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Welcome to the Kai Protocol - an algorithmic stablecoin running on Klaytn.
Last updated
Welcome to the Kai Protocol - an algorithmic stablecoin running on Klaytn.
Last updated
Kai Protocol is the first stable coin in the Klaytn chain designed by the Kai Protocol team. Klaytn Chain's DeFi services include a variety of solutions that can adjust the supply volume to keep the price of Stable Coin Kai (KAI) at the target price to provide interoperability.
Designed inspired by the Basis Cash Stable Coin project, the Kai Protocol is a multi-token protocol consisting of Kai (KAI), Kai Shares (sKAI) and Kai Bonds (bKAI) tokens.
As a medium of exchange, cryptocurrency has a technologically advanced structure compared to existing monetary instruments, but is treated as a fairly risky investment product due to value volatility and is evaluated as not suitable as a payment instrument. This is because, even while a transaction is being executed, the value of a coin can rise or fall sharply compared to when it was transmitted.
The high volatility of cryptocurrencies is the main reason why cryptocurrencies are not being utilized as mainstream currencies. Due to the rapid volatility of the value converted into fiat currency, the value of the payment changes even during the payment time, making it very difficult to process or respond to it.
Stable coins have emerged to solve these problems.
Tether (USDT), one of the most well-known types of stable coins, is a stable coin that is directly linked to fiat currency in a 1:1 ratio. Stable coins in this way are also called Fiat-Collateralized Stable coin.
Fiat-Collateralized Stable coin issuers hold a reserve in fiat currency and issue tokens in proportion. For example, if the issuer has 1 million dollars, 1 million tokens will be distributed, each worth 1 dollar. Users can freely trade them like tokens or cryptocurrencies, and can always exchange them for the equivalent USD fiat currency.
These Fiat-Collateralized Stable coin are very stable in terms of volatility. However, there is inevitably a high level of user risk here. After all, we have to trust the issuer. Users cannot be sure that the issuer has reserves. It is best to wish the issuing company to be as transparent as possible when submitting their audit reports, and the fact is that such a system is far from a non-trust based system.
Algorithm-based stable coins are not guaranteed by collateral assets such as fiat currency or cryptocurrency. Algorithm stable coins operate entirely on algorithms and smart contacts that manage the issued token supply.
Functionally, the monetary policy of algorithm-based stable coins is quite similar to the way the central bank manages the national currency. Basically, the algorithm-based stable coin system reduces the token circulation when the price of the linked fiat currency is lower.
When the price rises above fiat, additional tokens are supplied to lower the value of the stable coin. These types of tokens are also called Non-Collateralized stable coin, and it is a fact that existing algorithms or non-collateralized stablecoins are less stable to volatility compared to collateralized stablecoins.
Based on analysis and research on existing algorithm stable coins, Kai Protocol is designed to control KAI's prices through an improved supply and demand algorithm compared to existing algorithmic stable coins, and at the same time controls Tether(USDT) and Dai through the buyback fund system.
It is designed to secure a level of stability comparable to that of a fiat currency or Crypto-Collateralized Stablecoin such as DAI).
More details can be found in the MECHANISMS section.
