Kinesis Silver (KAG)

What Kinesis Silver is

Kinesis Silver is a token representing one ounce of allocated physical silver. The Kinesis whitepaper defines KAG as a "1 oz silver contract and token, consisting of silver cast bars of a minimum fineness of 999, and bearing an identifying stamp of a refiner as per ABX Quality Assurance Framework, table of Approved Refiner List" (source: Kinesis Monetary System whitepaper 3.1, July 2020).

The word doing the work is allocated. The whitepaper states that "Allocated means that full direct title to the bullion used for the 1:1 backing of KAU and KAG coins is allocated to the owner of the respective coin." Under an allocated arrangement, specific bullion is titled to the holder rather than being a general claim on a pool, which is a stronger position than an unallocated account in an insolvency.

KAG has a sibling. KAU is the gold token, defined as a "1 fine gram gold contract and token" of minimum fineness 995 under the same refiner framework.

For where to buy Kinesis Silver from your country or state, see the availability tables on this page and the venues listed at Exchanges.

How it works

Tokens are created by minting rather than by issuance against a promise. A user buys silver through the Kinesis Mint, and the whitepaper describes the process: bullion or fiat is brought into the Mint, the corresponding Kinesis currency is "automatically emitted and appears in the Minters Kinesis Wallet," and from there it can be sent, spent or sold.

The ledger is not a general-purpose blockchain. The whitepaper says KAU and KAG "are based on the bespoke Kinesis Blockchain Network (through optimised Stellar technology)," which Kinesis chose to "leverage the high transaction speeds and superior security that Stellar offers" while adding its own functionality.

Fees are published and small, and they are the engine of everything else in the system. Kinesis's current fee schedule gives a 0.22% fee to "Buy or sell gold (KAU) and silver (KAG) bullion at the quoted market price, via the Kinesis dashboard or the Kinesis Exchange," and a 0.45% fee to "Send gold (KAU) and silver (KAG) to another Kinesis account." Mint trade execution is 0.45% per transaction, and a mint deposit from the platform is $25 per transaction.

Storage is the fee that is absent. The schedule states that "Storage fees on all fully allocated precious metals held by Kinesis are eliminated by the robust vaulting infrastructure." For a physical metal product that is the notable line, because vaulting and insurance costs are what normally erode a bullion holding over time.

The yield system is what those transaction fees fund. Kinesis states on its fee page that it "gives back over half of all transaction fees to our users every month – with 6 yields paid in gold and silver," and names them: hold and earn, spend or trade and earn, refer and earn, mint and earn, hold KVTs and earn, and promote Kinesis and earn.

The whitepaper explains the logic behind the design, which it calls a velocity-based yield. Minters "receive a proportional share of the transaction fees as a yield forever on the Kinesis coins they create," with the share depending on how much of the currency they minted relative to all coins in existence and on how much it moves. Holder Yield is described as "purely passive," designed "to compete with bank deposits, stock dividend yields and rental property yields." Referrer and depositor yields reward bringing users and capital in.

The point of paying for movement rather than for holding is stated directly: the system rewards participants "based on their participation and the overall velocity (rate that money changes hands)" of the currency, with the yield "derived purely from economic output rather than debt like fiat currency with fractional banking."

Supply and tokenomics

KAG has no issuance schedule. Supply is whatever has been minted against silver delivered into the vaults, and it contracts when holders redeem. There is no cap, no emission curve and no monetary policy; the constraint is physical bullion.

The whitepaper does not publish the individual yield percentages in its text; they appear in tables the document describes as illustrating "the incentivising yields and their potential per annum return based on the Kinesis systems money velocity rate if all incentivising yields are utilised." Those are modelled figures conditional on velocity assumptions, not published rates, and this page does not restate them. The current fee schedule confirms the aggregate, over half of transaction fees returned monthly, without breaking it into per-yield percentages.

The Kinesis Velocity Token, KVT, is a separate instrument from KAG and KAU. The whitepaper devotes its own section to it and to the initial token offering that distributed it, and the fee page lists holding KVTs as one of the six ways to earn. KVT is not a metal-backed token.

History

Kinesis set out to make bullion transactable rather than merely storable. The whitepaper's stated aim is "a universally adopted, decentralized, asset-backed monetary system" that is "efficient, secure, fair, and incentivizes commercial exchange."

The economic argument behind it is explicitly about Gresham's law. The whitepaper names the principle that "bad money drives out good" and treats it as the obstacle: people spend the currency they value less and hoard the one they value more, so a sound-money token would sit idle. The velocity yield is the counter-measure, paying holders more when their coins move than when they sit.

The Initial Minting Offer ran from 25 March 2019 to 30 August 2019 and offered higher ongoing fee shares to early adopters, with participation requiring subscription in the KVT offering.

Risks and what to watch

Custody is the central risk in any tokenized metal. Allocated title is stronger than an unallocated claim, but the holder still depends on the vault operator, on the accuracy of the allocation records, and on the insurance behind the vaults. Independent verification of the bullion is a matter for the operator's own audit arrangements rather than for the blockchain.

The whitepaper is dated July 2020. Fee figures on this page come from the current schedule, but the yield mechanics, the KVT structure and the platform description all come from a document six years old at the time of writing, and specifics may have moved.

The ledger is a private network built on Stellar technology rather than a public chain with independent validators. That makes the transfer of a KAG token a record on infrastructure Kinesis operates, which is a different trust model from a permissionless blockchain.

Redemption for physical metal is a process with its own terms, minimums and costs, and it is a different action from selling KAG for cash on an exchange.

Silver's price is volatile in its own right. KAG tracks an ounce of silver, so the token's value moves with the metal, including the sharp drawdowns silver is known for.

Frequently asked questions

What backs one KAG?

One ounce of silver. The whitepaper specifies silver cast bars of minimum fineness 999 bearing a refiner's stamp under the ABX Quality Assurance Framework, with full direct title allocated to the coin's owner.

Does Kinesis charge storage fees?

No. The current fee schedule states that storage fees on fully allocated precious metals held by Kinesis "are eliminated by the robust vaulting infrastructure."

What does it cost to buy or send KAG?

The published schedule gives 0.22% to buy or sell at the quoted market price, 0.45% to send to another Kinesis account, 0.45% for mint trade execution, and $25 for a mint deposit from the platform.

How does the Kinesis yield work?

Kinesis states it returns over half of all transaction fees to users monthly across six yields, paid in gold and silver. The whitepaper describes them as velocity-based, rewarding minting, holding, referring and depositing.

Where can you buy Kinesis Silver?

Availability depends on your country or US state. See where to buy Kinesis Silver for the exchanges serving your jurisdiction, and Exchanges to compare fees, kyc requirements and supported payment methods.