Gresham's Law Calculator

Hi Kinesis Forum,

I've been a sound money advocate for 15 years now, slowly stacking silver and gold. So, when I found Kinesis last week, I became extremely excited and slightly obsessed. I have just set up an account, but it’s not funded yet because I’m still in the process of convincing myself whether this is a worthwhile project to invest in. For that reason, I created a simple excel tool for which I will explain more below.

Gresham's Law Calculator

I was always under the impression that because of Gresham’s Law, if fiat is circulating there is no economic incentive to use gold and silver for everyday transactions. So, in order to fully convince myself and in the future others, I want to truly understand under what scenarios using the Kinesis platform would be profitable. If transacting in gold and silver using the Kinesis platform is truly more profitable for the individual than traditional banking that should be enough to catalyze the movement back to a gold standard. To that end I made a basic excel file that tracks an individual’s financials over the course of a year under two scenarios - banking with Kinesis or with a traditional bank. I want to be as accurate as possible without making it too complicated because it’s meant to be a tool for regular people to use and help them understand the benefits of Kinesis. Plus, I’m an engineer – not a financier.
To that end I made some assumptions and simplifications:

• The main difference between a traditional bank and Kinesis is where the fees and yield come from.
• If you look at inflation as a fee (which I do) then the fee you pay using a traditional bank is inflation. On the other hand, instead of an inflation fee, Kinesis has fees all along the process (from loading money into the debit card, transacting, withdrawing, etc.).
• Of course, fees are one side of the calculation and yields are the other. If fees are high but yield is higher that can move money to a system with higher fees.
• Essentially money will flow to whichever system maximizes the equation: Y (yield) – F (fees)
• For traditional banks, yield comes in the form of cash back, air miles, increased lines of credit, and interest rates from savings accounts. From Kinesis this comes from holder’s yield, minters yield, KVT, velocity yield, referrers yield. However, in order to keep things simple, I’ve decided to only look at fees. This may be an oversimplification on my part, and I would appreciate feedback from how you would handle this.
• I've also assumed that the relative price of gold to other goods is constant (which I think is a fair assumption in the long term)

All the information used for this tool such as fees and when they’re applied was gathered from the Kinesis website and my limited understanding of how the system works – not from personal experience. So please play around with the calculator. I hope you find it useful and with your feedback we can develop something more powerful. Also, I haven't seen one, but if there is a similar tool, please point me in the direction so I can play around with it.

I’m happy to be part of this community and excited to witness this project grow.

Looking forward for your comments and feedback!

Gabe

 

[Derek]

(As an aside, I opened the attachment in something other than Excel and it did not appear to be malicious. )

This is hard to model, as there are lots of factors that we can't clearly define:

• Back when we had the VISA cards, we saw yield on KAU for the previous year of nearly 7%. Now, there was quite a bit of artificial fee generation from mint cycling for KVTs, but we're also looking at millions of small spenders in developing nations coming online in what appears to be the near future that will be generating more fees than they consume. Yields may be significantly higher than you're (not) assuming.
• 10% annual inflation is reasonable to assume. It's nearly twice that by the traditional measures of the 1980's, but it's a reasonable assumption - technological advancement is disinflationary, after all. Or is it deflationary? Whatever, a 50" 4k TV costs one hell of a lot less than an old 20" B&W RCA set television did back in the day in real terms.
• We don't know the effect of velocity yield. As it's a % of the total yield pool it might be monstrous, or it might not. When we get physical cards (without the Baanx fees) and see the rewards system that goes live with them, mixed with velocity yield, it might be significant.
• The same goes for minter's yield. If you're minting $100,000 of gold every year as you deposit your paycheck into Kinesis, and the overall pool of money increases at a slower rate than velocity (because folks close to the global median income ($850 or so) spend every penny making ends meet and don't mint, then minting yield might actually start to matter. For now mint cycling for KVTs has really diluted this.
• How many people just want to opt out of the debt-based fiat system and hold real wealth even if it costs a percent or two?
• How long will the dollar remain relevant, and what will gold do? If the BRICS+ nations move closer and closer to a commodities-based trade currency, it's very possible gold will appreciate 10%+ per year in buying power relative to the dollar, in which case you've got another factor to model that will make a big difference.

This is probably something we'll need to model in a year or two when we understand how the components interact, and how these new nation-state partners affect velocity and yields.

I for one appreciate the effort you put into this.

 

[AlM]

Welcome Gabe and thank you for the s/s. It is a really valuable resource and could prove indispensable in many discussions.

Below is an extract of a post I made a few weeks ago, but the people you contact about Kinesis will have their own stories to persuade themselves, if this the concern. Search for "450k" to see the full post, but in a word, "inflation".

As Tom mentioned in last week's video with WSS, Kinesis is an alternative monetary system, which is useful in itself to spread risk, but run for the benefit of the hundreds of millions of people who are about to use it, not for the few thousand of the existing structures. Enlightened politicians in some countries are seeing this. The value proposition is overwhelming.

Preserving purchasing power has been gold's real value over the long term. Kinesis puts the after burners on and for the short term, too, with its yields. These have hardly started, as inputs to the yield system are just beginning: the VDC, cashback, bullion store, countries, businesses and institutions have yet really to get going, but I've been paid by Kinesis in physical gold and silver about this time of every month for over a year, so know that it works and that almost everything is in place.

Conversely, which bank returns over half its revenues to customers? Kinesis wants to give people financial freedom via its fees from a debt-free system, growing the real economy to increase velocity and create more fees to share with customers. Banks must keep people indebted for life via their fees, otherwise bankers are out of a job and we can see that happening now. At school we were never told why it *wasn't* a good idea to get a mortgage or a loan and whom these instruments benefit.

In the West, our term "spreadsheets" may or may not derive from sheets of cloth spread on tables in the Middle Ages, used to tally nobles' tax revenues and expenses, but some Japanese delegates on a course once told me, their instructor, that conceptually the sheet is actually wrapped around a globe, feeding back on itself, like a 3-D circle and this is indeed how they work. Kinesis is changing the circle from vicious to virtuous.

Anyway, the example:

"My 70-year-old sister recently corrected my mistake: our parents bought a completely typical, 3-bedroom semi-detached house in January 1970 for £5,000, not £6,000, as I'd thought.

Gold spot then was £17/oz, so 294 ozs for the house.

The drop in fiat purchasing power means that £450,000 are needed to buy the same house today.

*However*, with spot at £1,473/oz you'd still need only 305 ozs of gold.

So...£5k / £450k = 1.1% or a 98.9% drop in purchasing power of the pound. BTC didn't exist then and may not in 50 years' time, but gold?

Your killer point, Jeff, to use with the Bitcoiners, is that this excludes all yields that Kinesis will add from real world purchases. This is the innovation in precious metals that Kinesis has brought.

There's no better non-voting share than one of the 300k KVTs, forget about 21m BTC."

 

[Will]

Welcome Gabe! i assume you found us thru Wallstreet Silver?
Here are some good reasons to leave the traditional bank system: sound money, verifiable(6 month audits), 3-5 second transactions(runs on XLM)and most importantly, unconfiscatable, yield bearing insured asset. The only question is what ratio of KAU and KAG you choose. So far Gresh. Law has volume of KAU far exceeding KAG volume , as we all believe silver stacking will be more profitable in the short run. In my opinion if your looking for yield KAU paid 6.9% last year, nice return in upside down world!

 

[GabeR]

Hey Derek thanks for your feedback - you helped me realize that because the yield system is complicated and in the early days it's probably best when playing around with the model to either leave yields alone completely or assume a conservative average yield for Kinesis. With that said, I have revised the calculator to include yields in case someone wants to play around with that part as well, but I think that given the feedback so far, it’s hard to confidently assume a 7% yield will be average moving forward.

Maybe you will agree that even in the scenario where we only consider fees the calculator could still allow us to understand which economic scenarios the Kinesis platform outperforms the traditional banking system. To me that’s very important to understand because only then can a data backed argument for using Kinesis be made. Of course, I’m sympathetic to the sound money cause but for the sake of mass adoption the project will never grow beyond a niche market if it’s not sustainable and profitable for the individual. Also, for Kinesis to keep providing yields to customers and storing their gold for free - people need to use the Kinesis platform for debit card transactions.

From playing around with the calculator I found the factors that affect Kinesis’s value proposition are:

1.) Inflation

2.) Initial savings

3.) Savings rate

4.) Monthly income

• In general the higher the inflation rate and initial savings, the more attractive Kinesis's value proposition is.

• At high inflation rates Kinesis outperforms traditional banks except in the case of no savings, 0% savings rate, and a high monthly income.

• At medium inflation rates Kinesis outperforms traditional banks except when there is no savings and a low savings rate.

• Even at low inflation rates, Kinesis can be profitable for an individual as long as they either have high initial savings or a high savings rate.

• If an individual doesn't have any initial savings and their monthly savings rate is 0% no rate of inflation will make Kinesis advantageous

I encourage everyone to take the results above with a healthy amount of skepticism and review the calculator to make sure it’s working appropriately. With that said from my findings there's a lot of value that Kinesis offers even in low inflation scenarios, which to me is key when convincing other people. Because people may admit that inflation is a problem now but they are convinced that it's transitory, so not worth the time to invest in Kinesis if we'll have low levels of inflation in a couple years.

I know it's early days but for Kinesis to grow organically and catalyze a return to sound money, Kinesis needs to save/grow peoples' money under normal circumstances, not just in high inflation environments. It’s easy to convince people like me who are sympathetic to the cause, but most of the world will only switch to Kinesis if there’s an economic incentive. And a simple “trust me bro” isn’t going to cut it. Hopefully this tool will help people answer this question for themselves. Please see the attached updated excel file to play around!!!

 

[GabeR]

Welcome Gabe! i assume you found us thru Wallstreet Silver?
Here are some good reasons to leave the traditional bank system: sound money, verifiable(6 month audits), 3-5 second transactions(runs on XLM)and most importantly, unconfiscatable, yield bearing insured asset. The only question is what ratio of KAU and KAG you choose. So far Gresh. Law has volume of KAU far exceeding KAG volume , as we all believe silver stacking will be more profitable in the short run. In my opinion if your looking for yield KAU paid 6.9% last year, nice return in upside down world!

Hey Will! It's great to be here. I made my way here via Peter Schiff's podcast. He mentioned Kinesis as a potential gold backed crypto and that sparked my interest. Then I started researching and got hooked.

 

[rightone72]

Hi Guys, I haven't read everything in this thread yet but what came to mind already is while this is a comparison between those solely using Fiat systems to store their wealth and using Kinesis as a daily driver monetary system. Many have come to Kinesis from already storing some of their wealth in physical metals where there are either yearly storage fees or premiums paid when buying and selling, to those who already saw the value of carrying those costs Kinesis is reducing those costs and also continues to return more of them over time.

Plus it could be argued that the Fiat or CBDC systems that we see on the horizon need to have extra not insignificant considerations factored in.

But I am interested in seeing to breakdown of the current yield comparisons

 

[GabeR]

Hi Guys, I haven't read everything in this thread yet but what came to mind already is while this is a comparison between those solely using Fiat systems to store their wealth and using Kinesis as a daily driver monetary system. Many have come to Kinesis from already storing some of their wealth in physical metals where there are either yearly storage fees or premiums paid when buying and selling, to those who already saw the value of carrying those costs Kinesis is reducing those costs and also continues to return more of them over time.

Plus it could be argued that the Fiat or CBDC systems that we see on the horizon need to have extra not insignificant considerations factored in.

But I am interested in seeing to breakdown of the current yield comparisons

I understand what you're saying in the first part. Yes Kinesis has found a way to give gold holders a yield. This is unique because no one else is doing it and definitely incentivizes people to store their gold with Kinesis. However, the way they pay that yield is by collecting transaction fees. And the way they collect transaction fees is when people use their debit card. So in order for people to collect yield on holding their gold with Kinesis people need to make transactions with the debit card. If no one makes transactions then there's no possible way for Kinesis to pay the gold holders a yield and would have to start charging people to store their gold.

This calculator is intended to help people analyze their own financial situation and decide whether it makes sense for them to use Kinesis as a savings/checking bank.

 

[Rhyno]

I understand what you're saying in the first part. Yes Kinesis has found a way to give gold holders a yield. This is unique because no one else is doing it and definitely incentivizes people to store their gold with Kinesis. However, the way they pay that yield is by collecting transaction fees. And the way they collect transaction fees is when people use their debit card. So in order for people to collect yield on holding their gold with Kinesis people need to make transactions with the debit card. If no one makes transactions then there's no possible way for Kinesis to pay the gold holders a yield and would have to start charging people to store their gold.

This calculator is intended to help people analyze their own financial situation and decide whether it makes sense for them to use Kinesis as a savings/checking bank.

There are many ways to look at this from a competitive standpoint. The debit card is one that goes through legacy systems like VISA/MC that gives Kinesis instant access to millions of retailers. IMO that is a stepping stone and the real goal is direct transfers between users and businesses. For example, the Kinesis cash-back system(US only) provides a 3% cash back in PMs by eliminating legacy system fees. The friction on that right now is .22% to obtain the KAU/KAG, so net savings for the consumer is 2.78%.

The true comparison is with credit card cash back; I'm ignoring debit cards right now because the conversation is about comparing cash-back systems to each other.

In a true direct transfer system where Kinesis is part of a point of sale system at a restaurant the friction would be ~.44% to the consumer if using the exchange to obtain KAU/KAG and spend that KAU/KAG. The net savings is 2.56% which is more than enough to incentivize use of Kinesis over legacy systems by eliminating their fees and giving the customer that discount; CCs usually have a flat fee plus around 3% per transaction. Most credit card cash back systems then "return" a max of 2% to the consumer in the form of cash or points, but as we know the merchant is paying that and by extension fees get passed onto the consumer.

Although some CCs have instances of cash back higher than 2%, on specific items such as gas; it's mostly a max of 2% across the board here in the US. So Kinesis therefore competes nicely with legacy systems in just cash back potential. The merchant could give an instant in-store discount of 3% and break even on the transaction, like the cash-back example. The consumer gains .56% over legacy systems in this way.

This does not consider velocity and holders yields the consumer gets for being in the system. Additionally it does not consider merchant side incentives such as the 10% partner yields(white label) and referral yields(7.5%) that can be leveraged to incentivize Kinesis further from the merchant standpoint.

So let's say Kinesis partners(white label) with Revel a point of sale system Moes restaurants use where a meal averages $15. Revel would get 10% of all the transaction fees that comes through and perhaps the franchise owner gets the referral yield or it could all go to Revel. This would mean an additional kick-back of 6.75 cents for Revel and 1.1 cents to the store itself.

So now you have incentives for Revel to push adoption and even open accounts by giving first time discounts in order to gain referrals. The tech to do this would be simple for Revel by just using a QR code scan system that adds referrals and takes payments by using the API. We already have the Cryptoniq tool a free tool that the bullion store uses in this way.

 

[AlM]

There are many ways to look at this from a competitive standpoint. The debit card is one that goes through legacy systems like VISA/MC that gives Kinesis instant access to millions of retailers. IMO that is a stepping stone and the real goal is direct transfers between users and businesses. For example, the Kinesis cash-back system(US only) provides a 3% cash back in PMs by eliminating legacy system fees. The friction on that right now is .22% to obtain the KAU/KAG, so net savings for the consumer is 2.78%.

The true comparison is with credit card cash back; I'm ignoring debit cards right now because the conversation is about comparing cash-back systems to each other.

In a true direct transfer system where Kinesis is part of a point of sale system at a restaurant the friction would be .45% to the consumer if using the exchange to obtain KAU/KAG and spend that KAU/KAG. The net savings is 2.55% which is more than enough to incentivize use of Kinesis over legacy systems which usually have a flat fee plus around 3%. Most credit card cash back systems are pays a max of 2% to the consumer, but as we know the merchant is paying that.

Although some CCs have instances of cash back higher than 2%, on specific items such as gas; it's mostly a max of 2% across the board. So Kinesis therefore competes nicely with legacy systems in just cash back potential. The merchant could give an instant in-store discount of 3% and break even on the transaction, like the cash-back example. The consumer gains .55% over legacy systems in this way.

This does not consider velocity and holders yields the consumer gets for being in the system. Additionally it does not consider merchant side incentives such as the 10% partner yields(white label) and referral yields(7.5%) that can be leveraged to incentivize Kinesis further from the merchant standpoint.

So let's say Kinesis partners(white label) with Revel a point of sale system Moes restaurants use where a meal averages $15. Revel would get 10% of all the transaction fees that comes through and perhaps the franchise owner gets the referral yield or it could all go to Revel. This would mean an additional kick-back of 6.75 cents for Revel and 1.1 cents to the store itself.

So now you have incentives for Revel to push adoption and even open accounts by giving first time discounts in order to gain referrals. The tech to do this would be simple for Revel by just using a QR code scan system that adds referrals and takes payments by using the API. We already have the Cryptoniq tool a free tool that the bullionstore uses in this way.

View attachment 848

Amazingly detailed. Well, that's settled once and for all.

 

[SteveW]

Hi Kinesis Forum,

I've been a sound money advocate for 15 years now, slowly stacking silver and gold. So, when I found Kinesis last week, I became extremely excited and slightly obsessed.

Hi Gabe,

Welcome to the forum and to Kinesis. Your tour de force calculator is somewhat out of my depth but I appreciate more from your subsequent posts.

I'd like to move outside the box of Western thinking and point out what we have heard from our African representative. While we often have 3 or 4 banks at the main downtown intersection they can often be several miles travel in rural Africa. Yet almost everyone has one of those smartphones. In that environment, many are unbanked while Kinesis is better than a bank, especially for micropayments.

So, a major thrust of Kinesis is to bring a monetary payment system to those who are currently underserved while also attracting those in the West who are looking for sound money.

 

[GabeR]

the real goal is direct transfers between users and businesses

Pardon my naivety but I thought Kinesis's offerings were more close to that of a traditional bank. Some place where you deposit your funds to gain interest plus a debit card to spend. But from this statement it seems like you're suggesting Kinesis is trying to become a digital payments network similar to Visa or Mastercard?

The broader question that this thread is trying to answer is - under what exact economic conditions will people be motivated to use Kinesis? This will help us understand what market Kinesis is trying to capture and how big that market will be.

For example the model I shared shows that individuals (or businesses) that make/spend a lot of money but have low margins/savings rates will not find Kinesis profitable. This means it may be a waste of time trying to target these big businesses. However, that doesn't mean Kinesis is useless to all people. The model also shows that people who have high initial savings and a low income/spend will find Kinesis incredibly profitable. This class of people are typically retirees who are living off their savings and a small pension. Not surprisingly these are also the people who most negatively affected by inflation.

 

[Derek]

Pardon my naivety but I thought Kinesis's offerings were more close to that of a traditional bank. Some place where you deposit your funds to gain interest plus a debit card to spend. But from this statement it seems like you're suggesting Kinesis is trying to become a digital payments network similar to Visa or Mastercard?

I think the vision is a bit bigger than you're describing here.

For instance: Indonesia. Over a hundred-million un- or under-banked in the country, many with family members who are migrant workers and send money home from Malaysia. Kinesis has teamed up with the government to make a white-labeled version of Kinesis the savings/payment app for those hundred-million-plus people. Now (well, once the government finally rolls it out) anyone with a phone can make payments for utilities without walking miles to the post office, can save their money and earn a yield, can accept payments or make payments in a couple of seconds, can send their money home, etc. All on Kinesis, and using a currency that's historically resistant to inflation.

As part of this Kinesis has built the first commercial-quality vault in the country, and will be making sure that the gold that backs the Indonesian population's assets is stored in Indonesia itself. In return the government modernizes it's population, soothes some of the restlessness that's caused by economic uncertainty, and their partner yield will be adding to the bars of gold in the national treasury.

And we see those tiny payments generate fees, which funds the master fee pool. It's win/win/win.

Now another country is about to announce it's partnership with Kinesis, and there are apparently another ten having talks.

That is the Kinesis vision. So yes - it's about bringing back sound money and rational banking practices using modern technology, but it's also about providing that system to a billion plus people who've been locked out of banking and payment systems until now.

(At least, this is how I understand the system.)

 

[AlM]

Pardon my naivety but I thought Kinesis's offerings were more close to that of a traditional bank. Some place where you deposit your funds to gain interest plus a debit card to spend. But from this statement it seems like you're suggesting Kinesis is trying to become a digital payments network similar to Visa or Mastercard?

The broader question that this thread is trying to answer is - under what exact economic conditions will people be motivated to use Kinesis? This will help us understand what market Kinesis is trying to capture and how big that market will be.

For example the model I shared shows that individuals (or businesses) that make/spend a lot of money but have low margins/savings rates will not find Kinesis profitable. This means it may be a waste of time trying to target these big businesses. However, that doesn't mean Kinesis is useless to all people. The model also shows that people who have high initial savings and a low income/spend will find Kinesis incredibly profitable. This class of people are typically retirees who are living off their savings and a small pension. Not surprisingly these are also the people who most negatively affected by inflation.

The return *of* money is ultimately more important than the return *on* money.

Kinesis offers an alternative store of value, outside conventional fiat banking.

People understand that inflation is, right now, destroying their purchasing power. Governments, even without a CBDC, can authorise bail-ins, taking as much of their citizens' savings as "needed". This happened in Cyprus ten years ago and we saw what Canada did to its own taxpayers who supported the truckers.

Hence whether Kinesis produces 4% or 5% return per annum (already maybe 10x what's possible from a savings account) is less important than knowing that they do not have all their eggs in a single, fiat basket, but in physical gold and silver. Equally no-one is recommending putting everything in to Kinesis for the same reasons.

*When* the system fails, children will go hungry and lack basic necessities, such as heating. We can see this happening already in the UK and in other "advanced" nations. The strains are showing and we're much luckier than most.

Fear can be a great motivation. For this kind of thing, the old saying, "People buy from people", is not true. People buy people, based on trust. If they need to be swayed by fractions of a percent, something's wrong.

 

[rightone72]

I understand what you're saying in the first part. Yes Kinesis has found a way to give gold holders a yield. This is unique because no one else is doing it and definitely incentivizes people to store their gold with Kinesis. However, the way they pay that yield is by collecting transaction fees. And the way they collect transaction fees is when people use their debit card. So in order for people to collect yield on holding their gold with Kinesis people need to make transactions with the debit card. If no one makes transactions then there's no possible way for Kinesis to pay the gold holders a yield and would have to start charging people to store their gold.

This calculator is intended to help people analyze their own financial situation and decide whether it makes sense for them to use Kinesis as a savings/checking bank.

Transaction fees on spending via the card is only one input to the total yield basket, and I imagine currently it wouldn't be making up a large percentage as it is only in Beta testing in some places and the US hasn't been on-boarded with yet either. Low fees (compared to other services) are charged on every transaction and yields are set in their distribution ratios. The system seems to be growing fine without relying solely on the card transactions. There are videos explaining the various yields and charges here

I think for many advocates of sound money a robust system that is working, reliable, versatile and universal would be enough of a reason to use the platform, the fact that it has incentives written it to its code to give back to it's users is just icing on the cake

 

[Rhyno]

I thought Kinesis's offerings were more close to that of a traditional bank. Some place where you deposit your funds to gain interest plus a debit card to spend. But from this statement it seems like you're suggesting Kinesis is trying to become a digital payments network similar to Visa or Mastercard?

It is this...but potentially so much more than just a savings and interest vehicle.

It is called KMS Kinesis Monetary System. So from that label I think of it as a parallel monetary option that you can run in conjunction with the normal fiat where you live. I like to think of the different ways I can pay/receive as intersects with the normal fiat system, but I get to choose my exposure level. A new twist on Greshams law: if all my money is "good" and I have no "bad" money left. So each month my money will move in and out of KMS aka velocity.

The yield system rewards participation based on different kinds of use and KVT are like the dividends of a cooperative or credit union where participants benefit from the overall revenue

The broader question that this thread is trying to answer is - under what exact economic conditions will people be motivated to use Kinesis? This will help us understand what market Kinesis is trying to capture and how big that market will be.

There are at least 3 main targets. The sound money community, the crypto community and trade finance/commerce(institutional and retail). In addition, the application of Kinesis differ depending on the country. US based user habits will differ greatly from Indonesia and Turkey.

 

[rightone72]

Also while you are receiving an interest payment on your Fiat deposits, which are gradually starting to increase, I know that currently 3-4% is not bad a bad interest rate in Australia at the moment, The overall purchasing power of the Fiat currency is reducing due to inflationary pressures at around the same level or higher depending how you calculate it. Wiping out much of the perceived gains.

 

[GabeR]

From tinkering with the calculator I discovered that initial savings and savings rates play a huge role in determining whether using the Kinesis platform as a checking and savings account was profitable for the individual or not. The conclusion from this is that for SAVINGS it makes sense to use Kinesis even in an environment of low inflation. However, whether using the CHECKING portion of Kinesis wasn't conclusive. This led me to separate the two and analyze the CHECKING account portion.

This analysis is important for a couple reasons:

1. If using Kinesis as a checkings account is more expensive than a traditional bank then the individual will be incentivized to use a hybrid of Kinesis and traditional banks. Kinesis for a savings account and a traditional bank for a checking account. This would look something like: a person makes $10,000 a month, spends $7,000 on expenses using his traditional bank checking account and sends $3,000 to Kinesis to earn yield.
2. All the platform features (zero storage fees and yield) depend on users utilizing the system as a checking account to generate fees. B.c. it's obvious if everyone just holds gold in Kinesis vaults and no one transacts with it then there will be no fees to pay for these features.
3. Put another way, the SAVINGS account portion actually costs Kinesis money to maintain and acts as a net drain on yields so the transactions from the CHECKING accounts need to offset the operations expenses of the SAVINGS accounts.

What I found is that it doesn't make sense to use Kinesis as a CHECKING account if annual inflation is under 70% with the current fee structure of:

• Kinesis Virtual Card Transaction Fee: 0.95%
• Card Provider Transaction Fee: 1%
• Trade Execution Fee on instant KAU, KAG or crypto: 0.22%

Of course this is a function of fees and the lower Kinesis is able to make their fees the lower the inflation rate would need to be to make Kinesis profitable for the individual.

For those interested, the way the model works is it takes a person's income say $1,000 and then assumes the person spends all of it equally over a month ($1,000/30days=$33.33/day). The model then compares how much money an individual would lose to fees from Kinesis or from inflation. So assuming an annual inflation rate of 50% is a daily inflation rate of 50/12/30 = 0.1388%. That means every day the individual loses an average of $0.69. The individual loses more money at the beginning of the month when it has more cash than at the end of the month when it has spent all the money so there's nothing for inflation to erode. On the flip side when the individual uses Kinesis they lose $33.33*(.95+1+.22)/100 = $0.723 every day.

In conclusion - with Kinesis' current fee structure it would take inflation rates greater than 70% to economically incentivize people to use Kinesis as a checking account. This is significant because the zero storage fees and yields are dependent on the transactions that come from people utilizing Kinesis as a checking account. I'm not saying it's impossible we will get to inflation rates of 70%, in fact I think it's likely given 1.) Levels of debt owed by US gov 2.) Politically captured central bank that will liquidate debt with a printing press 3.) the lack of economic understanding the average American has. All in all, hopefully this tool will help people make informed decisions and teach people about the alternative monetary system Kinesis is building.

Please open the model and correct me if you see something that needs correction. The checking account analysis is on the tab titled "checking account dashboard". In the future hopefully I can make this document an HTML file so it's easier to share and tinker with.

 

[SteveW]

Thanks for the analysis. One simple comment about your model, which considers equal expenditures every day, whereas expenses often accumulate at month end. The Kinesis Virtual Card Transaction Fee of 0.95% is remitted into the master fee pool leaving the Card Provider Transaction Fee of 1%. This could indicate that the physical card may have at most a 1% transaction fee to the user.

The 3% metal back deal for specific merchants is a better deal for US clients. Further down the road we hope that transactions will use native currency and may even be charged at 0.22% to both client and merchant.

Your bank checking account is money that you loan to the bank and is at risk of bail-in.

Finally Kinesis is only just closing the loop as an end to end monetary system and has numerous areas for growth that could well alter your calculations.

 

[Rhyno]

I agree with Steve. The effort to create a calculator is great. However using the global virtual card is an oversimplification of the options.

Quick example: I have a lot of "savings" in sitting in Kinesis and am currently using my Citibank CC for all daily spending. I get 2% cash back on this spending. I pay this card off every month using auto bank draft, so there is a net gain to me of 2%.

It is however possible to start paying this card out of KMS via Wise as I have a US bank account with them and could make that my withdrawal account from Kinesis; there is however that $25 fee(friction). I would then set up an auto-draft from Wise into Citibank to pay the monthly bill.

I am considering a start to this as a medium term solution in January by sending the CC bill amount into KMS once the bill posts and convert USD into KAU. The grace period is about 28 days

This strategy would get the 2% in cash back, holders yield for the grace period(28 days) I'm holding the KAU(technically already spent); velocity yield for the trade in/out of KAU. Importantly I would still be supporting KMS, the master fee pool with all my velocity and limiting my exposure to fiat/USD/inflation by only interacting with the fiat system on my terms.

Downsides are the .22% fee both in and out of KAU and $25 fee; could perhaps consider the spread on KAU as well, however I've got potential KAU value gains over time as I expect the trend to be upwards as fiat devalues.

My hope is with the coming physical card and hybrid banking that it would eliminate that $25 fee. I could then eliminate Wise and just start using the Kinesis Physical Card for all spending or the integrated banking to continue paying the Citibank card. Alternatively the payments tab once fully developed could even serve as a 'bill-pay' like traditional banks have. There are many other bills I pay this way and I'd want to consolidate all of them in one place for simplicity sake.