Brrrrrrrr…… Remember that? Ah yeah… the good old days… Seems like an eternity ago now doesn’t it? It seems like those Days of Brrrrr are now behind us as the demand for KBTC has subsided which in turn has collapsed the price of KLON.
What happened?
I tell ya what happened Klondolorians! Inflation!
Ah that dreaded word which we seem to not escape, we hear it in our daily lives when it comes to traditional fiat currency. Central bankers constantly fearing it, worrying about over heated economies that will eventually lead to a recession or worse yet a depression. They like the Brrrr as well, but like all good Brrrrs, they come to an end from excessive supply that causes fiat devaluation.
Why do I mention fiat when speaking of a crypto like KBTC? Well KBTC acts more like a fiat currency than the crypto currency that it is trying to emulate, the King of Crypto himself, BTC.
And like what happens to fiat in a fallout from overheated economies, KBTC is currently experiencing the same thing. A massive oversupply that demand can not meet.
So what do we do?
Being that this is an Economics 101 directly related to supply and demand issue, this is where we need to draw our valuable attention.
Solve the supply and demand issue, and we solve our problem.
So we can either tackle the supply end of it or the demand end of it to help us get where we need, this is what all successful rebase protocols do in order to maintain stability and “sanity” to a protocol that seeks supply and demand equilibrium. Reduce Supply or Increase Demand.
Or we can also do both, and that is what I propose.
Currently we have an excess of KBTC with no demand in sight for the foreseeable future for it, save for what the devs have secretly in store for us.
This excess supply of KBTC brought to us from the glorious times of BRRRR to the stagflation we are seeing now which has bogged down its price while swing traders grind away WBTC from the Stability Fund as it trades it from deep sub par to mildly sub par.
Mind you, this isnt good for the protocol especially when the fund is making purchases above the collaterization level, as for every purchase made above the collaterization level needs to be made up by buying below the collaterazation level otherwise the stab fund will eventually run out of funds. That would be a big problem for us as then we will end up like Badger or the Basis projects.
The answer to all of this? Vaults.
We bring them into existence as we need them and they will scoop up excess KBTC from the stab fund, while attracting kBTC or kBONDS to them.
KBTC vaults would emit what we currently have in the stabfund. Stake KBTC and receive kBTC, lots of sites do this already with their token to control inflation from emissions. It incentivizes people keep compounding it in order to compound returns.
This essentially controls inflation, it’s how Sushiswap does it as well as dozens of other sites, the list is exhaustive.
The vaults are created to keep enticing people to lock tokens way so it actually helps the lower the circulating supply.
If it’s emits KBTC for staking KBTC it will attract KBTC and bring it into demand.
Right now, according to klonvision, we have 82 KBTC, that’s roughly 4.2mm dollars. Say we emit this over 4 years that’s 1mm per year. There is a good chance that we can attract 4–5mm worth of KBTC to the vault as that would be a 20% apy on basically Bitcoin.
5mm of KBTC is 100 kbtc that would be committed to the vaults thats at a 20% apy, which is unheard if on bitcoin.
If the demand is greater than that we may go down to 10% or even 5%, which will be 200–400 kbtc in lock up in this one vault.
Sounds counterintuitive to cutdown inflation by creating more I know, however this is how the U.S manages the dollar - it prints more to get itself out of a mess and then sells a bunch of bonds to lock it all up.
They basically kick the inflation down the road and then when they get there they do the cycle all over again.
Or you can do this exact same model but instead of staking KBTC, you stake bonds and let the bonds receive the income.
If we did this you will see how fast people will burn kbtc to buy bonds to stake.You can even make it where bonds have to commit to the stream.
Say minimum 3 months, Would you commit to staking bonds if you will get what you own in KBTC again in a stream over a year or two years or several years?
God knows what 20% APY on BTC will be worth in 4 years!
Think all of this out as it requires some thought and not a knee jerk reaction.
If this were done , we should reduce the emissions on expansion down to a percentage of what we were are normally used to so the boom and bust cycles last much longer than they do now. It’s ok greedy Klon maximalists, the reduced emissions will still be significant when factoring in all the kAssets that will eventually be onboarded!
The good thing about all of this is that in can be tried using a smaller amount to see how well it does it attracting capital.
We can set up a vault that emits 10 kbtc over a period of 4 years and see how well it does in attracting capital, then commit to more if it’s working as intended.
You can limit withdrawals to weekly, monthly, quarterly or semi annually as well. This would would be another tool in controlling inflation as you would know when payments will become “due” and will fall back into circulation. You can assess the situation again at that time and possibly create new vaults if the timing of releasing all that supply isn’t ideal.
Implementation and Execution
My suggestion is, let this, meaning kBTC, trade side ways for a bit, allow the stab fund to make below Collaterization level purchases ( can’t stress how important this is for the health of the overall system).
Announce that these kBond vaults will be launching in several weeks.
Allow people to buy kBonds at above 1 as this is a truly deflationary action ( there are currently no deflationary mechanisms, this would be one)
Make it such that bonds need to be committed to the vaults for a minimum of time, I suggest 3 months which will coincide when the quarterly withdrawals of earnings can happen. Earning a nice double digit APY on BTC isn’t a bad thing -astute investors know it’s worth the wait. Believe you me!
Make it such that withdrawing earnings will commit the bonds to an additional 3 months unless the whole position is withdrawn. If you guys think 3 months is too long, it can be made for less, but I think the longer commitments overall bring better stability to pricing.
There is another option in lieu of locking kBond holders for 3 months, and that would be the AMPL geyser model where the longer the staking occurs for, the rewards are amplified, it’s a sliding scale from 1x to 3x over a 30 day period. We can use 30 days or we can extend the sliding scale over 3 months. This will inventize really long term hodling.
So under a similar AMPL model, we can have accelerated emissions for Kbonds that are staked longer which in actuality translates to the full emission share that one would normally earn if the amplified rewards system was not in place.
Use Cases and their Importance.
Without use cases, real value can never be generated and value begins to materialize once a use case begins to appear.
Use cases of KBTC can be as simple as creating these vaults, or getting on other platforms like Cream and being able to borrow against your own kBTC ( or any other kAsset for that matter ) A use case would be anything where it would require holding or staking KBTC somewhere else in the Blockchain and receiving value or utility from it.
The best way of creating use cases , is setting up partnerships with other platforms that would allow us to stake there and reap someutility benefit or rewards.
The second best way is the vaults that emit KBTC over time to stakers of kBonds/kBTC
If we have this system in place, I believe we will solve the use case issue for kBTC, we incentivize kBond purchasers to continue buying bonds (even at above par if it makes sense), we solve the issue of the big fear that people have about the Stab fund having a large supply of KBTC at hand that would lead to insurmountable stagflation should it all be released into the market.
We can coincide this with the launch of the Liquidity pools for bonds as well as this will make bonds more desirable. The LPs for the bond liquidity pool can also receive a stream of kbtc to incentivize that pool.
If we solve KBTC pricing, we will solve KLONs pricing and if we solve KLONs pricing, the LPs will come back.
And this also means we have a working model going forward for all kAssets coming on board in the future as well.
