening, MoonMan. Dr. Doscoin sends his apologies. He just couldn’t get back on to the call. Apparently, he’s been listening, which is great. So he’s been with us in spirit. And thanks, everyone for your questions and for joining us this evening. Have a good night. Cheers.
Thanks so much, everyone. Have a good one. Thanks for having us.
Thanks for checking out another episode of The Ether. That was the Kinetic Money AMA and some updates hosted by Orbital Command. Recorded on Monday, February 7th 2022. This episode of The Ether was brought to you by WeFund. WeFund is a community crowdfunding cross-chain incubator on Terra, and it’s the first launchpad that implements a milestone funding release system to protect investors. All money raised for projects is deposited in Anchor Protocol and it’s refundable, and all decisions are based on community voting power. WeFund is community focused and designed to be a user friendly experience for both project creators and investors. Be sure to follow them on Twitter and join the Telegram for more information. Links are in the show notes and check them out online at wefund.app. This episode of The Ether is also brought to you by Luart. Luart is the first gamified NFT platform built on the Terra network. Luart provides a seamless minting and trading experience all while earning you rewards just for being a user. Be sure to follow them on Twitter and join the community in the Discord server for the most up-to-date news and announcements regarding all the hot new NFT launches, platform upgrades, and new projects hitting the secondary marketplace. Are you ready to #PutYourHelmetOn and join the movement? Find out more luart.io. TerraSpaces appreciates the support from all our sponsors. For terraspaces.org, I’m Finn. Thanks for listening.