Stabilisation Mechanism

Round Cycle

The round cycle is changed to 1 hour so that the KAI supply can be adjusted according to the dynamic price volatility of stablecoins in the Klaytn network.
Depending on the round cycle, the price of KAI is investigated to determine whether to increase the issuance of KAI or increase the bKAI.

Reference Price(TWAP)

The reference price (TWAP) is a 1-hour weighted average price determined through the exchange rate of the clayswap KUSDT+KAI pair and determines the expansion/contraction status of the round.
Expected price (TWAP) is the 1-hour weighted average price determined through the exchange rate of the KUSDT+KAI pair from the start of the round, and is the estimated price for the next round.

Expansionary Policy

[Based on the 2022-01-06 update]
If the base price (TWAP) at the start of the round is above $0.995, additional KAI is issued to meet the market demand and distributed among sKAI single deposit participants.
  • Additional issuance = KAI circulation x issuance rate
  • KAI Circulation = KAI Supply - Treasry KAI Reserved
  • The issuance rate is fixed according to the KAI circulation as shown in the image below.
[Based on 2021-10-07 update]
※ Since the price volatility of stablecoins in the KLAYswap is maintained between $1.003 and $0.995, rather than maintaining the maximum standard of $1.003 for additional KAI issuance, if the KAI price is maintained within the price volatility of other stable coins, it is considered a stable price. As a result, the base price (TWAP) of the expansion round and the issuance base are changed.
When the KAI reference price (TWAP) at the start of the round is above $0.995, it will be in an extended state, and additional KAI will be minted according to the KAI circulation and issuance limit. Additional minted KAI will be distributed proportionally to sKAI holders who have deposited sKAI on the Kai Protocol homepage.
  • Additional KAI issuance from round 340 = KAI circulation * 0.1%
  • When the amount of bKAI circulation at the start of the round versus the amount of KAI held by the Treasury Contract is small
    • The additional KAI issuance is temporarily changed to 3%.
    • For the distribution of sKAI deposit, the amount corresponding to the additional issuance limit is transferred to the Boardroom Contract and distributed.
    • The remaining amount is held by the Treasury Contract and is used for repayment of bKAI.
[Based on before the 2021-10-07 update]
When TWAP-KAI's time-weighted average price is $1 KUSDT or higher, KAI is extended to be minted additionally, and sKAI holders who deposit sKAI into Kai Protocol can earn additional KAI as compensation.
During the first week (21 rounds), the extended KAI extra mint limit is fixed at 3.00%, after which it is adjusted according to the total KAI supply as shown in the table below. After the limit is determined, the issuance limit will not change to the previous figure, even if the circulation volume temporarily changes with the purchase of a reduced state bKAI.
  • KAI additional issuance from round 22 = (Time-weighted average price -1) * 30%
  • If the amount of bKAI circulation at the start of the round versus the amount of KAI held by the Treasury Contract is small
    • The additional KAI issuance amount is temporarily changed to 3%.
    • For the distribution of sKAI deposit, the quantity corresponding to the additional issuance limit is transferred to the Boardroom Contract and distributed.
    • The remaining amount is held by the Treasury Contract and is used for repayment of bKAI.
Total KAI Supply
Additional Supply Limit
Under 1m
3.00% Cap
1m+
2.00% Cap
2m+
1.50% Cap
5m+
1.00% Cap
10m+
0.50% Cap
20m+
0.25% Cap
50m+
0.10% Cap
10% of KAI additional amount will be accumulated as a team fund and will be used for price stabilization and marketing of KAI.
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Team Fund Address: 0xe3b68dca64782c8130a13c6d5b8efb0a1332159a
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In the expanded state, in addition to the additional issuance of KAI described above, KAI for accumulating the buyback fund is minted separately.

Contraction state

When TWAP-KAI's time-weighted average price is less than $0.995 USDT, bKAI is minted in a Contraction state. You can purchase 3% BKAI of the total amount of KAI.
KAI holders can purchase bKAI at a 1:1 ratio, and the KAI used is incinerated and excluded from the circulating supply. However, the total circulation of bKAI cannot exceed 35% of the total circulation of KAI.
bKAI holders can obtain sKAI as compensation by supplying liquidity to the bKAI-KAI pool in the Klay swap. The reward pool is activated when state is Contraction, and KAI can quickly recover to its target price through demand for KAI. After price stabilization, bKAI-KAI's liquidity providers will have more sKAI, allowing them to steak sKAI and obtain more KAI when the protocol is extended.
The bKAI-KAI sKAI distribution ratio is determined by the formula below, with a minimum value of 7 and a maximum value of 40. According to the applied distribution rate, the distribution rate of other liquidity pools decreases proportionally, and even if it is changed to an expansion round, it will be maintained for at least 2 rounds (16 hours).
  • bKAI-KAI sKAI Earn rate = (150 * (bKAI circulation at the time of contraction status / KAI circulation) + 3)
Since there is no expiration date for bKAI, holders can repay it to KAI through a claim at any time. The KAI exchange rate for bKAI repayment is 1:1 by default.
The mechanism that prevents more KAI from being swapped for bKAI does not seem to benefit the user, but it maintains the price stability of KAI, which has recovered prices above $1 by curbing the issuance of additional KAI in the protocol as a whole.

Buyback Fund

[Based on 2021-10-07 update]
When the time-weighted average price of TWAP-KAI trades higher than $0.995 USDT and is extended, KAI will mint additional KAI under the formula below to create a buyback fund.
  • KAI additional issuance for minimum buyback funds = KAI additional issuance * 30%
  • If the base price (TWAP) is $1.003 or more
    • Additional KAI issuance for buyback funds = (Price(TWAP) - 1) * 10%
    • Maximum limit is 3%
KAI additionally issued as a buyback fund is converted into KUSDT, KDAI, KUSDC, and KLAY to be accumulated and used to stabilize the KAI price. In order to rule out the risk of arbitrage, buybacks are held on an irregular basis. The buyback automatic algorithm reviews the application when KAI price stabilization and buyback fund KUSDT holdings approach 100% of KAI circulation.
In order to stably expand the size of buyback funds other than additional KAI issuance, monetization is carried out through liquidity supply up to 70% of the funds held.
  • Basic monetization pool : KUSDT+KDAI, KUSDT+KUSDC, KLAY+KUSDT
※ 50% of sKAI held by buyback fund monetization and buyback will be used as a source for expanding the buyback fund size, and 50% will be distributed to a single depositor of sKAI. It will be updated when the application time is confirmed.
[Based on before the 2021-10-07 update]
When the time-weighted average price of TWAP-KAI trades higher than $1 USDT and is extended, KAI will mint additional KAI under the formula below to create a buyback fund.
  • KAI additional issuance for buyback funds = (time weighted average price - 1) * 10%
  • The limit of KAI additional issuance for buyback funds is 3% and the value is subject to change.
  • Example) When the average time-weighted price is $1.05, additional issuance for the creation of a buyback fund is 0.5%
KAI created as a buyback fund is converted into KUSDT, KDAI, KUSDC, and KLAY to be accumulated and used for KAI price stabilization. (For the sake of efficient buyback, the operating time of the buyback fund will not be separately announced for the time being.)
The buyback fund is implemented as a smart contract that can only buy, sell, and burn.