A new cryptocurrency
Kau and Kag, based on 1g of gold and 10g of silver, are planned for next year
A NEW blockchain-based monetary system is claiming an advantage over existing cryptocurrencies such as bitcoin because the units are backed by gold and silver bullion.
Kinesis has been born out of an established organisation, the Allocated Bullion Exchange, or ABX, founded in Australia in 2011 and now one of the world’s leading electronic exchanges for precious metals. The system’s currency units, the Kau and the Kag, based on 1 gram of gold and 10 grams of silver, respectively, will probably launch early next year.
According to Andrew Maguire, a member of the Kinesis advisory board, South Africans will be able to access the Kinesis currency in a similar way to how they access existing cryptocurrencies such as bitcoin and Ether.
Regarding South African merchants, Maguire said consumers would be able to use any merchants who accept Visa or Mastercard and they would be able to use an ATM machine to convert Kinesis to cash in the local currency. “In the medium term, Kinesis will look to grow a base of international merchants and merchant aggregators to accept Kinesis currencies directly,” said Maguire.
Preceding the launch of the cryptocurrency, Kinesis is offering Kinesis Velocity Tokens (KVTs), which are investment tokens to build the initial financial backing for the system. These are limited to 300 000.
“These are on sale now via Kinesis. Those who buy them receive an ongoing portion of the transaction income from the Kinesis monetary system, so they are an investment instrument, rather like shares,” said Maguire.
Maguire said the Kau and Kag would probably launch around February next year.
“They are based 1:1 on physical gold and silver bullion and will be subject to fluctuations in the underlying price of bullion. Both will, at a minimum, be bid in line with spot London bullion, since Kinesis does not charge storage fees. One could argue that the increase in demand for real physical gold and silver will suck liquidity out of the price-setting synthetic paper markets and provide a stronger, less volatile environment for gold and silver,” he said.
The gold and silver bullion backing Kinesis is stored in highly secure thirdparty vaults around the world. The bullion, which is fully insured, will be subject to semi-annual audits.
Maguire says the Kinesis system is attractive to both consumers and investors for the following reasons: • Depositing money in a bank in the traditional way effectively means taking on bank risk, where you are exposed above the guarantee limit. Kinesis does not expose you in this way because it is backed gram for gram by gold and silver. There is no counter-party risk because the depositor retains title to the gold and silver represented by their deposit. • As Kinesis is managed via the blockchain rather than the traditional banking system, it protects against “haircuts” for depositors, as happened in Cyprus in 2012/13. • With other cryptocurrencies, the title can be held by the exchange and the end user holds a warrant to that title. “This is why crypto exchanges get hacked, because they are effectively treasuries,” Maguire says. • Kinesis is cost efficient, Maguire says, with transaction costs at just 0.45 percent.