Kine: A universal liquidity pool protocol that can customize digital asset portfolios
Kine is a decentralized protocol that builds universal liquidity pools backed by customizable digital asset portfolios. Liquidity pools allow traders to open and close derivatives positions based on trusted price feeds, avoiding the need for counterparties. Kine removes the restrictions on existing peer-to-peer trading protocols by expanding the mortgage space to any assets based on Ethereum or other public chains supported by the Kine protocol and allowing third-party liquidation.
Compared with similar products in the market, Kine has many advantages.
1. Safety advantages:
- Transaction security - both deposits and withdrawals can be viewed through tools such as https://etherscan.io/
- Operational security——to give full play to the security of the wallet, all operations such as deposit and withdrawal require the user to sign with the private key
- Asset security - user assets are saved by the corresponding smart contract, and the corresponding deposit and withdrawal records can be checked on the chain
2. Advantages of experience:
- Provides a trinity solution of liquidity, handling fee and transaction experience;
- A variety of assets can be traded, including digital assets and non-digital assets;
- KINE's mechanism allows traders to complete the transaction immediately according to the order price, and there is no case of partial transaction or non-completion after the order is placed. In KINE, the counterparty of a trader is not other traders, but a liquidity pool where pledgers provide liquidity;
- Leverage trading is supported, and Gas fees are extremely low;
- A balance between performance and security. Currently, KINE provides the best trading experience and high security. No front-run is the greatest protection for stakers. With the continuous improvement and perfection of the Defi infrastructure, KINE will gradually improve the security of transactions in the future.
Operation Mechanism Introduction
Essentially, the Kine protocol is a mortgage loan system. While the collateral is a generic ERC-20 asset, the loan asset is a special purpose token representing a stake in the liquidity pool. Next, we will briefly introduce its operation mechanism:
1. Mortgage assets
Assets deposited into the contract increase the user's debt limit. The debt limit is equal to the market value of the mortgaged assets multiplied by the mortgage factor. The value of collateralized assets is governed by price feeds provided by on-chain oracles. The collateralization factor is a system-wide parameter that depends on the price volatility and liquidity of the asset.
Users can flexibly choose one or more supported mortgage assets and form their own mortgage portfolio. They can increase or decrease collateral as long as there is sufficient unused debt limit.
2. Issue kUSD and debt
Users with unused debt limits can issue kUSD, a synthetic USD stable digital asset backed by liquidity pools. kUSD is the only asset accepted by Kine Exchange, a peer-to-pool derivatives trading platform that provides multi-asset exposure and a zero-slippage trading experience.
When users issue kUSD, they create Multiple Collateral Debt (MCD). The value of an MCD can increase or decrease independently of its original issue value, depending on the net position taken by the liquidity pool. This pool provides liquidity for all trading pairs referenced on Kine Exchange. It accumulates and distributes fees and funds to stakers.
The mortgagor acts as the collective counterparty of all traders on Kine Exchange and bears the risk of MCD value fluctuations. When the liquidity pool suffers transaction losses, the MCD price rises, and the debt value of all mortgagors increases proportionally; on the contrary, when the liquidity pool gains transaction profits, the MCD price falls, and the debt value decreases. Stakeholders may choose to hedge this risk by taking positions outside of Kine Exchange.
3. Income distribution
Transaction fees and funds collected by Kine Exchange will be distributed to the stakers of the liquidity pool. The exchange will accumulate revenue in kUSD and convert it to KINE tokens for exchange through third-party DEXs such as Uniswap.
Stakers can periodically receive rewards from the distribution contract.
4. Burn kUSD
When stakers want to withdraw their collateral or exit the system, they must pay their debt by burning kUSD. If there is MCD pool volatility in staking, they may need to burn more or less than the kUSD they originally issued. The repayment process is as follows:
- A certain amount of kUSD is converted into MCD according to the latest debt price provided by the oracle machine.
- MCD is returned to the loan system and the unused debt limit is increased.
- With an unused debt limit, users can withdraw some or all of their collateralized assets.
5. Liquidation
If the value of the pledger's outstanding MCD exceeds its debt limit, a part of the outstanding MCD can be repaid by burning kUSD in exchange for an increased amount of collateral. This incentivizes arbitrageurs to step in quickly to reduce staker exposure and de-risk the protocol.
The percentage that can be closed is a value called the liquidation factor, which represents the percentage of MCD that can be repaid, ranging from 0 to 1, such as 25%. The liquidation process can continue until the user's outstanding MCD is less than their debt limit. Any Ethereum address that owns kUSD can call the liquidation function.
Economic Model
KINE is the native protocol token of the Kine protocol and is currently issued on Ethereum following the ERC-20 standard. The KINE token is a utility token designed to facilitate community governance and incentivize the virtuous circle of the Kine ecosystem, with a total supply of 100,000,000 tokens.
1. Token use cases
1) Governance
Once mature, Kine will gradually transition to community governance, allowing the community to determine the future of the protocol. KINE token holders can stake their KINE to vote or propose new ideas to improve the Kine protocol. Such decisions may include:
- Add/delete mortgage assets on Kine.Finance
- Add/delete trading assets on Kine.Exchange
- Protocol parameters, such as mortgage factor, supply cap, risk limit.
2) Pledge
KINE is accepted as the pledge asset of the liquidity pool. KINE stakers will receive an exclusive share of the fee pool, earning higher returns than other collateral.
At the same time, the transaction fee income from Kine.Exchange will also be converted into KINE before rewards are distributed. And long-term KINE stakers will also accumulate more governance voting power.
2. Distribution and release of tokens
The distribution and release rules of Kine tokens are as follows:
1) Balancer Liquidity Boot Pool (LBP)
Issue 5,000,000 KINE tokens (accounting for 5%), and conduct initial DEX issuance in the form of LBP in March 2021. There is no lock-up period, and tokens can circulate freely after purchase.
2) Seed supporters
Issue 13,000,000 KINE tokens (accounting for 13%), priced at $0.20, and the tokens will be locked; 10% will be unlocked immediately after IDO; the remaining 60% will be released linearly in the next 12 months; the remaining 30% will also be released in the second year will be released linearly.
3) Private placement participants
Issue 12,000,000 KINE tokens (accounting for 12%), priced at 0.50-1.00 USD, tokens will be locked; 25% will be unlocked immediately after IDO; the remaining 75% will be released linearly in the next 12 months.
4) Team and advisors
20,000,000 KINE tokens (20%) are issued and the team assists in the launch of the initial version and future upgrades of the Kine protocol. Tokens will be locked; 25% will be unlocked 6 months after IDO; the remaining 75% will be released linearly in the next 18 months.
5) Mobility partnerships
Issuing 10,000,000 KINE tokens (accounting for 10%) is a strategic market liquidity provider and is responsible for maintaining an orderly secondary market for KINE, kUSD and related underlying assets. Tokens will be locked within 12 months; 25% will be unlocked before listing; the rest will be unlocked in batches every month for the next 12 months.
6) Ecosystem Development Fund
40,000,000 KINE tokens (40%) will be issued with the task of developing and promoting the Kine ecosystem. Tokens will be released over a period of no less than 48 months; more details to be announced.
Epilogue
The Kine protocol provides a decentralized solution to establish a universal liquidity pool backed by a customizable portfolio of digital assets. With the continuous improvement and improvement of the Defi infrastructure, Kine will gradually improve the security and user experience of transactions, and expand its ecosystem in the future. The application of KINE tokens will also play a role in community governance, pledge, rewards, etc. We have reason to believe that with the continuous advancement and improvement of the Kine protocol, it will become one of the important players in the DeFi field and bring a better financial service experience to a wider range of users.
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