As I have already explained in other articles on the web, Kuailian uses Ethereum (ETH) as a payment method. However, since it doesn’t work with PoS technology yet (that will come with ETH 2.0), ETH is not one of the tokens that Kuailian works with on its Staking products.
In other words, Kuailan operates with Master Nodes from other cryptocurrencies and receives returns for it. Kuailian receives those returns in different cryptocurrencies, which transforms into ETH to liquidate the daily returns to clients.
The effect of the ETH rise
Since July 22, ETH has started an upward trend that has led to annual highs in a very abrupt way.
It has been a meteoric rise. In just over a week, ETH has increased its price by more than 40%.
The rest of the cryptocurrencies, although most of them are also trending upwards, are not growing as fast as ETH.
This means that, with respect to ETH, they are depreciating.
That is, with the same rate of generation of returns, Kuailian can buy less ETH, and therefore, although the efficiency of the pool remains the same, the final return that reaches the customer is lower.
Comparison with Dash
Dash is the predominant cryptocurrency in the Kuailian pool.
On July 20, Dash was trading at $ 69.02 and on July 29, it was trading at $ 81.74, representing an appreciation of 18%.
On its side, on July 20, ETH was trading at $ 236.15 and on July 29, it was trading at $ 318.19, representing a 35% appreciation.
In other words, DASH has grown 17% less than ETH in this period. It has depreciated against ETH, like the vast majority of cryptocurrencies.
Does that mean Kuailian’s final returns are going down? Let’s see it with an easy example.
Numerical example
Let’s assume a person has low risk kuais (LR) and medium risk kuais (MR) for a value of 10 ETH each.
July 20th
On July 20th, Kuailian’s daily returns were:
LR: 0.12%
MR: 0,31%
Therefore, that person received 0.043 ETH (0.012 + 0.031).
Looking at the ETH quote that day ($ 236.15), he received $ 10.15.
July 29th
On July 29th, Kuailian’s daily returns were:
LR: 0.11%
MR: 0,26%
Therefore, that person received 0.037 ETH (0.011 + 0.026).
That means 14% less return on ETH value (remember that Dash depreciated 17% compared to ETH in that period).
But looking at the ETH price that day ($ 318.19), he received $ 11.77, that is, 16% more than on July 20.
Conclusion
When a very rapid growth in ETH happens, if the rest of the cryptocurrencies that make up the pool are not able to follow the rise,, Kuailian’s returns on ETH are reduced as the Crypto / ETH pair is negative.
However, measured in FIAT value, Kuailian’s yields compensate and exceed that effect, obtaining superior yields.
Furthermore, if the ETH generated by previous returns have been preserved, these will also be affected by the increase in the value of ETH.
Therefore, although at the ETH performance level, it may seem like bad news, in my view, the ETH rise is very positive news.
Join Kuailian
If you want to join Kuailian, you can do it through this link.
Super interesting article! I have two questions. I was wondering since your deposited Ethereum gets divided to alt coins the changing value of Ethereum and it’s effect on your deposit have no impact on your daily/montly returns right? Secondly if I am not mistaking you pool money together with other people to rent nodes. What determines the profitability? Are we talking about the amount of blockchain verifications pass through the node? If I understand correctly the % of higher risk goes to smaller coins with cheaper to rent master nodes that have more traffic?
Thank you for your clarification.
Hi Mathis. Thank you for posting.
Your first statement is not completely right.
The Masternodes pay their rewards in tokens (Alt Coins), but Kuailian needs to exchange these tokens to ETH to pay their customers.
If ETH is “expensive” related to the tokens, then Kuailian will get less ETH’s and therefore, your daily returns in ETH will also decrease. Having in mind that although the amount of ETH’s decreases, they are more valuable.
Regarding the profitability of the Masternodes it is not directly correlated to the amount of transactions. For every different token, the Masternodes have a quite stable profitability, which is predefined. It may vary a bit from time to time, but we can asume that it’s always more or less the same.
The profitability that is defined for each tehnology (tokrn) depends on many factors, being one of the most important the market volume, liquidity and stability of the token.
Tokens with less market cap, high volatility and low liquidity will pay higher rewards, because the Masternodes holders are assuming a very high risk for staking this kind os tokens and verifying transactions (no matter how many transactions). There is a high risk of the collateral (staked tokens) being devaluated.
On the other side, Masternodes of more “stable” coins (for example Dash), pay less rewards, because the risk is also lower.
Thanks you for the response Calvin!
If you don’t mind I have some follow up questions.
Your deposited ethereum gets staked in different coins.
I assume seeing that the profits are more or less stable that the changing value of ethereum does not influence your profits?
When at the end of your 1000 days you decide to not prolong your contract does the value of the deposited ethereum influence the total amount of money you receive back or is this purely based on the value of the different coins you are staking in at that day?
You say that when ethereum is more expensive the company pays less. However a friend of mine staked 8000 dollars. His profits went from 10 dollars to 2 dollars (in medium risk) without ethereum becoming 5 times more expensive. I find this profit somewhat alarming especially when the value of ethereum will/should grow significantly these next few months.
Hi Mathis,
The profits are not that stable. In fact, they are quite dependant on the ETH/tokens pairs.
You can find the 2020 profits evolution here: https://easykuailian.com/profitability-kuailian-december-2020-1-53-lr-2-33-mr-and-7-48-hr/?lang=en
If the tokens are not growing as fast as ETH, this translates into lower ETH-based profitabilities.
Following your example, if we look at the Medium Risk profitability, we find that it has moved from the 14’8% in April to the 2,3% in December (/6,5).
Whilst ETH value has moved from 130 USD in April to 1.300 USD in December (x10).
We can see that the relation is not direct (because the Medium Risk profitability has not divided been by 10) but it’s been affected.
Regarding your other question, as soon as you deposit your ETH in the pool, they are immediately exhanged to other tokens. So you no longer have ETH’s. You own a % of the pool.
At the end of the 1000 days those tokens (the % that corresponds to you) will be withdrawed from the pool and will be converted to ETH to give them back to you.
But in the same way, the amount of ETH’s that you will receive back will depend on the price of the pair tokens/ETH at that moment.
Of course, this has a negative impact in a moment like today. But this depends on the market situation. If at the end of the 1000 days we are in an Alt Season market you will get much more ETH’s.