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NuFi > Kin Ecosystem

On the Subject of Nodes

One of the great debates in blockchain centers around what it means to be decentralized, whether it’s a necessary trait for the application you’re developing, and how a blockchain’s centralization should affect the regulatory status of the cryptoasset(s) running on top of it. While many followers of the blockchain space would identify as decentralization ‘maximalists,’ touting the utopian anarchic virtues of their favorite project, others would argue that centralization is a sliding scale, and that none of the major blockchains in production today are truly as decentralized as they claim to be. Take Bitcoin, for example, where the world’s longest-running and most valuable blockchain has one-third of its hashpower consolidated under one mining pool operator, Bitmain, nearly putting one multi-billion dollar entity in control of the protocol.

Or take two of the other top 10 cryptocurrencies by market capitalization, XRP and Stellar, which have been criticized relentlessly since their inception, for adopting federated Byzantine fault-tolerant models of consensus, as opposed to the more popular ‘trustless’ Proof-of-Work (PoW) or Proof-of-Stake (PoS) models. Where PoW grants power and incentives to the users that run the most powerful machines supporting the network, and PoS grants power and incentives to the wealthiest users supporting the network, federated models optimize for network efficiency by employing ideas like flexible trust and quorum slices. While I’m not savvy enough to go much deeper into consensus theory, the short story is that decentralization maximalists typically aren’t fans of consensus models that require ‘trust’ in any specific node on the network, regardless of the blockchain’s application.

Consensus and Kin

So when the development team behind the Kin cryptocurrency, the Kin Foundation, announced several months ago that it would ‘fork’ the Stellar blockchain to use in parallel with the existing ERC20 token, and that the ONLY node operator at the outset of the new blockchain’s production network would be Kik, the chat app that launched the cryptocurrency, the crypto community’s negative reaction didn’t come as much of a surprise. While Foundation (and Kik) CEO and Founder Ted Livingston later clarified that this wouldn’t be a problem for the blockchain’s end-users because they already trust the app’s developers, and that the network would grow to be more decentralized as additional apps and partners joined the ecosystem, the maximalists didn’t want to hear any of it.

Fast forward five months, after the maximalists and some pre-sale investors have exited a large portion of their Kin position, bringing down the value of the Kin token in conjunction with an extended bear market, and the topic of nodes has surfaced once again. After the release of the atomic swap between ERC20 Kin and the token on the new blockchain was indefinitely delayed, despite already having the technical procedure developed and audited, the project’s followers wondered why. And in recent updates posted by Livingston and community manager Yoel Rivelis, it was revealed that the atomic swap won’t be cleared for release by the Foundation’s legal team until the Kin blockchain federation has assembled at least seven full nodes (operated by independent entities) to run the network. In other words, the Foundation has come to the conclusion that based on their blockchain’s consensus model, they can’t reasonably claim that the blockchain is decentralized enough to link to the ERC20 token until they have seven nodes. I’ll say more on why that probably is, in a moment.

This revelation, which comes at the tail end of a Q3 which saw several major announcements from the Kin Foundation, including the launch of the Kinit survey rewards app, the launch of Kin inside of beauty app Perfect365, and the hiring of former Twitch exec Matt DiPietro as CMO, may also explain other undelivered promises from the project.

The Liquidity

For example, a recurring problem for early adopters and followers has been the available market liquidity of the Kin token. During the token’s “distribution event,” community staff assured prospective investors that they had received indication from multiple exchanges that planned to list the token shortly after launch. The Jaxx wallet even formally announced they would support Kin (and presumably, would offer it on their built in Shapeshift exchange as well). And in the year following those statements, the largest exchange overall that has listed the token, HitBTC, only offers one trading pair, and they aren’t even Kin’s largest exchange by volume.

While Livingston claimed that the Foundation had de-prioritized listing the token on exchanges until there was a call to action for developers and advertisers to buy and sell the asset, according to the community staff, it had become a priority as early as late July. And yet, two months later, the token remains unlisted on any additional major exchanges, despite the project’s high profile and connections to various exchanges at the board of directors level.

While many high-volume cryptocurrency exchanges, both in the United States and around the world do not have very strict criteria for asset listing, other than substantial application fees (to the tune of millions of USD), others hold themselves to a high standard of eligibility based on the project’s fundamentals. Perhaps the most sought-after exchange, for its retail customer base and direct pairs to fiat currency, Coinbase publishes strict eligibility criteria (which they call the Digital Asset Framework), which include concepts such as decentralization and token utility. While the ERC20 version of the Kin asset is fully decentralized (at least, as far as the industry at large is concerned), without at least seven nodes, the Kin blockchain is not. And without the aforementioned atomic swap, the ERC20 Kin asset has arguably zero utility, as it isn’t connected to the app ecosystem where Kin is earned and spent.

The Regulators

Coinbase isn’t the only organization involved in crypto that has a problem with tokens that lack the combination of decentralization and utility. The Securities and Exchange Commission of the United States (SEC) regulates the sale of securities assets to and from citizens of the US. The SEC has recently developed a greater interest in enforcing securities laws in the cryptocurrency space, particularly with respect to tokens sold in an initial coin offering event (ICO), which is how the Kin Foundation raised their development funds. After issuing guidance on non-compliant token sales such as The DAO, and taking enforcement action against sales in-progress like Munchee, and completed token sales like Centra, the SEC has been intensely deliberating amongst themselves and other US regulatory bodies to develop a better framework for how the laws should apply to crypto assets.

https://steemitimages.com/0x0/https://cdn.steemitimages.com/DQmesqJsffFW5afTEKJk3thtZJDEGrB1MyFkwF6BKmpxvJa/image.png

William Hinman, SEC Head of Division of Corporation Finance

In June, the head of the SEC’s Division of Corporation Finance issued an unofficial statement that Bitcoin and Ethereum are not securities, and that the decentralized status of their blockchains was a key determining factor in reaching his conclusion. The SEC, which has had an open investigation into Kin’s token sale since shortly after the conclusion of the sale (alongside investigations into dozens of other tokens), is keeping a close eye on how the Kin Foundation conducts itself, and may be watching how it proceeds towards decentralizing its blockchain, and whether it succeeds in providing meaningful utility to the Kin token. Exchanges based in the US, such as Coinbase, Gemini, Bittrex and others, are likely to be wary of listing assets that may fit the SEC’s fuzzy criteria for a security token. And even if the atomic swap were achieved with only one node running the Kin blockchain, the utility of the token would remain limited to that centralized chain, therein not qualifying the ERC20 asset for real utility.

The Partners

Kin has also had a hard time onboarding major partners, as well as smaller developers in the absence of any programmatic incentives for integrating their cryptocurrency. It is plausible that some app companies, who likely follow the crypto space to some degree, aren’t sold on the idea of implementing a currency over which so much power is held by one or two entities, or which is still lacking so many of the fundamental infrastructural features necessary to make it all ‘work.’ This presents something of a ‘chicken and egg’ scenario, in which exchanges, regulators, apps and investors are hesitant to partner with a blockchain so centralized and feature-incomplete today, which means they won’t run nodes for Kin, which means the blockchain won’t become decentralized enough to unblock those missing features.

Naturally, the ‘seven nodes’ requirement raises several key questions, the first of which we (at NuFi) feel we already know the answer to.

So, why does Kin need at least seven nodes?

I’ll defer to Adam to comment on this:

“While it’s important that Kin not be recognized as a security, it is also important that the network not be recognized as a Money Services Business (MSB) by FINCEN.

As we noted within “How Does the Kin Consensus Protocol (KCP) Work?” the Kin network will need a series of federated validator nodes within the network to create balanced quorum slices who can ultimately ensure >66% accepting votes in a network consensus.

So why seven?

Having 7 nodes ensures that no entity controls more than 20% of the vote. Which seems to be the magic number the Kin Foundation believes results in the network not being considered a money services business.

What is so special about 7 nodes and the 20% number?

For the Kin Consensus Protocol to successfully validate a transaction, the network must reach a consensus of >66% of votes. These votes are voted on by overlapping quorum slices, where within each one of those quorum slices a >66% or greater vote must take place.

Since members who follow a quorum slice can have their vote changed by the quorum slice they follow, it actually takes significantly less than 66% of voting power to influence the network.

In fact, if a single actor (entity or user) were to control 20% of the votes in a Federated Byzantine Agreement network (like Kin or Stellar), and all quorum slices within that network overlapped, that it is almost mathematically impossible for the network to vote the same way as the actor who controls 20%. In order to defeat the vote of the 20% actor, every other tangential quorum slice would have to cast their primary vote against the vote of that actor. If any single node within the network that is in a tangential quorum slice were instead to vote in favor of that vote, or vote to accept that vote, or to fail to vote, it would create a domino effect of quorum slices changing their votes due to the level of influence this node has.

The only other way around this would be to isolate that node (or those nodes) in a specific quorum slice, which runs the risk in turn of leaving us with disjointed quorums which result in a broken network.

Given this, anyone who controlled more than 20% of the federated nodes that were default to a Federated Byzantine Agreement network would have the power to:

  1. Always get their vote approved even if it was the initial minority vote.
  2. Hold the network hostage with fractured quorum slices.

In any scenario in which a minority entity (or entities), or a minority of the voting nodes can exercise control over the majority, the network is no longer decentralized and therefore can not be considered exempt as a money services business.

At 7 federated nodes, we are able to create interdependent quorum slices, where no one node has excessive voting power and the majority favor always plays out within these votes.”

Who is running a node today?

As mentioned above, the only confirmed node operator to date is Kik Interactive, developers of the Kik chat app (and current parent company of the not-for-profit Kin Foundation). It’s possible that the two other apps that have partnered with the project, IMVU and Perfect365, are also running (or planning to run) nodes, but we aren’t clear on that.

Who will run nodes in the future, and when?

It’s possible that the Foundation has stipulated in its terms of partnership with apps like IMVU and Perfect365 that they are to run full nodes for the network as soon as they’re ready for integration, but this has never been stated. As for smaller developers and followers of the project, the Foundation hasn’t yet made it clear what the operating costs to run a node will be, and they also haven’t published all of the code necessary to get a full node running on the new blockchain. A preliminary documentation FAQ uncovered on Github a month ago estimated a cost of upwards of $2000/month for Kin blockchain nodes. So, in the meantime, Kin may need four additional major app partners to run nodes in order to achieve their goal of seven.

Other blockchains have thousands of nodes. How does the Kin blockchain have fewer than seven nodes after a whole year since raising $100 million and beginning development?

While Kin started raising funds over a year ago, they didn’t shift blockchain strategy to forking Stellar, thus needing to build their own network of nodes, until May. And because these nodes need to be sufficiently independent of each other in order to truly decentralize the network, they can’t just buy Amazon AWS instances around the world and claim decentralization. They also may be bound by what incentives or funding they can offer node operators, as the Foundation paying for others to run nodes could easily raise eyebrows over the threat of collusion. Still, with nearly five months behind them, and a major fundraise completed, it is concerning that the Foundation hasn’t yet been able to onboard more than just two apps to participate in the ecosystem, and presumably, in consensus as well.

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Five Problems Kin Needs to Solve to Become the Most Used Cryptocurrency by EoY

The Kin Foundation set the lofty goal of “becoming the most used Cryptocurrency by End of Year” in 2018.

Depending on their measure of success, they’ve either got a long way to go, or an incredibly long way to go.

There are also some key problems that stand in their way that will need to be resolved – but shipping solutions to these challenges would send strong signals that Kin is poised for growth in Q4.

The Most Used Cryptocurrency:

To reach the status of the “most used cryptocurrency” by the end of year, Kin would likely need to compete on transaction numbers, transaction volume or total number of wallets. Kin is a long way off on all these fronts, but the most likely measure is in terms of transaction count (especially given Kin’s focus on micro-transactions).

So where does Kin sit currently? As of September 5th, during a slow bear market, here are the top transacting blockchains based on Blocktivity’s reporting of a 7 day average:

Transactions Per Day, Per Blockchain:

  • EOS – 4M transactions/day
  • BTS – 1.2M transactions/day
  • Steem – 1.1M transactions/day
  • ETH – 600k transactions/day
  • BTC – 230k transactions/day
  • KIN – 20k transactions/day

While there is some debate as to the legitimacy of how transactions are counted for “EOS,” “BTS,” and “Steem” (all of whom are made by the same dev), even if we were to discount them entirely and leave ETH as the leader with 600,000 daily transactions, this is still very far from Kin’s 20,000 transactions a day – many of which are automated account creation transactions performed by the Kin Foundation.

So, let’s examine some of those key problems.

Problem #1 – Restricted Integration (SDK):

Even though the Kin Foundation is focused on building an “open and fair” ecosystem on an open source technology, they’ve taken a very restrictive approach to their early integrations.

While the Kin team launched a $3 million Developer Program and accepted 40 different participants to that program, the ability to build on the Kin blockchain is not yet available to anyone else.

Right now, developers who are interested in Kin are stuck:

  • Building for the ERC20 Kin token, which is unsupported. It’s also unclear if these apps will count towards the KRE.
  • Waiting for the Kin SDKs to have a public launch in the future.

At this point in time, developers have no real ability to develop for the Kin ecosystem and so Kin is turning away party guests before they even have a chance to knock on the door.

If Kin hopes to be the most used cryptocurrency by EOY, they will need to play a volume game with developers and not be too dependent on current apps, which could face serious challenges with integration, legal and user education.

Problem #2 – Isolated Ecosystems (Identity Layer):

One of the most important aspects of the Kin Ecosystem, that we’ve yet to hear any official discussion about, is the “Identity Layer” solution.

In order for users to move their Kin in and out of apps without creating multiple wallets, Kin will need to provide some sort of “Login with Kin” button (likely through Kinit) allowing people to receive compound value for their Kin by earning it in one app and spending it anywhere.

This is one of the core tenants for Kin and their “rebel alliance” – without this ability, apps are just isolated ecosystems that are no different than current in-app “rewarded video” experiences.

Rather than create a work-around, Kin has chosen that the first batch of apps will not be able to have users transfer their Kin outside of the app until some unknown future date.

An identity layer is crucial for Kin’s long term success, but the ability for users to transfer their Kin from apps to a public blockchain is table-stakes for truly being the most used cryptocurrency by end of year.

Problem #3 – Centralization (No Public Blockchain):

Kin has positioned themselves as a private, single-product focused blockchain, which wins them no friends within the cryptocurrency community.

Right now, Kin’s nodes are all run by the Kin Foundation or other private members of the ecosystem. It is currently not even possible to run your own node for the Kin blockchain mainnet as:

  1. The GitHub code is not up to date with the mainnet nodes.
  2. The network passphrases are not publicly released.

This means that the Kin Foundation fully controls the Kin blockchain network and could rollback any transaction or change a transaction at any time.

Blockchains are designed for decentralization through ‘trustlessness,’ and Kin won’t be able to become the most used cryptocurrency without building that trust with the blockchain community. Until Kin launches public nodes and decentralizes the network, then they can’t claim to be the most used cryptocurrency, as they would really just be a highly used in-app currency from a private company.

Problem #4 – Trapped Value (No Atomic Swap):

Currently, nearly all the Kin in existence is sitting on the Ethereum blockchain as ERC20 tokens.

The Kin Foundation shifted from Ethereum to their own private Kin Blockchain and left their tooling for the Ethereum blockchain unsupported.

This means there is no real purpose to the Kin ERC20 token (KIN1), and its value is entirely based on speculation until there is an “Atomic Swap” option to bring the Kin back over to the Kin Blockchain.

The Atomic Swap was originally targeted to go live in Q3 of 2018, but has been pushed back until at least late Q4 of 2018. With Kin’s track record of deadlines it is unclear if we’ll see the functionality released by end of year, but, it would be a crucial component to reaching their goal.

Problem #5 – Kik Engagement:

The Kik team has been disappointingly quiet on the progress of integrating Kin into Kik.

While Kik is supposed to act as a core beacon of the Kin Ecosystem, so far we’ve seen mostly idle wallets, minimal updates to the user experience and low engagement rates.

We’ve received minimal insights into the progress here, or future plans/timelines. The one communication we have from the Kin team on the “progress of the Kik integration” left us with vague answers, no hard data or concrete details.

Perhaps Kik is just playing their cards close to their chest – but the article doesn’t instill confidence. Coupled with the low volume of daily active users (and the lack of clarity around Kik wallet creation numbers), it breeds concern that the Kik integration may be under performing.

Integrating Kin into Kik could single handedly result in Kin being the most used cryptocurrency in the world by the end of year, if the engagement and retention rates are strong. This is Kin’s main lifeline for delivering on that goal, and yet the community has mostly been left in the dark here.

TL;DR Recap: How We Become Most Used:

What can Kin do to become the most used cryptocurrency by end of year? Any of these launches would signal good things:

  1. Launch public SDKs.
  2. Launch an Identity Layer.
  3. Launch public blockchain nodes.
  4. Launch the Atomic Swap.
  5. Roll out Kin into Kik.

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What Critics Have Right About Kin

Recently, we published our 5 part series on “What Critics Fail to Understand About Kin.” While we firmly believe that there is a lot of unfair criticism about Kin, there are also many points that critics got right.

At the end of the day, successful projects are often successful not because of the things they do well, but instead because of their ability to identify their short-comings and work to correct them.

We already know the “5 Challenges that Kin Must Overcome to be the Most Used Cryptocurrency by EoY,” but these related primarily to technical and product hurdles.

Given that, it is important for the Kin community to know what critics have right about Kin.

#1 – Kin’s Communication is Either Confusing or MIA:

When it comes to communication from the Kin Foundation team, the community feels they have three choices:

  1. No information.
  2. Confusing and vague statements that don’t get clarified.
  3. A response of “I’ll look into it and get back to you!” that goes unanswered.

The Kin Foundation has struggled in the past to meet their deadlines and fulfill previous production promises. Rather than adjust their goal-setting practice, the Kin Foundation stopped giving updates.

There is no official resource for answers and the community has no insights or updates on:

  • The Kin & Kik Integration.
  • The KRE.
  • The Identity Layer.
  • The Atomic Swap.
  • Partnership integrations with Unity, IMVU or others.

Kin continues to operate like a private company, rather than a blockchain project with community stakeholders – and leaving people in the dark has left a sour taste in the mouth of many community members.

It’s also a misaligned behavior for a company that says its operations will one day be managed by a non-profit foundation where the community is supposed to have a strong voice.

#2 – The Community is Unkept:

Kin’s community is the overgrown garden that no one wants to love or nurture.

In the Kin subreddit, many posts, questions or requests for help are answered by the community members (when they have the information to do so) – but the content remains largely unfiltered. In fact, spammy advertisement for other cryptocurrencies, and referral links to exchanges have often sat on the front-page of the subreddit for days on end leaving the community to wonder where the mods are.

In Telegram the situation is even worse. Users frequently use Telegram to get answers on new projects they are exploring. When they come to the Kin chats, they are instead met with an onslaught of aggressive (and sometimes offensive) memes, and given misinformation by multiple sources. In fact, multiple new people have come into the Kin Telegram in the past day only to be told that Kin is crashing because it’s “an exit scam.”  (Note: The one saving grace here is if that if something is really bad and in need of moderation, you can often ping Benji and he will get to it in the next day or so).

The rare times we do hear from the community team, it’s with odd questions like:

The Kin Foundation has at least 3 full-time community managers, and yet, it’s unclear to the community exactly what they are doing. The community feels ignored and taken for granted and that needs to be resolved.

#3 – Kin Wants Free Labor:

Kin is the cryptocurrency that is supposed to be all about rewarding users who create value. Creating a rebel alliance so people can earn their fair share.

At the same time, Kin has shown on multiple occasions that they want free or underpaid labor themselves – such as with the creation of their Ambassador program, where they wanted tremendous community management commitment and content creation from their Ambassador team in exchange for prizes such as T-shirts or online badges (which are still undelivered weeks after the conclusion of the pilot program).

The team has even gone as far to float the idea of volunteer community moderators to help manage Reddit and Telegram.

It isn’t uncommon in the world of crypto to have users step up and help moderator and manage the community – what is uncommon, and in this case hypocritical, is not paying them.

In most communities, the community member moderators are rewarded with bounties paid out in the tokens they’re working for.

Given that Kin has raised $100 million in an ICO, and sits on trillions of vested Kin tokens, they should ensure they “walk the walk” when it comes to rewarding users who create value.

#4 – The Kin Rewards Engine is Broken:

The real core of Kin is in the KRE. Given that developers are essentially replacing their monetization methods with Kin, they need to be able to be dependably rewarded for their users actions.

Right now, all previously released information about the KRE is considered inaccurate and out of date and the KRE is back on the drawing board.

Kin has realized that:

  1. The KRE would cause too much downward pressure in an early market that is highly illiquid.
  2. The KRE will have challenges in identifying fraud.

There are some other problems they haven’t yet acknowledged:

  1. The KRE doesn’t give a reliable way to predict income per user action (as compared to “Rewarded Ad Views”).
  2. The KRE may open up developers to double-taxation events as it requires both receiving the token (income tax) and then selling the token for fiat (capital gain/loss).
  3. The KRE’s declining reward model, instead of a growing reward model, means early adopters win big, but later adopters will depend on the market growth matching the KRE output.

There are a number of complexities surrounding the KRE, but if developers don’t get clarity on their potential earnings, they simply won’t be willing to take that risk.

Woah, this sounds bleak, do you still believe in Kin?

After writing this article, and addressing “The 5 Challenges Kin Must Overcome to be the Most Used Cryptocurrency by EoY.” I know a lot of people are going to ask if I think Kin can still be successful.

The answer to that is, yes.

I still think they can be successful, although I am also less confident than I was before.

In order to get there, they have to acknowledge and work on correcting the challenges they face both as a team and as a product. Weak teams defend their actions, good teams correct them.

I still own the Kin I’ve purchased – but I’m certainly looking for a change in the status quo.

Why do you think these things are problems for Kin?

While I can appreciate that in any startup you need to “pick what you are best at” and cut corners on other aspects to move quickly, Kin can’t continue to cut corners on community and communication. Success in the blockchain world will depend on a strong community that supports the project, and potential partners will look at how Kin treats their community as a litmus test of how Kin would treat them.

Do you think Kin will be the most used cryptocurrency in 2018?

I highly doubt they will be able to achieve their goal of being “the most used cryptocurrency” by the end of the 2018 year – and I think Kin is going to be a long hold in order for it to be a success.

I think users who are dreaming of a $0.01 Kin (or higher) in 2018 are simply wishful thinkers. I think we have a long journey ahead of us to build a robust ecosystem.

At the same time, I would love nothing more than if the Kin Foundation proves me wrong. This is one case where I’d love to eat my words.

But, I think it is fair, healthy, and constructive for us to admit that there are a few things that critics have right about Kin.

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What Critics Fail to Understand About Kin – Part #4

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:

  1. Creating me a new wallet that is disconnected from all my other wallets and Kin.
  2. 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.

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