CRYPTOMARKET

Kowala (mUSD) ICO Analysis: An Autonomously Stabilized Cryptocurrency

Project Description
For all the advantages that they bring as payment options, cryptocurrencies are notoriously volatile. To curb this volatility, a number of solutions have been proffered by a number of cryptocurrency projects with most of them attempting to deliver a stablecoin that has its value pegged to the US dollar. However, even the most popular of the stablecoins, Tether, has proven to be vulnerable to the practices of banks and governments.

Kowala wants to try a new approach, the project aims to introduce a family of distributed, self-regulating, asset-tracking cryptocurrencies. These cryptocurrencies, named kCoins, will attempt to maintain a 1:1 ratio with some of the most widely-traded assets in the world — USD, EUR, JPY, etc. Kowala’s first stablecoin will be the kUSD, and its value should correspond to that of the US Dollar. Kowala plans to regulate the value of kCoins using 3 core mechanisms: variable block rewards, variable fees and an active trading market. The project also wants to introduce a block reward algorithm that is applicable to 4 different scenarios: initial, divergent-rising, divergent-falling and convergent. The algorithm will make counteracting smaller price changes possible, and as a result, block rewards will be changed w.r.t. the previous block’s reward.

In the case of a divergent-rising scenario, i.e. when the price of kUSD is increasing beyond $1, the block’s reward will be made 1% more than the previous block reward. Consequently, miners on Kowala will earn lots of newly-minted coins and before long, a large number of these coins will reach exchanges as SELL orders, driving the price of kUSD down as a result. For instances that the price of kUSD reduces below $1, all transactions on the Kowala network will be charged a “stability fee”, and the project expects that this will reduce coin supply for some time. This should serve to drive the price up; to ensure that it does, the stability fees will be sent to dead-end addresses, ensuring that they are not in circulation. These 2 mechanisms should cause the price of kUSD to reattain parity with the USD.

Before kUSD is launched, Kowala plans to generate 1,073,741,842 mUSD tokens to facilitate the allocation of kUSD mining rewards. It is also important to note that block rewards on the Kowala protocol are not allocated by the proof-of-stake or proof-of-work mechanism. Instead, they are allocated by an innovative mechanism called the proof-of-control. In this mechanism, people who own mUSD tokens will have an exclusive right to mine within the associated mining sector; to exercise this right, they have to register their tokens in an mUSD block reward roster. Put simply, they have to prove cryptographically that they hold control of the private keys that unlock the addresses that hold the mUSD.

Furthermore, mUSD owners can either perform mining activities directly or through third-parties. What this means, essentially, is: anyone that owns mUSD tokens can authorise a mining operator to mine on their behalf — the operator is to be paid by the owner. This model should remove the excessive use of electricity for crypto-mining because there is no incentive for a miner to outperform other miners. Additionally, security is to be provided on Kowala by distributing blockchain validation-by-consensus across various independent parties.

Existing Product
The project already has a testnet.

Hard Cap and Valuation
As mentioned above, Kowala plans to generate 1,073,741,824 mUSD tokens before the launch of kUSD. Approximately 10% of the total above were sold to early investors, advisors, and team members in October 2017. The project plans to hold 15% indefinitely, and the remaining 75% will be sold in one or more token sales in the future. Investors that buy mUSD after the launch of kUSD will not receive any portion of block rewards that were generated prior to their purchase.

Marketing Power
As of the time this post was published, Kowala had over 350 followers on Twitter, over 160 followers on Instagram, over 120 followers on Facebook, over 115 followers on Telegram, 58 subscribers on Youtube, 52 followers on Linkedin, 25 followers on Reddit and 4 followers on Medium.

Team Members’ Areas of Expertise

Business experts

Eiland Glover, Co-Founder and CEO.

  • Founder and CEO of Perquia — which allowed publicly traded companies create and issue fractional shares of their own stock as part of a customer rewards and loyalty program — for 3 years.
  • CEO of Danycare Medical Beauty, a spin off from Adagen Medicalpartnership, for a year.
  • Founder of Stoke Education, a tutoring service, for almost 6 years.

Target market experts

Luke Sully, Advisor.

  • Global Blockchain Lead for Security at IBM for a year.

Marketing experts

Craig Bromberg, Chief Marketing Officer.

  • Chief Marketing Officer at Steemit for 3 months.
  • Director of Digital Business Development at LRN, a company that specializes in advising and educating organizations, for less than a year.
  • Strategic Account Executive at SurveyMonkey, a data platform, for a year.

Sara Walker-Santana, Content Marketing Director.

  • Strategic Marketing Consultant at Equinox for 5 months.
  • She worked in the Marketing at Macy’s East for 11 years.

Legal experts

No team member with legal expertise.

Software engineering experts

John Reitano, Co-Founder and CTO.

  • Software Engineer at several firms, including Hedgeye Risk Managementand Enact Health Management Systems.
  • He is proficient in Java, HTML, CSS, C++, Oracle and Linux.

Adam King, Application Engineer / UX Designer.

  • Software Developer at Hedgeye Risk Management for almost 2 years.

Blockchain development experts

Ricardo Geraldes, Senior Blockchain Engineer

  • Software Engineer at im for 6 months.

Token sale structure

No team member with prior ICO launch experience. However, the project has a partnership agreement with CanYA — they held a token sale in December 2017 and raised 11,013 ETH.

Token economics

Same as above.

Conclusion

Strengths

  • There is need for a stable cryptocurrency.
  • No need for a “supercomputer” to mine kUSD → low energy consumption and reasonable hardware requirements.

Potential risks for investors

  • Small community.
  • Strong competition (DAI etc.).
  • At some point, kUSD will rely on traders to remain stable.
  • In comparison to Tether, kUSD has no actual collateral that supports it’s $1 valuation. For one, there is no proof that Tether has $2.3 billion sitting around somewhere. However, this may also be a risk.

Disclaimers:

  • Nothing written in this article is a legal or an investment advice.
  • Information is provided on a best-effort basis and is subject to change without prior notice. Be sure to verify everything you read with a project team.

The analysis was produced by Research Center team members: Alexander Hinz, Mark Jedd, Anna Muratova.

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