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What Critics Fail to Understand About Kin – Part #5

August 31, 2018
in Blockchain, Kin
Adam Cochran
blockchain , ethereum , featured , featured-header , kik , kin , stellar

Missed the rest of the series? Check out “Part #1” “Part #2“, “Part #3” and “Part #4“

When I first started this series critique number 5 was “The Kin team hasn’t done anything since the ICO.” A lot has happened since then, including the launch of the Kinit app, and so we’ve heard less and less of this critique over time.

Instead, a new negative narrative has surfaced that we’re going to combat, one that I call “the two blockchain problem.”

It seems whenever Kin related news gets shared around cryptocurrency communities we consistently hear:

“Kin can’t decide which blockchain they’re on.“

“Kin keeps flip-flopping on blockchains.“

There are two subtle points that people are misinterpreting here, that we should clear up.

Critique #1 – “Kin Can’t Decide Which Blockchain They’re On!”

At first, when I heard users complaining about this decision, I thought it was in reference to the migration from the Ethereum blockchain to the Stellar blockchain, and then to their own Kin blockchain. However, after taking the time to have in-depth discussions with these users, I’ve realized instead they are (surprisingly) upset that Kin is a token that lives on two blockchains.

While cross-chain projects like ChainLink and Bitcoin-to-Ethereum Atomic Swaps have been celebrated, people seem to think that Kin’s chain-duality is a negative, rather than a positive.

The Case for Two Blockchains

Ethereum Scaling

When Kin first launched, they were focused on the Ethereum blockchain, as most new ICOs and blockchain projects from 2017/18 were.

At the time, Ethereum was yet to face some of the platform’s worst scaling challenges, such as the CryptoKitties craze, and the upper bounds of Ethereum’s transactions-per-second capacity had been mostly untested.

Shortly after Kin’s launch, the Ethereum network was hammered by the launch of CryptoKitties. Seeing how few transactions were needed to clog the Ethereum network, Kin realized that they could not possibly implement their project on Ethereum blockchain in the short term.

They even went as far as to calculate what would happen if Kin were to ‘airdrop’ a little bit of Kin to each Kik user, and realized that if they did this, they would take down the Ethereum network for days.

Rock and a Hard Place

At this point the Kin Foundation knew they had to explore other options, including their own blockchain.

The challenge became that moving to your own blockchain means:

Losing out on existing Ethereum infrastructure like web wallets, hardware wallets and decentralized exchanges.
Exchanges have less incentive to list your coin, as they now have to run a node of your blockchain rather than just add a smart contract token.
Increased overhead, as you now need to create your own software wallets and node tools.
Decreased security at the initial launch of the network, as you lose access to Ethereum’s global network of validators.
Decreased liquidity for investors, as they can no longer easily move tokens within the Ethereum network.

We’ve seen examples of these challenges faced by other popular projects. Consider RavenCoin, a mine-able community token that launched around the same time as Kin. They’ve faced a tremendous uphill battle with their token, and even though they have a large and highly involved community, they are only listed on a few small unknown markets, have a market cap of only $39M and get less than $600k/day in daily turn over. Beyond that, a significant portion of the developer’s time is spent upgrading and maintaining software wallets, which takes away resources from their main vision.

The Decision

The Kin Foundation, realizing that they didn’t want to put their users in that position, decided to do something new. They decided that they would continue to explore other blockchains while still keeping the Kin token available on the Ethereum network, so that users could take advantage of the existing ecosystem for liquidity.

While this introduced significant confusion, especially in messaging surrounding “KIN1” and “KIN2” (Read: “What the heck are KIN1 and KIN2?“)

Critique #1 – Conclusion & TL;DR

Kin isn’t split between blockchains, and they don’t have two tokens. The Kin Foundation is focused on building the Kin Blockchain, a highly-customized fork of the Stellar blockchain that supports 0-fee transactions and high-rate TPS.

Since Kin knew that moving to their own blockchain might result in reduced liquidity for token holders, they allowed Kin to remain active on the Ethereum blockchain for trading.

Kin is not building tools to support the Kin token being used on the Ethereum blockchain. Their tools are focused on the Kin blockchain, and users will be able to move their tokens over via Atomic Swaps.

Critique #2 – “Kin Keeps Flip-Flopping on Blockchains!”

In recent years, especially in political-spheres, changing your mind has been demonized with the word “flip-flopping.”

Before we get to the Kin Foundation specifically, let’s first clear this up.

“Flip-Flopping” is changing your answer to a question, or your position on an issue without substance (or without meaning), primarily to take advantage of a current benefit. (i.e. lying to a crowd for votes).
Changing your mind is what happens when you learn new information that disproves your previous position. It is not flip-flopping, it is not bad, it is actually the most healthy thing to do when presented with new information. (In startups this is often called a “pivot.”)

To that end, the Kin Foundation has never once “flip-flopped” on which blockchain they are going to use. Instead, they’ve learned new information as time went on and changed their minds.

Leaving Ethereum

As we mentioned earlier, Kin’s decision to leave Ethereum was based on challenges around scalability.

The inability for the Ethereum blockchain to scale to the level that Kin needed for integration into their own Kik app, let alone into multiple enterprise partner apps, meant that they simply couldn’t complete their vision on the Ethereum blockchain.

While Ethereum is rapidly moving towards scaling solutions, even optimistic estimates put these as being implemented sometime in 2020, which would delay Kin’s timeline far too long.

This initially lead to Kin exploring Stellar.

Aside: Ethereum Vs Kin

It’s worth noting, that many have argued that if Ethereum won’t have scaling before 2020 then there is no way Kin will be able to create their own blockchain that will have scale.

The important distinction here is that Ethereum is trying to create a scaling system on a live blockchain, while managing a number of existing features, none of which were designed for this scaling system.

Kin, on the other hand is trying to implement scaling by building a blockchain of their own, and only having the features they want/need within it. They are two very different products, with different challenges.

Leaving Stellar

After leaving the Ethereum blockchain, the Kin Foundation began to explore Stellar’s blockchain as an alternative, due to its focus on high scalability and low cost fees. Stellar achieves those goals by using a more efficient consensus model and removing the overhead of a “Turing Complete” smart contract language, like Ethereum has.

While Stellar proved to be advantageous from an underlying technology perspective, it introduced a unique set of challenges in terms of user experience.

To create a new wallet on Stellar, a user must first fund the wallet with at least 1 Lumen (Stellar – XLM), and whenever they send a transaction the user must burn 100 Stroops (0.0000001 of a Lumen).

This meant that in order to use Kin, users would first need to purchase and load their wallets with Stellar, and make sure they have a balance of Stellar in their wallet at all times in order to make transactions.

Since most users would be using Kin via third-party apps, they wouldn’t be aware of background processes like this, and certainly wouldn’t be familiar with how to use exchanges to purchase Stellar and load it into their wallet.

This would drastically increase either the financial load on developers (requiring them to spend around $0.50 for each new account activation) or increase the education friction on new users. Either of these options would ultimately lead to less adoption in the Kin ecosystem.

This finally led the Kin team to decide they needed to pursue their own blockchain.

The Kin Blockchain

Kin obviously wanted to avoid making their own blockchain to start, as building a blockchain from the ground up is a tremendous cost and comes with its own headaches.

But, given that no other blockchain technology was ready to perform at the scale they needed without sacrificing user experience, the Kin team pivoted and decided to build their own based on a fork of Stellar.

Building their own blockchain comes with a lot of advantages. It will allow them to create the exact infrastructure that they and their partners need without worrying about third-party developers and other complications.

It also means that Kin has the potential to expand beyond their initial ambitions and offer other features in the future including smart contract support (like we learned in their recent Engineering AMA).

Critique #2 – Conclusion & TL;DR

Kin didn’t flip-flop. They learned new information, and pivoted in response.

They had to do this twice. It wasn’t their initial plan to build their own blockchain, but, now they are doubling-down on that, and this brings a lot of benefits.

They aren’t going to be changing their blockchain again.

A Final Note

There has been a lot of fuss about Kin’s journey with multiple different blockchains, especially in the messaging around KIN1 and KIN2. The fact that the Kin Foundation is a blockchain company that is willing to change course when learning new information is a good thing.

Adaptation is key to success in startups. Far too many blockchain projects seem to worry that admitting you were wrong is a point of weakness, and so they cling blindly to their statements. In the end, that will be the downfall for a number of these companies.

If there is one thing Kik has proven they are good at, it is evolving to stay in the fight. For the last decade they’ve had to continually evolve to stay relevant, and that’s something that’s foreign to most blockchain startups.

I personally believe that Kin should go all in on their new blockchain, building it first as a platform for themselves, then supporting other projects that want to live within the ecosystem, because Kik is one of the few companies with the expertise to help deliver on a project at this scale.

Whatever lays ahead for the Kin blockchain, I think it’s clear that their decision to change blockchains was the right choice for them and that many of the critics who disliked that choice were kind of like baseball fans refusing to cheer for anyone other than the home team.

There is a lot that Kin hasn’t done right to date, but, the project has an incredible potential and has shown they have the ability to bring real partners into the fold and help make crypto adoption mainstream – and in the end, that’s why we had to examine “What Critics Fail to Understand about Kin.”

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What Critics Fail to Understand About Kin – Part #4

August 28, 2018
in Crypto, Kin
Adam Cochran
featured , featured-header , kik , kin , Kin Ecosystem , Kin Foundation , Kinit

Missed the rest of the series? Check out “Part #1” “Part #2” and “Part #3”

In their July 17th article covering the launch of the Kinit beta app on Android, CCN author Jake Sylvestre wrote that during his interview with Kin’s VP of Communications, Rod McLeod, he had concerns over the existence of a business model for Kinit.

After explaining Rod’s point of view on bolstering a decentralized ecosystem, Jake wrote:

“Despite the app’s claims of a decentralized business model, I’m still convinced [sic] that this app will be profitable when it launches out of beta.“

(Although it is clear from the rest of the article that he meant to say he is “NOT” convinced)

The first thing I have to concede here is that is quote is 100% accurate. Kinit is not a profitable app in beta, and there is a very good chance that it won’t be a profitable app when it is out of beta.

But, even asking the question of “Is Kinit profitable?” shows that there is something that CCN fundamentally missed.

Before we can discuss that specifically, we have to be firmly on the same page on what Kin is and what the Kin Foundation’s goals are.

What is Kin?

Kin, as a cryptocurrency, hopes to be the digital currency exchange on the internet for non-physical goods. It will initially distribute via the Kin Rewards Engine (KRE), rewarding content creators and network participants for the value they add to the digital ecosystem.

In this regard, Kin is fundamentally just like the US dollar, except its aim is to be used for digital products in apps and on the web.

Right now, Kin is run by Kik, the company that created it. But, the long term goal is to pass control of Kin over to the non-profit “Kin Foundation.” Kik will still be an ecosystem partner like any other developer, but, the currency, blockchain and strategic roadmap will be managed by the Kin Foundation.

This distinction is fundamental to the long term health of the ecosystem. Kik has the goal of being a profitable growing startup. Their best interests may not always be the best interests for Kin (although they’ve tried to align themselves by holding a stake of Kin and vesting it over 60 years.)

What’s the goal of the Kin Foundation?

Simply put, the goal of the Kin Foundation is “to make Kin the most used cryptocurrency in the world.”

If Kin is the equivalent of the US dollar, then the Kin Foundation is kind of like the US Federal Reserve Bank. (Cue rage from crypto hard-knocks who hate federal monetary policy)

In the US monetary system, the Federal Reserve isn’t tasked with making a profit. Instead, the Federal Reserve aims to help set monetary policy, manage economic challenges of the currency, and manage the circulation and supply of the US dollar.

The Kin Foundation is responsible for adoption, development and maintenance of the Kin blockchain and the Kin Ecosystem.

As a non-profit, they aren’t looking to create a profit producing venture. Instead, their actions only need to be either self-sustaining, or even performed at a revenue loss for a short period of time if it helps the over all health of the ecosystem.

Why is this the Kin Foundation’s focus? At the end of the day, a currency is only as valuable as its use cases. If no one adopts Kin, then Kin has no value.

What Problem does Kinit Solve?

Kin is a radically new concept. With a few pillars:

1. Reward users for value added behavior.
2. Let users redeem their value either in my app, or in the offers ecosystem.
3. As a developer, be rewarded by the KRE for the amount of value I create by bringing new users and transactions into the ecosystem.

This is very different from the setup that most developers know today. It isn’t about driving users to IAP purchases, subscriptions or ads, and it isn’t about thinking about monetization in terms of your own app in isolation. Instead you have to think about how to create value, retain users, and retain them within not just your app, but the larger ecosystem.

Couple that with the fact these are tokens on a blockchain, and a lot of app developers are left scratching their heads as to how this all works. That’s where Kinit comes in.

The Goal of Kinit

In previous live AMA’s with Kin founder Ted Livingston, Kinit has always been touted as “an example integration for the Kin Ecosystem.”

The goal of Kinit is not to make money on the price difference between their ad earnings and the cost of gift cards. In fact, Kin has stated that they are *drastically* subsidizing the cost of the gift cards in the Kinit app.

The goal of Kinit is to show an example integration of Kin within an application, test the network, and get approval by large publishing partners like Apple.

With that in place, it is much easier for the Kin Foundation team to go to other partners and say “Hey, look. This is the kind of stuff you can build with Kin, and we know it works and we know Apple will approve it.”

Kinit is an example, a demo that the Kin Foundation is happy to spend money on because it makes the onboarding to the ecosystem easier.

Kik and the Kin Foundation hold reserves in Kin, and so their vested interest isn’t in making short term revenue off of the Kinit app. Their goals are focused on making sure many developers and users adopt Kin, which has a compounding effect on the value of the Kin they hold.

Will Kinit Disappear One Day?

With Kinit being noted as a “sample” application it may seem almost inevitable that one day, once the ecosystem is more robust, that the Kin team would remove Kinit from the app stores.

However, it’s clear that Kinit has a much larger role to play long term.

In a decentralized ecosystem, one of the largest challenges is what we call the “identity layer”. Any time I open up an app that uses Kin it would have the choice of doing one of two things:

Creating me a new wallet that is disconnected from all my other wallets and Kin.
Finding someway to verify my identity and use a main Kin wallet without me sharing my private key.

#1 is obviously a no-go as it creates a terrible user experience. But, #2 is a challenging problem, and it’s one we continue to face on the internet, where we each have hundreds of accounts with various websites and no real central identity.

The most successful “identity layer” we’ve seen previously is the “Login with Facebook” button that Facebook strategically used to dominate the internet. Since users had a Facebook profile and were often already logged into Facebook it created an easier way to manage centralized identity.

Kin has closely watched Facebook over the years, and has always commented on how their tactic is to “copy & crush” their opponents. But, it seems like when it comes to the identity layer problem, Kin is likely to take a lesson from the pages of Facebook and create a “Login with Kin”/”Login with Kinit” for apps.

This would allow users to use Kinit as a centralized wallet to securely hold their funds for use in different applications, as well as to manage their identity across multiple applications without having to trust third-parties.

This smart play reduces the “sign-up funnel friction” in ecosystem apps, and creates a visibility loop. If users need to download Kinit to connect their apps for multiple wallets, then these apps will drive lots of downloads to Kinit. Kinit in turn becomes a top downloaded app on both app stores, and within, Kinit promotes apps in the ecosystem that use Kin. Driving these downloads to the apps that use Kin would cause them to become top downloaded apps as well, which are discovered by new users, who now need to download Kinit and thus the loop continues.

So What is the Business Model?

Kinit does have a business model. It’s not one of making profit margin off of their top line revenue, but instead, creating an example to onboard ecosystem partners and a viral adoption loop to rapidly grow the user base of the Kin ecosystem.

And that is far more valuable than $0.10 surveys.