Kinesis is a gold and silver backed cryptocurrency which aims to be a complete monetary system. By depositing gold or silver for KAU or KAG tokens, you not only get fee-free storage for your precious metals but share in the profits generated from transactions on the Kinesis network.
In addition to their metal backed tokens, they also have a purely digital revenue-sharing token called the Kinesis Velocity Token (KVT). The quantity of KVT is fixed at 300,000, unlike KAU/KAG which expand and contract with the amount of gold and silver held in the system. The advantage of owning KVT over depositing gold or silver, is that your share in the transaction fees is fixed, instead of being diluted as more people join the system.
Rather than issuing equity (shares) in a private or public offering, Kinesis are effectively funding their development with an initial coin offering (ICO) of KVT. After several extensions to the deadline, Kinesis recently completed its ICO for the KVT, selling around 200,000 tokens for US$1,000 each, leading to a total of $200 Million in initial funding to build the system. The outstanding 100,000 KVT remain with the Kinesis founders.
If this was a traditional equity funding round, it would give Kinesis a valuation of $300 Million. This is a significant amount, so the question must be asked, is this justified? There are several potential issues with Kinesis and their valuation. While entitling the holder to profit sharing, the KVT does not have the voting rights or regulatory oversight of traditional shares.
A market cap of $300 Million makes Kinesis worth more than Goldmoney ($170 million at time of writing) a publically listed (XAU.TO) digital gold custodian. Goldmoney already has $1.5 Billion assets under management and pays a dividend. Goldmoney initially tried to cover storage fees and insurance using transaction fees. However, over time Goldmoney had to shift towards charging storage fees as customers choose to save rather than spend their gold.
Current tax law in most countries makes the accounting of transacting in any foreign currency, fiat, crypto or gold complex, and so we seem far from a world in which people transact widely in alternative currencies.
With these potential problems in mind, and with their being more than 50 competing gold backed crypto currencies in development including one from the Perth Mint, it seems hard to justify the valuation of the Kinesis Velocity Token, and whether there will ever be a worthwhile return on investment.
