1. Product Name
- Kurrency
2. Product Overview
- Kurrency is a service that mints Crypto Dollar; a token designed to maintain its value at 1 USD. Crypto Dollar of Kurrency, KCD(Klaytn Crypto Dollar) maintains its value at 1 KCD = 1 USD based on Kurrency Team’s priority on Stability - which ensures that minted KCD is always backed with collateral of higher value.
- Kurrency’s CDP contract ensures that KCD is always minted at 1 USD regardless of the market price. Therefore, should KCD market price be higher than 1 USD, participants can mint KCD at 1 USD and sell in the market for arbitrage profit - until KCD supply has increased and KCD price has returned to 1 USD.
- Contrarily, should KCD market price be lower than 1 USD, participants can repay their minted KCD for arbitrage profit. KCD minters can retrieve their collateral after repaying the equal number of KCD they have minted - regardless of KCD price. Therefore, lower KCD market price would be an opportunity for KCD minters to repay their minted KCD at a lower price, and retrieve their collateral - until KCD demand has increased and KCD price has returned to 1 USD.
- Liquidation is also a method for maintaining 1 KCD = 1 USD peg. KCD positions whose collateral value has declined to certain value are automatically liquidated in order to maintain overcollateralization of KCD.
- In the unlikely case that KCD price drops drastically, Kurrency has also prepared “Recovery Mode” whereby KCD can recover its peg by encouraging purchase of KCD within the market. When Recovery Mode is activated, KCD mint is suspended for 10 minutes, and Stability Fee for each collateral is increased. KCD mint suspension restricts demands for KCD to only be met by purhase in the market - which ultimately appreciates KCD value closer to 1 USD again. Increased Stability Fee encourages KCD minters to repay their minted KCD - which ultimately means that i) KCD supply in the market has decreased due to repayment, and ii) Minters will purchase KCD from the market for repayment, which again appreciates KCD value closer to 1 USD.
- In addition to CDP mint of KCD, Kurrency also provides PSM(Peg Stability Module), where users can exchange KCD with other stablecoins (oUSDT, KDAI and oUSDC) - supporting KCD peg to 1 USD. KCD Peg is supported by continuous arbitrage opportunity through PSM. Regardless of the price of KCD, KCD can always be exchanged with equal amount of stablecoin - rather than value. Therefore, when KCD is a bit higher than 1 USD, users can exchange stablecoins with equal amount KCD - resulting in arbitrage profit. In the opposite case when KCD is a bit lower than 1 USD, KCD can be exchanged to equal number of stablecoins - again resulting in arbitrage profit. It is also notable that KCD peg can be guaranteed by PSM reserve of stablecoins.
- KCD minters have to pay Stability Fee, which is minting fee that starts accruing when KCD is minted. However, Stability Fee can be reduced with revenue generated from safe management of users’ collateral.
- Kurrency also provides “KCD Earn” as a method of monetizing KCD. Users can deposit their KCD to KCD Earn to receive revenue in real-time. KCD Earn revenue is generated from Stability Fee of KCD minters and revenue generated from safe management of users’ collateral.
- Please refer to Kurrency Docs for more information
3. Background
(1) Need for Key Currency of KLAYTN Network
- Key Currency that maintains its value plays a very important role in the Ecosystem as the medium of trade.
- Generally stablecoin acts as Key Currency due to its stability. However KLAYTN Network has low stablecoin market cap as compared to other networks.
- Stablecoin Market Cap of major chains are : (23.Oct.05, Source : Defillama [Link])
- ETH(65.8b USD), BSC(5.0b USD), Arbitrum(1.66b USD), Solana(1.51b USD), Polygon(1.30b US0D).
- Comparably, Klaytn is only 52.06m, which is staggering 1/1263 that of Ethereum.
- TVL of each chain is also notable (23.Oct.05, Source : Coinmarketcap Link)
- ETH TVL is 47.8b USD, while Klaytn TVL is 148.64m USD.
- Comparably, Klaytn TVL is 1/322 that of Ethereum.
- Klaytn TVL is significantly smaller than Ethereum TVL, but Stablecoin market cap of Klaytn is even lower.
This implies that KLAYTN Network does not have a strong stablecoin that can act as the Key Currency.
- Stablecoin Market Cap of major chains are : (23.Oct.05, Source : Defillama [Link])
- The need for Key Currency will not only be highlighted in current NFT or DeFi market, but also will be increased in upcoming
RWA(Real World Asset)and STO(Security Token Offering) markets.- With solidification of STO regulations, STO and RWA markets are expanding, with increased participation of traditional finance. It is speculated that many companies will soon utilize STO model for greater funding. As such, STO will soon play an important role in the financial market.
- Vitalization of RWA and STO within KLAYTN Network requires
stable medium of trade- which can easily be stablecoin that acts as the Key Currency of the Network.
(2) Need for NATIVE Key Currency
- Currently most of the stablecoins in KLAYTN Network are bridged from other chains (23.Oct.05) :
- Bridged (90%) : USDT (56.06%), DAI (20.29%), USDC (13.68%)
- Native (10%) : KSD (8.47%), KCD (1.30%)
- Due to high demand for stablecoins in most DEX / DeFi protocols of KLAYTN, it can be speculated that stablecoins bridged to KLAYTN Network are mainly utilized only in DEX / DeFi investment, rather than acting as Key Currency.
- Relying only on bridged stablecoins possesses multiple risks, including, but not limited to : Dependency on external stablecoin projects, hacking/exploit of bridge services and significant price gap between original stablecoin and bridged stablecoin.
- i.e. Multichain issue of 23.July : Nearly 120 million USD had been exploited and there were various issues regarding CEO - ultimately leading to conclusion of the bridge service.
Therefore, KLAYTN Network needs native stablecoin that can act as Key Currency.
4. Proposal
(1) Summary
- Goal : Providing
300k USDLiquidity to KLAY/KCD Pool - Required Asset : Total of
525k USDworth of KLAY- 375k USD worth of KLAY : Collateral for minting 150k KCD(LTV : 40%)
- 150k USD worth of KLAY : KLAY to be provided as liquidity in pair with 150k KCD
- Liquidity Period :
- KLAY-KCD Liquidity will initially provided for 1 Year
- Further decision on Liquidity Provision after the Initial Period is subject to discussion with KLAYTN Governance Council.
- Decision on the DEX to which KLAY/KCD liquidity shall be provided will be discussed with Klaytn Foundation.
- Provided KLAY will NOT be spent nor sold; rather, it will be utilized to provide liquidity.
- Kurrency Team will create customized CDP vault for Klaytn Foundation. Customization/Benefits will include :
-
NO Stability Fee (10% →
0%)- Currently on Kurrency :
- 10% Stability Fee is incurred for KCD positions with KLAY collateral. Stabilty Fee can be reduced with revenue generated from safe management of users’ collateral.
- Accumulation of Stability Fee may lead to liquidation of the position.
- Benefit for Klaytn Foundation :
NO Stability Feeis incurred for KCD position in order to minimize the risk of liquidation from accumulation of Stability Fee.
- Currently on Kurrency :
-
Lower Mint LTV (45% →
40%)- Currently on Kurrency :
- Mint LTV for KLAY collateral is 45%, which indicates that for every 100 USD worth of KLAY collateral, 45 KCD can be minted.
- Benefit for Klaytn Foundation :
LTV for this proposal is adjusted to 40%in order to further minimize the risk of liquidation so as to ensure safety of KLAY Collateral.
- Currently on Kurrency :
-
NO Liquidation Fee (10% →
0%)- Currently on Kurrency :
- In case of liquidation, Liquidation Fee of 10% is incurred to KCD positions with KLAY collateral.
- Benefit for Klaytn Foundation :
NO Liquidation Feeis incurred in order to protect KLAY fund of this proposal
- Currently on Kurrency :
-
NO asset management of KLAY collateral
- Currently on Kurrency :
- Users’ collateral is managed in KLEVA’s KLAY Lending Pool for profit, and the profit is used to reduce Stability Fee and provide reward to KCD Earn.
- Benefit for Klaytn Foundation :
KLAY Collateral will not be managedin order to prevent any risk to KLAY Collateral. Risks may include bad debt, difficulty to withdraw KLAY collateral, or any risks that may rise due to unforeseen issues.- Other disadvantages of managing KLAY Collateral in KLEVA KLAY Lending Pool include :
- Reduced reward for other KLAY Lending Pool participants which ultimately disincentivizes participation on the pool.
- KLEVA KLAY Lending Pool is pool of KLAY to be lent to other users for Leveraged Yield Farming, meaning KLAY Collateral being managed in KLAY Lending Pool may be utilized / provided as liquidity in other DEX/DeFi investment - which may incur unforeseen issues.
- Currently on Kurrency :
-
LTV Management Bot
- Kurrency Team will develop and provide LTV Management Bot that can aid Klaytn Foundation to manage LTV in order to prevent risks of Liquidation. LTV Management Bot will include features such as :
- Monitoring LTV of KCD position
- Daily alert / update on LTV
- Emergency Alert when LTV has reached 50%
- Note : LTV will start from Mint LTV (40%), but may increase when KLAY Collateral depreciates in value. When LTV has reached Liquidation LTV at 60%, KCD position may be liquidated. Therefore, it is advisable to manage position before LTV reaches Liquidation LTV
- Kurrency Team will develop and provide LTV Management Bot that can aid Klaytn Foundation to manage LTV in order to prevent risks of Liquidation. LTV Management Bot will include features such as :
-
- Utility of any profit that may occur with liquidity provision will be decided after discussion with Klaytn Foundation (e.g. Buyback & Burn of KLAY in the market)
(2) Expected Effect
- Expanding native Key Currency liquidity without selling/dumping KLAY
- KLAY will only be used as collateral to mint KCD and to provide necessary liquidity.
- Constructing the foundation for vitalization and expansion of RWA & STO market
- Basis of RWA & STO market is stable medium of trade : Key Currency (KCD).
- As Key Currency, KCD must be conveniently accessible and abundant in the network.
- Users with experience / knowledge of CDP mint will continue to utilize CDP of Kurrency to mint KCD; however, general users who may yet not be comfortable with CDP mint will be able to conveniently purchase KCD from the market generated from liquidity provided by this proposal.
- Building the foundation for institutional on/off-ramp
- Participants(both individuals and institutions) wishing to enter certain blockchain network with Fiat prefer to utilize Native Stablecoin of the network due to its bridge-free, relatively risk-free nature.
- One of the main reasons that Circle is providing native USDC to Optimism(Link)
- With KCD as native Stablecoin - Key Currency of Klaytn - Klaytn Network can also build the foundation for on/off-ramp of fiat based participants, opening doors to greater expansion.
- Participants(both individuals and institutions) wishing to enter certain blockchain network with Fiat prefer to utilize Native Stablecoin of the network due to its bridge-free, relatively risk-free nature.
- Deflation of KLAY / KLAY Value Appreciation
- Profit from Liquidity Provision
- Any profit that may occur from Liquidity Provision will be used for the betterment of KLAYTN Network after discussion with Klaytn Foundation.
- i.e. The profit can be used for Buyback and Burn of KLAY in the market.
- Increased demand for KLAY gas fee
- The main focus of this proposal is establishing native stablecoin, KCD as Key Currency of KLAYTN Network.
- Once Key Currency has been established, KLAYTN Network will be able to build the foundation for next level Decentralized Finances and markets, including RWA, STO and institutional on-ramp.
- With the introduction of new markets, new participants will join - increasing traffic and transactions of KLAYTN Network.
- Increasing transactions mean that KLAY is more in demand - for it is required as Gas Fee.
- Thus leading to value appreciation and further burn of KLAY.
- Profit from Liquidity Provision
- Stabilizing KCD peg to 1 USD → Thus strengthening role as Key Currency(Positive Cycle)
- Increased KCD liquidity within KLAYTN Network would lower price impact of KCD trades, thus further stabilizing KCD price and its peg to 1 USD.
- Greater stability of KCD will strengthen its utility as Key Currency of KLAYTN Network - which then creates positive feedback loop between KCD price stability and Key Currency utility.
- The positive feedback loop then again solidifies the foundation for KLAYTN to allow next level Decentralized Finances and markets.
(3) Competitive Advantages
- Kurrency is operated by WEMIX PTE. LTD., the blockchain subsidiary of WEMADE, a publicly listed company on KOSDAQ. With advanced experience in implementing numerous blockchain projects, WEMADE possesses the expertise required to stably operate blockchain service.
- WEMADE has been member of KLAYTN Governance Council since 2019; one of the longest member of Klaytn GC. As Governance Council, WEMADE is directly related to the betterment of KLAYTN Network, and thus further incentivized to improve KLAYTN.
5. Team Information
- WEMIX PTE. LTD.
6. Official Links
- Official Site : Kurrency
- Discord : Kurrency
- X : https://twitter.com/KurrencyFinance
- Medium : Klaytn Crypto Dollar – Kurrency – Medium
- User Docs : https://docs.kurrency.io/v/kcd.en/introduction/intro
