The cryptocurrency that will soon help power the popular Kik messaging app is making a big technology shift — again.
Kik’s crypto token, kin, currently exists as an ethereum-based ERC-20 token, yet ExposedCrypto recently reported that’d the company would be moving to a two-chain system whereby its tokens were supported on both the ethereum blockchain and the stellar blockchain. But today, the Kin Foundation, the non-profit organization managing the development of kin, has announced another move, deciding instead to fork stellar to create its own blockchain.
While Kik had first envisioned the two-chain system because it worried about transaction fees on ethereum – a blockchain that pushed up against its scale when the crypto-collectable cat game, CryptoKitties, went viral – Kik has decided that even stellar’s minimal fees were too much for what the company hopes to accomplish.
For its kin token, the problem with stellar is that it costs a tiny amount to make a transaction on that blockchain, and that has to be paid in lumens, stellar’s native cryptocurrency.
Whereas on Kik’s own blockchain, transactions won’t cost anything.
This is especially important given Kik’s goal for its cryptocurrency – to facilitate micropayments, as small as a penny or even less, across the internet more efficiently. The theory is that, if these seamless transactions are possible, entrepreneurs will start creating new digital services that encourage transactions between users for things like inexpensive private chats, digital gifts (like stickers or gifs), personalized photos and more.
Speaking to ExposedCrypto about the decision, Kik CEO Ted Livingston told ExposedCrypto:
“I think what makes Kin unique is it’s one of the very few projects where product is driving the technology and not vice versa.”
To encourage entrepreneurs to create these services on the Kik app, the Kin Foundation has a giant pool of kin in reserve that it will use to automatically pay entrepreneurs for fostering economic activity, called the Kin Rewards Engine (KRE). The KRE will pay out a share of kin every day, rewarding each app based on how much economic activity it generated that day.
According to the announcement Tuesday, all that activity will now take place on kin’s blockchain.
Yet, ethereum will still be involved. When a founder has earned enough kin that they want to hold, the idea is they could use a technique called atomic swaps to move their kin over to ethereum. In short, every kin token will exist on two ledgers: one on the ethereum blockchain and one on the kin blockchain.
When its kin half is in a user’s wallet, the ethereum half is locked up in a smart contract, and vice versa.
But while this is the roadmap today, Livingston won’t hazard a guess about when this system will officially go live. Although, the company is currently moving forward with building its own open-source codebase, cloned from the stellar protocol and, as Livingston put it, “taking destiny into our own hands.”
Federated nodes, zero fees
While Livingston remains bullish on stellar, having evaluated other blockchains as he looked for workable solutions, stellar still wasn’t exactly the right fit for Kik.
“It wasn’t that the fees were too high, it’s that they cost something and that created an incentive for spammers,” he said.
While originally, the team had thought it could just subsidize the transaction fees, they soon realized that it would have to put lumens in people’s wallets to do that. As such, they theorized that bad actors could then just create a bunch of wallets and scrape up the lumens, in an effort to secure enough money to make an impact on the network.
As such, Kik has created a fee-less proprietary blockchain, and have done so with the use of established, permissioned nodes.
“When you look at the Stellar network and compare it with Kin’s fork of Stellar, the two networks are identical, with one exception: the people running the federation nodes,” Livingston said.
For instance, the Kin Foundation will run the first node, but Livingston said, that as the company brings on more partners, those partners will be expected to run trusted nodes, too. As such, even though the Kin Foundation will initially control the blockchain, because all nodes will be treated equal, eventually the foundation’s voting power over the network will diminish.
Unlike nodes in the stellar federation, these partners won’t earn anything for validating transactions (if they did, there would need to be a transaction fee). But Livingston believes future kin nodes will be run by the large services driving the kin economy, the ones that earn a lot of income through the KRE, so have a strong interest in seeing the value of kin grow steadily and as such, will volunteer as nodes.
“As more digital services come on board, and as the Kin ecosystem gets bigger and the consumer base gets bigger, there’s more incentive for more people to run these federated nodes,” Livingston said.
This move, while trading off some decentralization for high throughput, aligns with what some industry analysts, including Blockchain Capital’s Spencer Bogart, have predicted as a forthcoming trend. Bogart worries that these systems will become not innovative blockchain systems but ones that resemble the current centralized systems we have today.
But Livingston argues that difference is trustlessness.
“If this is going to be a common currency between billions of consumers across thousands of digital communities, we need it to be trustless,” he said, adding that consumers can rest assured that it isn’t possible for any one entity on the network to take their cryptocurrency from them.
But censorship resistance?
Yet, what could suffer in this federated node model is cryptocurrency’s first raison d’etre – censorship resistance.
For instance, if the kin token ran on stellar, validation would be separate from use cases. Validators would earn income from securing the network, and companies building services to use kin would have paid those validators in fees for use of the network. But under Kin’s new vision, the larger companies driving the public facing use cases will also provide back-end validation.
And those will be companies who could collectively decide, for example, to ban a service viewed as offensive or malicious from using the network (in other words, to censor it).
Think of it like this: imagine that the internet today were built in a similar way to the kin blockchain. The big nodes – services probably like Ebay, Etsy, Vimeo and others that successfully encourage people to spend money with each other – could get together and decide to block a site’s transactions that they or their users think is offensive.
Would the stellar nodes made up of largely unknown back-end internet services companies cave to collective social pressure before a bunch of companies with widespread name recognition and a large base of consumer users decide to act as dictator?
Knowing that the latter is probably more likely, this is what many crypto enthusiasts want to guard against through the use of decentralized cryptocurrency protocols.
It’s a question Livingston has grappled with, but contends it’s an exception that maybe isn’t as bad as it sounds.
“The question is less about the terrible stuff of the world. That’s stuff we’re all going to have to grapple with as a global society,” he said, adding, “The question is more about centralized powerCould Kin become a centralized authority in the kin ecosystem? And we want the answer to that to be no.”
Governance, Livingston continued, is one of the most interesting topics in cryptocurrency right now, and the team behind kin is thinking about all these problems actively.
“I think the really exciting thing from an engineering point of view is kin is at the bleeding edge of solving these blockchain challenges and leading the industry there.”
Bike chain image via Shutterstock