Transcript: Self Repaying Loans with Kinetic Money

Kinetic Money
Kinetic Money

Finn 0:42
Hello and welcome to The Ether. Today is Tuesday, January 11th 2022. This episode of The Ether is brought to you by Orbital Command, a community validator on Terra dedicated to educating, expanding, and promoting the LUNAtic community. Follow Orbital Command on Twitter using the link in the show notes to receive regular threads on Terra protocols and yield strategies, news, resources, and Twitter Space discussions. You can also support their community efforts by considering them next time you’re delegating or redelegating your LUNA. Find out more at TerraSpaces appreciates their support. Today on The Ether we have the GT Capital Kinetic Money Chat. Let’s take a listen.

RyanLion 1:27
Okay, so got myself in Jimmy and Lenny and Mark from kinetic and money. And welcome everyone to another GT Spaces, the first one in 2022, where we’re trying to connect the Terra community closer to the projects that are coming and launching. Today we are joined by the guys from Kinetic Money. Guys, do you want to just a couple of minutes just to introduce yourselves and your background in crypto.

Mark 1:59
Yeah, hey, I’m Mark. My original background’s actually in business. And then I stopped doing business and taught myself how to code and became a developer. And I’ve been in the Cosmos ecosystem, more on the core protocol side of things for about three years. And then I’ve been playing around in Terra and decided to take the leap and start something from the ground up. And that’s where it kind of Kinetic came to be.

RyanLion 2:27
Thanks, Mark. Lenny, are you there? Hearing a lot of shuffling from Lenny, but no actual words.

Lenny 2:34
But since then have been doing some marketing related stuff. So not so much in the blockchain in terms of the… Yeah, nine to five job, I guess, but obviously always had my feet inside DeFi. And especially once Terra kind of came up and about. So yeah, I definitely would consider myself a LUNAtic in that sense. But super pumped to be on this today and, yeah, hear what what questions you guys have for us.

RyanLion 3:08
It’s great to have you both here. And speaking of the team, is there a larger team that sits behind the screen at Kinetic? And how did you come to build on Terra specifically?

Mark 3:21
Yeah, so there’s about six or seven of us, varying from front end design, DevOps, and memes and legal ops and a data analytics person. So there’s definitely a few of us. They like to be more behind the scenes. And so that’s what they’re focusing on. And then Lenny and I are trying to be more forward facing.

RyanLion 3:52
How was the holiday periods over the last month, trying to spend some time with family and also get this thing moving towards lunch?

Mark 4:01
So at least for me, luckily enough, I’m in Europe and my family is not in Europe and in the States. And so I didn’t want to go back to the States and deal with traveling and because of all this Corona, and all the stress with maybe missing a flight because you don’t have a test. And so I decided to stay and so I was cooped up at home and really just coding away trying to get everything done. And then hopped on a few family calls.

RyanLion 4:32
Hence down and focus Nice.

Lenny 4:36
Yeah, on my side, pretty similar. I have family here. So I’m located in Germany and I am from Germany. So I have family around the corner here but we just spent two, three days there and then straight back to focusing on launch for sure.

RyanLion 4:53
Cool. So talking about the project, do you want to give everyone here an intro into what is Kinetic Money and where the inspiration came from?

Mark 5:05
Yeah, so funny enough, the project kind of started randomly. It was a friend of mine who started his own project and a different ecosystem. And we were looking for names for his project. And he started out with the name Entropy, and then now diverged into something else. But we were kind of looking at synonyms of Entropy and Kinetic came on. And then I really liked the name Kinetic, and then went online to Namecheap and saw that is available, bought the domain, and then I was like, “Okay, let’s figure out what to build now.” And then looking at the DeFi ecosystem on Terra, and kind of what’s missing, we kind of settled on building a product similar to Alchemix.

RyanLion 5:55
So the name came before the idea, that’s quite unusual. But I guess a lot of people here in Terra are maybe not familiar with Alchemix who… I mean, I think we get that the headline “self repaying loans”. Do you want to talk a little bit to how that works and how you’re going to take the application from the ETH-native version to a Terra version?

Mark 6:20
Yeah, definitely. So in short, what Alchemix and Kinetic aim to do is, a user comes in and deposits a asset, a collateral type, we can use UST for our example. So the user comes in and deposits UST, this UST is then directed towards a yield bearing protocol, like Anchor. And then inside the vault, the user is able to take out a loan in… Drive of the domination of the collateral, meaning that if UST is deposited, then a synthetic of UST is able to be minted, in this case, kUST. So if LUNA is deposited, then kLUNA could be minted as a loan. If kATOM, kSOL, all these things are deposited, then there’ll be able to take out loans in the synthetic. And so in turn, what happens on the back end is every so often, a harvest function is called. And this harvest function just looks at the yield bearing protocol, and says, “Okay, I deposited this amount of money, this amount of collateral in your protocol, and now I’ve waited X amount of days, X amount of minutes, and there should be some yield that was generated from this. And in turn, it takes that yield into the Kinetic system, into the Kinetic vault and pays down the global debt. And so when a user takes out debt they take out a loan, and this is counted as debt towards their account. Now if a user doesn’t have a loan or an outstanding loan, then the yield is credited to their system. So in this case, if a user deposits 100 UST and doesn’t take out any yield for any synthetic for the next year, that means there’s a 20%… There’s $120 now in that account. Well, now instead of taking out $120, the user can take out a loan of up to $70, meaning if the user takes out $70, then their account is reset to zero and there’s no debt and there’s no credit.

Mark 8:37
Now, the overarching question is where does that yield go after it helps pay down the system. In our case, it gets sent to the Phaser. And what the Phaser does, is it does two things. First of all, it sends all these tokens that receives from the vault back into the yield bearing protocol, in order to receive a higher yield for the people participating in the vault. And the second part is, it helps maintain the peg of the synthetic and the collateral. So in this case, we want to maintain the peg between kUST and UST. And so there’s many ways to maintain the peg, the first being arbitrage. So the interesting thing here is if you take out a loan of, let’s say, $100, and then you go and use those kUST tokens, let’s say, on some credit system, some debit card system, and then all of a sudden you have an outstanding loan for $100. And all of a sudden, let’s say in a scenario where the peg breaks down to 95 cents. Well, now it’s like you can go buy 100 kUST for $95 and then repay your $100 loan in the system because in the system 1 kUST is always equal to one UST and so in this sense, you essentially made $5. So that’s the first way the peg can be assisted to be maintained.

Mark 9:57
But the second is the Phaser where essentially you… If you don’t have an outstanding loan, or if you don’t have anything to repay in the vault, then you can stake your kUST, and over a period of X amount of blocks the kUST will be phased into UST. And so in this sense, as long as there is funds in the Phaser to withstand the phasing, then be kUST token will always be… The synthetic will always be worth the collateral. And so this is the foundation of Kinetic. And this is very similar to Alchemix. There are a few minor variations in terms of how we distribute tokens to the yield bearing parts. But also, we’ve kind of chose to start at this point, in a very similar point to Alchemix to set a foundation. We love Alchemis, we’re heavy users of it in the Ethereum world. And we want to use it as a foundation to build more products in the future.

lejimmy 11:05
Hey, Mark. I just want to jump in and ask, what do you foresee folks using the self repaying loans for? I guess some popular use cases that we’ve seen on Ethereum, and perhaps maybe some unique ones that are kind of native to the Terra ecosystem?

Speaker 1 11:27
Hey, Ryan, not sure if you’re talking about you’re on mute, if you’re saying something.

RyanLion 11:31
I think I heard a question from Jimmy though, right?

lejimmy 11:33
Yeah, I think Mark’s microphone might have switched to him.

Speaker 1 11:37
Oh, it was Jimmy talking? Then I can’t hear Jimmy talking. That’s weird.

RyanLion 11:41
Are you both on the same account? Are you both on the GT Capital account?

Speaker 1 11:45
Oh, that might be what it is. Okay. Cool. Jimmy, you stay on, I’ll jump off.

RyanLion 11:51
So I think the question there, Mark, I’m not sure if you heard the question. It was can you give us some examples of use cases where a user may want to take a self repaying loan both on… Classic Ethereum use cases and maybe some Terra-specific use cases?

Mark 12:08
Yeah. So the overarching goal is anywhere that’s accepting UST. So pay with Terra Kash, Kado, White Whale, Kujira, Angel, anywhere that’s accepting UST we want to work on integrating kUST with them. And so the immediate use case that we would really love to see is a kind of debit credit card. And this is a feature that we have planned and we have designed, we just haven’t implemented yet within the vaults. And the idea is, essentially, you go and swipe your card at a 7-Eleven or… And then when you’re swiping your card, your card essentially draws from your CDP, and it draws kUST in order to pay your transaction. And so in this sense, it’s in a way like a credit debit card. Because it’s an automatically repaying loan. And so over time, they will be repaid. And so that’s really interesting and something that I’m very excited about. Len can definitely give a lot more ideas.

Lenny 13:18
For sure. And I think the cool thing, what Mark just explained is that when the user essentially swipes their card, instead of what you usually would do is, let’s say, there’s a UST balance behind the card and earning yield in Anchor or some other way, what usually would happen is you just lower your collateral by spending money, essentially. So you have less collateral that’s earning your money. However, if you do that strategy, by taking out the CDP of kUST and using that for covering whatever you pay, you essentially not lowering your collateral, meaning there’s more money at work at all times. And that money will gradually pay off your loan. But you can make more yield by having obviously the higher collateral. Obviously, we want to kind of abstract that and have the user potentially not even know about they’re doing it. So one big thing on my focus is to get some partners on board and we had a lot of good conversations. So I’m sure after launch, after we have our Kinetic SDK out there, I think there will… We’ll see adoption of this idea fairly quickly. Another one, I guess that’s actually Mark’s favorite use case, kind of payment streaming. Similar idea. But it’s not only about a debit card, it’s about… Any payment can really be done by taking out a loan on your collateral and having the loan paid back automatically.

RyanLion 14:57
Yeah, I think Jimmy’s been saying in the GT Capital Telegram group for probably about six months now of whenever we first heard about Kinetic that he’s going to buy a MacBook, and have it pay the loan back itself.

Mark 15:14
Yeah, with the new MacBooks coming out every couple of years, it’s a good excuse to just get a new Macbook and then have the loan pay out by the next year and then just get a new one the following year. [chuckle]

RyanLion 15:25
Exactly. So just to kind of replay back some of the walkthrough that we’ve been to here. So you mentioned users depositing collateral. Now, you mentioned UST, LUNA, ATOM, etcetera. Is v1 going to be just UST or will we be able to deposit LUNA as collateral as well?

Mark 15:46
So we want to focus on UST as the first use case, and really set the ball in motion with UST and bring it to a stable place with a constant factor of growth. And then after that we want to look at expanding out. We want to… Because Anchor will be our foundational UST yield, we are very focused on the yield reserve of Anchor right now. And seeing how that can evolve. And so, it’s really dependent on multiple factors, on how fast we introduce new asset pairs. But we definitely want to add more and add quickly.

RyanLion 16:28
Okay, cool. So I think everyone’s ears picked up when you mentioned kLUNA because, we’re getting a whole alphabet full of different types of LUNA in a minute. So MVP product’s essentially will be UST. So when I deposit my UST into Kinetic, how… So let’s say I deposit 1,000 UST in there, how much will I be able to borrow?

Mark 16:54
Right now we have a rough lower bound of 50%. But we’re running some simulations right now, in which we were to consider increasing it from 50% to possibly higher like 60%, 70%. But it really, at the end the day as we run the simulations we’ll kind of figure out what the protocol will be most healthy with. And be at that if we start at the lower bound 50%, at what stages can we increase that to 60%, or possibly 70%? There is… So I know Do mentioned a couple times Kronos, the credit score system that would essentially be coming to LUNA. And this kind of really perked our ears. And we started thinking about how we could use the Kronos system to possibly offer some accounts higher collateralization limits because they have a higher credit score on Terra. And so we’re really excited to play with that idea a lot.

RyanLion 18:06
That’s a really interesting application for sure. So I’m depositing UST, I’m borrowing kUST at up to 50%, maybe 60% or 70%, depending on how you guys can progress things. Now my view is that you’re then putting that UST into aUST and using that yield to essentially pay off the loan over time. Is that the main source of yield? Or do you guys have any other strategies to increase the yield from that UST?

Mark 18:44
Yeah, so this has also been a very interesting subject for us. So also to clear up, you will also be able to deposit aUST, not only UST. This is primarily because there’s close to 3 billion aUST just sitting in people’s wallets and asking people to unwind that back into UST only to rewind that back into aUST seems a bit cumbersome. So users will be able to deposit and withdraw aUST directly from Kinetic. And the other yield… So we are really interested in Prism and adding Prism y tokens to Kinetic. And so in this sense, this would be a different than a UST strategy. But in this sense, we would allow users to deposit their y assets into Kinetic, and then those y assets would help pay back the debt of the system or of the individuals who have deposited that y asset. We find this really interesting because that means certain individuals who deposit yLUNA or y any asset could push their yield far above the protocol’s minimum.

Mark 19:57
Hey, can you guys hear me?

Mark 19:58

lejimmy 19:59
Can you talk a little bit about the mechanism in which the Phaser can boost yield returns?

Mark 20:09
Yeah. So essentially after the vault harvest the yield and sends it to the Phaser, the Phaser puts the UST back into the yield bearing protocol, be it Anchor or some other money market that will come to Terra, or some other yield bearing protocol. So it puts it back into the yield bearing protocol. And now the Phaser itself is generating yield. And so after the Phaser generates yield, instead of harvesting it and sending it somewhere else, what essentially does is it calls a message on the old contract that pays down the global debt. So you can… For example, if there is 20 million UST in the vault and 20 million UST in the Phaser, this would essentially double the yield on that original 20 million in the vault. Therefore, making twice as much Anchor yield.

lejimmy 21:10
So I think this is quite a big deal, where folks would be incredibly interested in using Kinetic just for this feature alone. When I use Kinetic, early last year… I mean, sorry, Alchemix early last year, I realized that… We’ve talked a lot about protocol owned liquidity these last six months, and emissions, and the idea of war chests and treasuries being able to generate yield for creating value for the underlying token. But now that I think about it, this Phaser, transmuter, kind of idea is like the OG protocol owned liquidity, right. The Treasury, but in this case, like the Phaser, is essentially holding a whole bunch of UST that’s generating yield, and instead of sort of just holding on to this money for future uses, it’s just boosting everyone’s return, and just boosting how quickly their debts are being repaid, right. And if I did the math right, on a 50% loan to value borrow, and if it’s being repaid back at twice the rate of the current Anchor yield, then it would take roughly about one and a half years for that loan to be paid back, right. So just with the whole laptop example, if I wanted to buy a $4,000 MacBook, every 18 months, I would shove $8,000 into Kinetic, borrow 50%, go buy that laptop, and every year and a half, I can just get the latest and greatest shiny object.

Mark 23:09
Yeah, for us here’s been definitely been a few moments. At the core, of course, everyone on the team loves to degen and ape into various things on Ethereum and a lot of it into Terra, and various other protocols. And there’s been so many moments that was like, “Oh, if we only had Kinetic on Terra launched today, this would be so much simpler, or we could ape even more into this other protocol.” And so, we’ve definitely had those moments where it’s like, if we’re saying those things, that means there’s definitely other people saying the same thing.

lejimmy 23:46
Would it be fair to say that if I deposited a whole bunch of yLUNA inside some future version of Kinetic that I could potentially boost my debt repayment to something ridiculous, like going from 1.5 years, to 1 year, to 6 months, to maybe even, I don’t know, weeks worth of repayment on a 50% loan?

Mark 24:10
Yeah, this is like the most interesting thing. I mean with LUNA being burned every day, the staking return going up, and then we’ve talked with the Prism folks on how to collaborate on this front, and we’ve played around with some possible numbers and the amount of yield that you’d be able to generate from something like this is definitely higher than what you’d be generating just holding your assets in Anchor alone, or some other protocol.

lejimmy 24:46
So with LUNA I feel like it’s a lot different than all of the other potential bAssets, right? Like for LUNA we can mint or, say, burn the LUNA staking rewards into UST directly. But with bETH, bSOL, bATOM, you’re essentially selling the staking rewards for those proof of stake assets and turning it into UST. Whereas for the yLUNA portion, you’re essentially… By using Kinetic and just using the Kinetic Protocol, you’re helping the burn rate of LUNA even further. Is it fair to say?

Mark 25:36
Yeah, definitely. This is what makes the integration with LUNA so interesting. I don’t think there’s another chain where you can do something like this. So the way Terra is designed really brings a huge benefit to Kinetic, and adding yAssets or just LUNA yields back to users.

lejimmy 25:57
Okay, awesome. And I’m sure we could talk about strategies all day. But I know there’s a bunch of other stuff about the protocol and the launch sequence and everything like that, that we want to chat about. So maybe I can defer to Ryan to continue on with the convo.

RyanLion 26:11
Yeah, Jimmy’s gone into full imaginooor mode there, I think. But that’s all good. I see people are starting to line up for questions. So I think we’ll just maybe want to cover off the governance token aspect of the protocol, and then we’ll move to questions. So if you do have questions, start raising your hand now. So yeah, Mark, in terms of the governance token, I believe it’s the CMTC governance token that’s going to be releasing alongside the protocol. Perhaps you can talk a little bit first to kind of what function does the token have, how does it accrue value, and then maybe moving into how will the token be distributed.

Mark 26:56
Yeah, definitely. So it’s KNTC. And so basically, KNTC will help govern the protocol and help govern the Treasury and really be used for with stakers. And so from day one, the protocol fees of Kinetic will be sent to stakers. And how users will be able to stake is similar to what we’ve been seeing with Astroport and with the recent Prism announcement, is that there’ll be an xKNTC. And so can the Kinetic stake will be autocompounding. And where do the incentives kind of come from? So the protocol fees are split into roughly 3-4 different groups, and groups breakdown as 12.5% or Angel protocol, shout out to Angel. And then 25% to the dev fund, but the dev fund is capped. And the reason we chose to opt for a dev fund is because Kinetic is entirely self funded. So we did not do any sort of raise pre-launch. And so we would like to hire more people full time, and to do so we want to kind of get some funds into the door. But then the rest of these funds are sent to stakers. So roughly 62.5% are sent to stakers from protocol fees. But after the dev fund cap is reached, then that other 25% is also sent to the stakers. And then once the dev fund kind of ditched below the cap, then it’s redirected. So we saw this as we don’t want the dev fund to grow immensely, we want it to be sustainable, and then the rest just go to stakers.

RyanLion 28:50
And at what points are you capturing those protocol fees?

Mark 28:54
So the protocol fees, there is a small percent taken on the harvest fee. So we may be starting with 5%-10% of the harvest fee, which of the harvest which would bring the overall yield of Kinetic down from, I think it’s 19.5% right now in Anchor and it would be reduced to just 19%. So just taking that little amount out in order to pay back stakers, Angel protocol, and the dev fund. Now, past that we aim to bring on as much protocol owned liquidity as we can from day one. And so this is kind of like how we… The launch sequence is quite complex, I’d say. We’re still working on the details. But in short, we’re aiming to do a Lockdrop event in which users will be able to lock UST token in return for KNTC. And what this UST will be used inside the protocol is for seeding the Phaser and also seeding a kUST-UST pool. And so the interesting thing here is while many other protocols that are doing lockdrops, the user kind of suffers from impermanent loss based on how long they lock up their tokens in the protocol. And so in kinetic since the tokens are being used on a stable swap pool, the chance of impermanent loss is very minimal to none. And so essentially, you’re not losing out, there’s no opportunity lost for participating in the lockdrop. So the phase one is Lockdrop, and then airdrop, we previously mentioned some airdrops on Twitter. And then phase two will be an LBP. The LBP will be similar to Angel, similar to White Whale, and the LBP will be transitioned into the AMM pool for Kinetic.

RyanLion 31:11
Okay, cool. So three stages, lockdrop, which is essentially people locking up their UST for a specific amount of time in exchange for X amount of Kinetic tokens, you then got the airdrop, I don’t know if you want to speak any more to that because it’s a very generous airdrop. I think probably given that you haven’t had to take any VC funds, you’ve been able to put a larger proportion of tokens into that bucket. And then finishing off with an LBP that will then take the token into essentially launch phase.

Mark 31:49
Yeah, we’re quite happy with this design. Well, I say that now, as coding it is definitely not making me happy, and they’re not making some of the team members happy. Just because there’s a added amount of complexity, and there’s a lot of testing to be done. And so the nice thing here is in the lockdrop, you’re not really losing out to impermanent loss with locking your UST in the protocol. And we find that there’s going to be a pretty high percentage of tokens, liquid tokens from day one. And this was definitely enabled by not taking extra money from VCs and not selling part of the protocol.

lejimmy 32:34
If I could just reiterate. Okay, yeah, we have the airdrop. But I think the important thing to note is that lockdrop, when you said it’s seeding the kUST, UST pool, as well as the Phaser. Those are all mechanisms that will help, one, keep the peg of the synthetic stablecoin kUST, as well as boosting the Anchor returns, right. So the more funds that you raise from the Lockdrop, is it fair to say the higher the boosted yields may become in the Phaser?

Mark 33:14
Yeah, so the higher amount of funds raised in the lockdrop will enable a higher amount of yields from day one. So, of course, the interesting thing here is from research based on what we’ve seen with Alchemix, the peg is fairly well maintained. And so the alUSD peg is fairly well maintained without the Phaser. And so without the transmuter in their case, so the Phaser ends up just accruing more and more tokens in order to just earn higher yields. So as the protocol lives on, there’s a pretty high potential for just higher and higher yield as more tokens or more collateral is deposited into the vault, and more harvested yield is sent to the Phaser. So if we start out with, let’s say, 30%, and then it dips below because the amount of collateral coming in is very high and very fast. In the long run, it will come back up to 30% or higher because the Phasers just constantly fed with more and more tokens.

lejimmy 34:25
And then I’m curious, you’re launching right around a year after Alchemix has launched and I’m just curious of a couple of the lessons you’ve learned as you’ve witnessed them over the last year, and some of the ideas that you’ve planned on implementing with Kinetic.

Mark 34:48
Yeah, so we’ve definitely had a few learnings. We’ve talked with the Alchemix crew and worked with them on a few things and really enjoy them. They’ve definitely inspired a lot of people and inspired us for Kinetic. The learnings have definitely been more around how to increase the protocol, how to more stabilize the protocol. And of course, learning from the security hacks that happened over the last year, and more other ones that kind of were caught before launch. And so learning from those have definitely been good things. And so those have been our core learnings. There’s definitely been more small things that we’ve focused on. And there’s definitely some more questions that we’re also talking with them right now, because looping is definitely on our mind right now.

lejimmy 35:40
I guess for those who’s not familiar, would you, I guess, elaborate a bit on the recursive or looping issue.

Mark 35:48
Yeah. So basically, right now, a user could… So right now on Anchor, there’s a protocol called MIM that has a degen box, that is essentially allowing users to loop over the Anchor yield multiple times, and I believe the APY there is 100%. And so with Kinetic, this becomes a bit easier. And so we’re trying to think of ways to benefit the protocol for users that are doing this. So in the sense that either more fees are going to the stakers if more people are looping, because looping tends to have a tendency to destabilize a protocol. So talking with Alchemix in the early days on their podcast, they were a bit concerned with looping as well, especially in the infancy of the protocol. I’d say they were able to live through it. But with kinetic, it’s essentially, one Loop would be that you deposit $100 into Kinetic, you take out 50 kUST, you swap it for UST, and then you just deposit another $50 into your vault, and then you take out $25, swap it to UST, deposit back into the vault, and then after a couple of times, the yield that you’re generating is higher than your original yield, in the sense that you’re leveraging your tokens.

lejimmy 37:20
So it essentially creates an instability for the kUST pair, is that right? As people are dumping a bunch of the kUST into that pair to continue looping their position.

Mark 37:35
Exactly. So we do plan on quite heavily incentivizing the kUST-UST pool. So users will be able to add and then from the lockdrop user, there will be a decent amount of funds in there already. And we have roughly a runway of 2-4 years of incentivization. And then after that, we hope to have a large amount of protocol owned liquidity. But we do plan on distributing more of the protocol fees to LP incentives, if needed at that point.

lejimmy 38:15
Yeah, I did note that the admission schedules for the ALCX token was quite, I guess, controversial within the first six months of the protocol or so and then more recently… Their forums are such a great source of information and the thinking behind Scupy and the team. I’ve seen that most of their emissions now are not even going to LP incentives, right. They’re going towards participating in the Curve wars and the bribes to essentially accumulate CVX and CRV. So I think the equivalent for us on Terra would be essentially the Kinetic Treasury owning a whole bunch of ASTRO tokens and gauge voting for the kUST-UST pair. Does that sound right?

Mark 39:05
Yes. Yes. That is definitely right. Yeah, we’re definitely focusing. We’re in their forums, reading, trying to learn from them and speaking to them more and more as we inch closer to lunch.

lejimmy 39:19
Okay, cool. Ryan, I guess do you want to finish up and maybe grab some questions from the audience as well?

RyanLion 39:28
We had a couple of speakers lined up, but they have all backed out. So if anyone wants to put their hand up and ask a question to the team we can do. If not, I think you guys have got some questions from Twitter that we could potentially be cracking on whilst we’re waiting for people. Cedric, do you want to ask you a question?

Cedric Diggory 39:48
Yeah, how are you guys doing?

Mark 39:49
Good. And yourself?

Cedric Diggory 39:50
Good. So one, I just wanted to be clear on a few things. So let’s say you deposit $10,000, you’re able to borrow $5,000, in 18 months you’re stating that that loan will be paid, so the 50% loan will be paid back within 18 months. It’s that clear so far?

Mark 40:06
Yeah, I mean, those, those are definitely projected numbers. Of course, as the protocol grows and lives, the numbers may differ. But we are aiming to have a higher yield than Anchor itself.

Cedric Diggory 40:19
Gotcha. So my next question would be, let’s say, for instance, I deposit the money, take the collateral, but then life happens or whatever, and I need to get that money back. As long as you pay back the collateral… Or what you borrowed, I mean, you’re able to take your collateral back out. Is there an unlocking in periods of the collateral no matter what, or as long as you pay back your loan, you’re good?

Mark 40:39
As long as you pay back your loan, you’ll be good. So there is a way to liquidate yourself, of course, it’s a liquidate free protocol. But if, let’s say, you have $2,000 outstanding, but, let’s say, you need the $8,000 in UST to off-ramp or do something, then you could call to liquidate, in which it would take $2,000 from your initial collateral and give you the $8,000 back if you don’t want to wait for the entire loan to pay back itself.

Cedric Diggory 41:10
Perfect. So I guess that kind of answered my last question, because my last question will be, how often does it pay back? Basically… So, say, if I owe 50%. Say, I have a borrow of 50%, would I be able to perpetually borrow more as it’s paying itself back to keep me at 50%? And how often do the pay back come into the account?

Mark 41:27
Yeah. So basically, you could do it in the sense of, you put in $10,000, you take out a $1,000 loan, use it for that month. And then by the end of the month, you can take out another $1,000 and… Or you take out that whole $5,000, and then let’s say within one month that pays back $1,000, you can take out that $1,000 again, and use it the next month do the same thing. So as long as the harvest function is being called, the overall debt of the system will be going down, meaning you can take out more loans as long as it’s under your collateralization limit.

Cedric Diggory 42:03
And do you guys do this monthly? Is that how… When do these payments… Whatever, however it pays itself back, when will we see that in our own account? Is that monthly? Is that daily?

Mark 42:15
It’s going to be… We will be calling the harvest function. The harvest function has a limit of… I believe we are setting it to every 5-10 minutes. So it can be called every 5-10 minutes, or it can be called longer. But we plan on calling it at least once to twice a day.

Cedric Diggory 42:33
Cool, man. Thanks. That’s it for me.

Mark 42:36
Alright. Thank you.

RyanLion 42:37
Really great questions there. Just an add on question there. So I can’t partially withdraw collateral. But I can essentially self liquidate to withdraw the remainder of my collateral. Is that correct?

Mark 42:53

RyanLion 42:54
Gotcha. So you can only get your collateral back in full once you’ve fully paid off a loan.

Mark 43:00

RyanLion 43:01
Cool. Gotcha. Yeah, great question, Cedric. Next up, we’ve got Block Muncher. Come in with your question.

Mark 43:08
Love your name.

Block Muncher 43:10
Thanks. Hi. Yeah, so you touched on this a little bit. I guess I’m kind of really curious if you guys have talked to… Or something you’re already considering with Anchor Protocol, if you’re talking to them about sustainability of their entire ecosystem? Because it ssounds like at least with your initial v1, what you were recalling it. You’re heavily relying on Anchor Earn yields. And I’m wondering about the Borrow side, and how that ends up making sure that you’re not… Just like the MIM degen box, like you were mentioning is not helping on the Borrow side of Anchor. Just what are your thoughts there, if there was anything else you didn’t touch on before.

Mark 44:00
Yeah, so the interesting… So we have a hypothesis that since we’re allowing users to deposit aUST on top of UST that a lot of users that just have aUST sitting in their account will deposit it into Kinetic. And so in this sense, we wouldn’t necessarily be adding too much on top of the existing. But we have gone back and forth internally on this. It is a very hot subject. And we are talking to Anchor here and there on various schemes and we are running through some data ourselves and various designs to help protocol safety come into fruition. We’ve also gone as far to talk about how we ourselves can also incentivize the Borrow side if need be, to help things out there. But I do think the Anchor team is very aware of what’s going on. And I am pretty confident in them that they have a plan on how to attack this with adding different types of yield bearing tokens. So adding SOL, adding ATOM, having all these other tokens definitely seems like it’s up their alley. But yeah, we plan on getting way more involved in Anchor governance and Anchor Protocol design, even to the point where we may even put some devs to help assist, get a feature through the door if needed.

Block Muncher 45:25
Cool. Thanks. Thanks. I’m glad your thought’s going to that.

lejimmy 45:27
I just have a follow up.

RyanLion 45:29
Yeah, go ahead, Jimmy.

lejimmy 45:31
Yeah, so like, I haven’t dive too deep into Alchemix v2, but I know that they’re allowing, say like, multiple collateral types and multiple strategies. As far as on the Terra ecosystem, I think the other money markets that are coming on board in the near future are going to be, say, Mars, and Edge, maybe some UST vaults coming from, say, White Whale arbitraging, or I think Yield Foundry DAO, they’re doing something interesting with their Hedge Plus program. I guess my question is, how flexible is the Kinetic vaults in where they deploy and harvest the UST yields.

Mark 46:21
So they are pretty dynamic in terms of how they’re designed. The, it’s designed to accept multiple strategies. Just in the initial version, we are kind of like leaving it as one strategy. And then plan on doing a contract migration in order to upgrade to allow multiple strategies, kind of like stabilize the first version, and get it tested, get it in use, and then introduce the second part.

lejimmy 46:53
So you’re creating your own yield aggregator, right? Alchemix is built on Yearn Finance, and then the dive vault for Yearn Finance is doing a bunch of weird stuff behind the scenes that we don’t really know or care about. It’s just like, we just know that it’s generating yield for the DAI stablecoin, right. But I guess we don’t really have anything like that. We don’t have like a yield

Mark 47:17
An aggregator of some sort.

lejimmy 47:18
Yeah, just like some kind of vault. So essentially, you’d almost be creating that yourself then, huh?

Mark 47:23
Yeah. I mean, if a team comes out and puts it together, we would be ecstatic to work with them and integrate them as our core functionality, and then add them into the default set of strategies. But until that comes to fruition, we can’t really assume that it will happen.

lejimmy 47:51
Okay, I think that’s all for me. I don’t know if anyone else in the audience has any other questions. Or perhaps Ryan… Don’t know what else is on our agenda for the space.

RyanLion 48:03
Yeah, I think we’ve managed to cover most of the bases here. And yeah, last opportunity, if anyone wants to come and ask any questions. I guess the the obvious question that we haven’t asked is, how far away from launch are you guys, roughly?

Mark 48:19
We’re aiming to launch within Q1. And that is the goal. I’ve definitely been burned by giving more exact timelines. So we want to leave it more like as in Q1. But we’re working as hard as hard as we can and as as fast as we can to get everything tested to go through the sequences to launch. The core product is ready, and ready to go. It’s just the token part and the token launch part is the part that’s, I would say, primarily slowing us down.

RyanLion 48:51
Interesting. So have you completed audits on your main smart contracts?

Mark 48:57
We have a team of people going through the contracts right now. And then on top of that, we have scheduled audits that will come to fruition in the near future. So it’s launch is kind of coordinated across getting public facing audits and getting the launch contracts ready to go.

RyanLion 49:23
Exciting times. And if people want to follow along with what you guys are doing, where’s the best place to… I guess, where’s the best place to follow? Maybe where’s the best place to come and engage if people have got questions?

Lenny 49:39
Yeah, I think obviously Twitter. Twitter’s a good one. We have a Telegram as well. We’re mainly using it as an announcement channel for now, just because we saw how much questions get asked in other announcement channels and we just don’t have the resources right now to have a person just being on Telegram answering questions. However, that doesn’t mean we’re not answering questions to anyone. Feel free to slide in our Twitter DMs. And we generally answer anything that’s not a marketing promotion request. So if you have any curious questions, just shoot them to us, either in a Twitter comments or just in the DMs. And yeah, just keep an eye on our Twitter. That’s pretty much where we will post every kind of new announcement or content.

RyanLion 50:31
Do you guys have a white paper or lite paper that’s available? And if not, is that coming?

Mark 50:38
We don’t at this time. We’re working on a series of blog posts to explain things a lot more clearly. And I’d say, possibly these blog posts could be combined into something of a lite paper. At least for me, the Terra ecosystem seems to be very adept with lite papers, so we may add one, just because that is the norm. But since the protocol can be explained pretty well without a paper, we may also just try to do more information on blogs that can be synthesized and read easier by a wider audience.

RyanLion 51:20
Makes sense. I do have a final question coming in here from from gladius_maximus. If you want to come in and ask your question before we close out here, you’re more than welcome to.

gladius_maximus 51:32
Hi, yeah, I want to… Have a question. And this comes up a lot, even on Anchor about degen box, and also for Kinetic money, people looping things. Does it really matter where the money is coming from? If the money’s coming from $1,000 from somebody putting it initially, or somebody looping it, does that really, really matter to the protocol?

Mark 51:35
It doesn’t, I wouldn’t say it matters where the money comes from. It matters more on the stability of the protocol. So we can easily see that the degen box and various other means that in various other users of Anchor are just depleting the reserve faster than expected. And so a lower reserve could lead to a more unstable protocol or lower yields, and so on. And so it doesn’t really matter where the funds come from, in my opinion, it’s more of the safety and stability of the protocol that matters the most.

gladius_maximus 52:38
So that’s then more of a question of scalability of the protocol than where the money is coming from. So I think people are… I think we need to reframe this more about scalability. And if you look at MIM, they’re limiting how much they’re pushing out to mint. So it’s almost like putting a brake on how much aUST can be minted. Because there is no break on aUST, and maybe there’s no break on kUST, and it is that break that makes the protocol stable. So we don’t have a break, and then we’re complaining that we’re getting too much money come in. But really, we just need to manage stability some way. And I’m guessin on Anchor, they’re managing stability by having this buffer of the yield reserve and hoping that the new collateral is going to come in through new interest… at lower interest rates. So how… Are you potentially thinking about putting a limit on how much kUST can be withdrawn?

Mark 53:38
Yeah, so there’s a debt cap associated to kUST. And so in the sense that if there’s 20 million in the Phaser, but there’s 100 million in the vaults, that means at a 50% ratio, it’s like 50 million can be minted. And maybe at that point in time, maybe only 3 million can be minted. But this doesn’t mean that the user shouldn’t still deposit their aUST or their UST because they’re getting a credit. So when the debt cap increases, then there’ll be able to mint kUST. So in this case, we’re doing it this way so we can assure ourselves a stable swap between kUST and UST. Because if all of a sudden the debt cap is increased to $1 billion and people come in and take that $1 billion, if there isn’t sufficient use case or liquidity to trade that kUST to UST, then the kUST peg can easily break.

gladius_maximus 54:33
Okay, thanks so much. Keep up the good work.

Mark 54:36
Thank you. Thanks for the good question.

RyanLion 54:39
Block Muncher, do you want to come back in? I see you’ve got your hand up.

Block Muncher 54:42
Yeah. Hey, just one more question. Just as a curiosity question, and if you don’t want to answer it, if this is something personal… You can… No problem. Just curious. It sounds like… You said that there’s no VCs that have given money and I guess it sounds like you guys haven’t raised in any other way. That’s really cool. It’s neat. It’s exciting, more community, kind of communal launch fashion. But just curious, how are you guys been funding or the team was able to work by themselves and just bootstrap? Or yeah, how have you guys been working?

Mark 55:21
Yeah. So in this sense, a lot of us have been in crypto for a while. And so with the recent bull market, and the recent push of LUNA, and push of various other projects and airdrops within the Cosmos ecosystem, we were able to say like, oh, if we were to take funds, we feel like that would just add a lot more bloat to ourselves. And we like being lean and fast. And so we just decided to do it on our own. Of course, this means that some people like myself, I’m not really taking a salary at this time. But for me, the staking rewards and stuff like that in LUNA, and in other ecosystems is more than enough to live off. So I’m happy to do it. And it’s also, for me, it’s like a passion project. And so it’s something I actually want to use or actually want to see exist in Terra.

Block Muncher 56:24
Cool. That’s awesome. That’s really inspiring. Like, not that it’s any payment. But we look up to you for doing that. It’s cool.

Mark 56:33
Thank you.

RyanLion 56:35
I was thinking exactly the same thing, a really inspirational approach to things that we’re not particularly used to in the crypto space. So, interesting story to hear. If you don’t have a hard stop, I think DefiZealot’s up here to ask a question. We may as well run through as many questions as people have.

DefiZealot 56:53
Yeah, hey, I’ll keep it short and quick here. One thing when I was playing around on your website, with the auto repaying loans little app that you have up there. I’m trying to understand the APY part, why that is variable and it’s not fixed. Is it something that you choose? I understand the self repaying a loan part, you lock up your principal, you take a loan, buy something, and then it automatically pays off, and you can take the loan again, after it pays off. That part is clear. But why is the APY variable and is this something that we’re speculating that it would be between 20%-40% and it’ll be variable? Or is it just there for us to make some guesses, I guess? Can you elaborate on that?

Mark 57:52
Yeah, definitely. So the the reason why it’s on the bottom, and it’s roughly 20% is kind of to model it against something Anchor. And then the higher end would be two times Anchor. Of course, we do have plans on exceeding this. But it’s kind of also to just gauge a mental model of like, “Oh, if I were to take this loan, and if it was at this percentage, how fast would it pay back?” Because it won’t be a guaranteed 40%. And because as the Phaser grows, the yield will grow as well. But as more collateral comes in on the vault side, then it will kind of decrease the amount of boost that’s coming from the Phaser. But then it’s kind of like a seesaw, like a teeter totter. It’s kind of like, as one is growing other one is being reduced, but then over time, the other one is growing as well.

DefiZealot 58:51
Okay, so it’s basically, I can count on it being 20% as the least? Is that fair to say?

Mark 59:00
Yeah. 20%. It’s entirely dependent on Anchor for right now. And so it would be a roughly around the same as Anchor.

DefiZealot 59:09
Okay, great. Thank you for that.

RyanLion 59:11
Cool. Thanks for the question, DefiZealot. I don’t think we have anyone else lined up here. So just to reiterate, if people want to follow what Kinetik are doing, you can catch them mostly on their Twitter, or maybe in their Telegram. We have a potential Q1 launch upcoming with no specific date stated, but keep an eye out for that. Anything else you guys want to add in here before we close up?

Mark 59:42
No, just thanks for hosting us GT. We really like working with you guys. Thanks for everyone for listening in. And thanks for coming along the journey with us.

RyanLion 59:56

Lenny 59:57
Yeah, absolutely. Thanks, everyone. Thanks, GT. But also thanks to all the community. We have seen great support, although we’re about to finally launch. So we haven’t launched it, but have still seen great, great support, which is also why we decided to do kind of a more sizeable the airdrop for the community. So yeah, thanks, everyone. And we’re excited to really get that product out so we can finally all use it and play around with it. And I’m super excited for what’s to come.

RyanLion 1:00:30
Thanks so much both of you for joining us. Yeah, a really exciting project that’s doing something a little bit different from other stuff that we’re seeing on Terra, so can’t wait to get my hands on it. I see we’ve also got Mr. TerraSpaces in here, who hopefully has been recording, so hopefully we’ll be able to put this out to a wider audience later on. But thanks so much again for joining and we’ll speak to everyone soon.

Finn 1:00:55
Thanks for checking out another episode of The Ether. That was the GT Capital Kinetic Money Space. Recorded on Tuesday, January 11th 2022. This episode of The Ether was brought to you by Orbital Command, a community validator on Terra dedicated to educating expanding and promoting the LUNAtic community. Follow Orbital Command on Twitter using the link in the show notes to receive regular threads on Terra protocols and yield strategies, news, resources, and Twitter Space discussions. You can also support their community efforts by considering them next time you’re delegating or redelegating your LUNA. Find out more at TerraSpaces appreciates their support. For, I’m Finn. Thanks for listening.