The KRE 3.0 was released in 2021, to coincide with Kin’s migration to Solana. The main feature of the KRE 3 was the decision to reward for Active User Balances (AUB) while previous iterations rewarded for the number of transactions apps could generate.
While there were advantages related to directly incentivizing for the number of spends, this also opened up the ecosystem to avenues of gaming and lower quality spends. Additionally, we could see more Kin moving from the KRE into exchanges instead of feeding Kin’s economy.
The main factors with awarding for AUB were:
- Would the economy maintain its vibrancy (spends)?
- Would the Kin economy absorb more Kin due to the AUB metric?
- Would there be possible gaming avenues noted that were not considered?
We have collected several data points in 2021, and used them to help answer these questions as we worked on the next version of the KRE.
Evaluating the AUB metric
1. Net Inflation
We have seen the amount of Kin outside the ecosystem (dark blue) get pulled into apps (light blue), leading to a point of virtual deflation in the future, where the majority of Kin is held inside of apps and is scarce outside. Although this is not yet the case, the AUB metric has been driving Kin in this direction. As Kin’s economy grows and apps take advantage of AUB, we see more Kin entering the app economy over time.
2. Kin burned through user churn
Users installing and uninstalling apps through regular user churn lead to permanent locking of Kin where the private key is deleted when an app is uninstalled. Currently standing at about 6MM / day or 50 Kin per capita, this amount is expected to increase with the:
- Growth of Kin’s economy (users)
- Increase in the average balance held by users.
The amount of Kin locked over time is a subset of the total absorbed by Kin’s economy and contributes to growing Kin’s scarcity. A growing Kin economy requires more Kin to service it, to the point where the amount disbursed by the KRE needs to be supplemented by Kin from the market (buys) to keep users engaged.
3. Developer earnings
In order to control inflation, the amount of Kin disbursed by the KRE has decreased with time, peaking in 2019 and dropping down to 250MM per day. This drop in inflation also correlates with a higher USD value, as developers are earning more today while they continue to grow Kin’s economy. The peak daily earning was ~86K USD on April 4th 2021, whereas it got started at the $1K-5K range in 2019 and most of 2020.
This cooperative competition by developers has led to the healthy growth of Kin’s economy and value.
4. Number of spends per Capita
The daily spends the average user makes has increased with time without the need for explicit rewards in this area. This means that the economy has continued to grow in terms of spends, without forcing developers to solely focus on transactions. By focusing on experiences, they can create meaningful opportunities for users to spend their Kin. The AUB metric has led the number of times a user spends in a month to increase.
This data is encouraging for Kin’s growth and using AUB as a reward mechanism. However, we have found opportunities to improve Kin’s economy, while still following this trajectory.
Opportunities to improve Kin’s Economy
- Volume of spends per capita
Although this value has increased with time, the dollar value spent by individual users remains relatively low (approximately 100 Kin). We need to increase the volume of spending (economic depth) in the economy.
- Median balance per user
This has also increased with time, with apps leading in this area having a median balance of ~19,000 Kin per user. We would like to see this number grow through all apps along with Kin’s economy. Large balances enable users to have more spending opportunities.
- Active Users
We would like to see apps with a higher Active User count rewarded for improving the size of the economy, even as all apps contribute in pulling Kin into the economy. An app with 10,000 users and the same AUB to an app with 5,000 should have a slightly higher reward, for bringing more users into the economy.
- Inter-App Activity
The current algorithm has yet to allow users to migrate between apps while still rewarding developers
- Small apps
New apps need to be able compete and grow with Kin’s economy by lowering the barrier to entry and growth.
Finally, any updates to the KRE need to ensure that:
- There is ample time for developers to experiment, adapt and earn
- There is ample time to adjust while maintaining their core strategy.
- The updates do not initially affect the current ranking, apps that adapt will find themselves earning more Kin and significantly moving up the ranks.
Apps are now able to use buy-module integrations such as Ramp and Simplex,and we encourage them to do so.
Integrating buy modules is optional, however, users purchasing Kin and pulling it into the economy (higher balance) and spending more (higher volumes) will lead to better rewards for apps with these functions..
We expect to release a proposal for KRE 3.1 that is in line with these improvement opportunities to encourage larger spends per users that coincide with larger median balances. Additionally, apps will also be rewarded for increasing the total number of users in Kin’s economy.
Kin is a decentralized cryptocurrency purposely designed to integrate easily across Mobile and Web Apps, with a built-in incentive model that rewards developers for increased usage. Apps built with Kin get paid for creating compelling cryptocurrency-based user experiences, where greater engagement results in shared economic benefits for users and developers. Today, the Kin Ecosystem boasts 60 million wallets, and has distributed over $70M in rewards across 60+ apps since its inception in 2017. Kin is an SPL token on the Solana blockchain, enabling consumer-scale apps to transact swiftly, with minimal-to-no fees. Learn more at Kin.org.