Frequently Asked Questions

Frequently Asked Questions About Kowala, kCOINS, and mTokens
  • What is Kowala?

    The Kowala Protocol defines a method for constructing a family of distributed, self-regulating, asset-tracking cryptocurrencies called kCoins. Each kCoin is designed to be traded on open exchanges and to maintain a close to one-to-one value relative to any widely traded asset such as a currency (USD, EUR, JPY, etc.) or other asset. Each kCoin is identified by a symbol consisting of the letter ‘k’ followed by the symbol of the underlying asset. For example, the kCoin of USD is kUSD, that of EUR is kEUR, and so forth. kCoins constantly gather market information from endorsed sources and regulate their value through three core mechanisms: variable block rewards, variable fees, and an active and well-informed trading market. These mechanisms are designed to return each kCoin to parity with its underlying, tracked asset. The expectation that a kCoin will eventually return to parity, in turn, creates arbitrage opportunities for traders seeking to profit from slight fluctuations in kCoin market prices around the peg. Because every kCoin needs a robust exchange market to function properly, each kCoin is implemented as a distinct independent blockchain with its own tokens, smart contracts, mining community, etc.

  • What is a stablecoin?

    A stablecoin is a cryptocurrency designed to keep the value of each of its units equal to the value of a unit of a fiat currency. The first stablecoin that will use the Kowala Protocol is kUSD.

  • Does the amount of mUSD I have impact on my mining performance?

    Yes, generally speaking mining with more mUSD will result in more kUSD mining rewards. This is because the more mUSD staked into a mining client, the more often the holder will have the opportunity to be elected the proposer via the consensus protocol. The elected proposer receives all the rewards for each block.

  • How does Kowala differ from Tether?

    Tether is backed by cash held in bank accounts, whereas kUSD is backed by algorithms designed to keep the supply of kUSD matched to its demand.

  • How does Kowala differ from Basis?

    When coins need to be removed from circulation, Basis does this by encouraging a small set of bondholders to lock up coins, wherease kUSD applies a special stability fee to each transaction and burns the sum of these fees.

  • What are some of your stability mechanisms?

    The primary ones are 1) mining rewards that apply and quickly increase when the price of kUSD is above its $1 target, and 2) stability fees that gradually increase (with a cap of 2%) when the price of kUSD is below its $1 target.

  • What if someone maliciously trying to break the peg?

    A prospective attacker would need to acquire a large amount of kUSD at or near its target price, and then sell this kUSD at a large loss. We expect that after such a theoretical attack, the price of kUSD would gradually return to its target of $1.

  • How can I exchange my kUSD for fiat?

    We expect that kUSD will be listed soon on exchanges. Once kUSD is listed on an exchange, you will need to trade kUSD for BTC or ETH and then BTC or ETH for fiat on the exchange. We expect that, in the future, some exchanges will allow direct trading of kUSD for fiat.

  • How can I exchange my fiat for kUSD?

    We expect that kUSD will be listed soon on exchanges. Once kUSD is listed on an exchange, you will need to trade fiat for BTC or ETH and then BTC or ETH for kUSD on the exchange. We expect that, in the future, some exchanges will allow direct trading of fiat for kUSD.

  • Can kUSD be called a privacy coin? How privacy concerned users can benefit from kUSD?

    Since kUSD started out as a code-fork of Ethereum, it has all the current privacy features of Ethereum. We have not yet added any unique privacy features beyond those already in Ethereum. However, we will consider on a case-by-case basis incorporating into kUSD any new features created for Ethereum, especially those that might enhance privacy.

  • I understand that each block can potentially have a huge kUSD block reward for miners, but does this mean that it is possible for an mUSD to become useless once all the kUSD has been mined?

    There is no pre-set limit to the amount of kUSD that can be mined. This amount is limited only by market demand for kUSD. As long as the circulating market cap of kUSD is growing, the newly minted coins contributing to this growth will be directed to the active miners.

    We distinguish between ‘young’ and ‘mature’ phases of the growth of the kUSD ecosystem. In the young phase, market cap is growing and most mining earnings come from new kUSD minting. Over time, compute fees (called transaction fees, or sometimes gas fees in Ethereum) become more significant. Mining revenue thus shifts over time from new kUSD minting to compute fees on the network. So mUSD won’t ever become useless, but the source of mining rewards will slowly change over time.

  • If investor have a node with 30k mUSD, what average profit ranges expected?

    An easy way to get a rough estimate of block rewards is to decide what the projected kUSD market cap growth will be over a certain period. Then divide the number of mining tokens the node is mining by the total number of tokens all nodes are mining (the total number of available mining tokens is 1,073,741,824). For example, if the market cap for kUSD increases by $3B over 12 months and, during this time, you mine with 30,000 mUSD, you would receive approximately 83,819 kUSD in block rewards.

  • Has anyone figured out the mining rewards formula? It’s quite complicated in the whitepaper.

    The mining rewards formula is actually becoming more sophisticated as we run it through testing. It may get harder to understand for a non-mathematician, but, in general, you can think of the block rewards formula like changing the temperature on your thermostat. When the sun is out and your room heats up, you turn on the AC. The temp in your room lowers gradually degree by degree until it reaches the desired temperature. The kUSD block reward algorithms also will adjust the minting and burning of kUSD in ways that return it gracefully to one dollar.

  • Will you create a downloadable wallet?

    We are building a cool, easy-to-use, web-based wallet app with the launch of kUSD. Stay tuned for more details and maybe some screen shots soon. We will, of course, also provide a downloadable command-line client similar to Ethereum’s geth.

  • Will other crypto wallets support kUSD?

    We expect that they will since kUSD is a fully fledged cryptocurrency, and since its API nearly identical to the familiar Ethereum API, it should be technically easy for other wallet makers to integrate it.