Operation so far
As is well known, Kuailian sales software licenses, or kuais.
These kuais have a cost of 100 USD, but they are paid with their equivalent value in ETH.
Every time someone purchases kuais, he contributes a certain number of ETH to the pool. This contribution is what is known as “collateral”.
That number of ETH contributed represents a certain percentage in relation to the total ETH that Kualian has received for the total number of kuais sold.
What is known as “% share of the pool”.
This percentage of participation has a double function.
On the one hand, it is used to calculate the % of the returns that corresponds to each user for the Kuailian’s staking activity.
And on the other hand, it is used to calculate the value that the user will recover on the day his contract ends. Said value will be the result of applying the% of participation to the value of the pool that day.
That is, the calculation basis so far has been ETH.
This does not mean that there is ETH in the pool. The ETH received into the pool is automatically converted to other tokens that Kuailian stakes with.
This should be borne in mind because there are people who, erroneously, think that if they have contributed a certain amount of ETH to the pool and ETH is revaluing, this will mean a revaluation of their collateral. Kuailian does not hold those ETHs.
This calculation basis in ETH combined with uncontrolled growth in ETH has led to several problems:
1. “Fictitious” problems
Apparent drop in yields
However well the pool may behave, and although the returns are increasing, these returns are received in tokens. If ETH grows at a higher rate than the tokens do, with those tokens generated, even if they are more, less ETH can be bought.
In the end, what the user perceives is that he is receiving less ETH’s. Although those ETH’s are worth much more, the perception is that returns are falling.
Apparent drop in the value of the pool
The same previous case applies to the pool. As much as the tokens that make up the pool revalue, and therefore the pool increases in value, if ETH revalues more than those tokens, the end result is that the pool is worth less ETH. Although its final value in USD is higher.
2. “Real” problems
The two previous problems are purely accounting, but there are other more real problems.
As mentioned above, the percentage of participation that determines the calculation basis for the distribution of daily returns and for the return of collateral at the expiration of the contract is calculated based on the ETH contributed to the pool.
But that generates great inequalities.
For example, a person who bought 10 kuais (1000 USD) when 1 ETH cost 100 USD contributed 10 ETH’s to the pool.
While another person who bought the same 10 kuais (1000 USD) when 1 ETH cost 1000 USD contributed only 1 ETH to the pool.
That is, they both contributed 1000 USD, but the first contributed 10 times more ETH than the second.
This means that his participation percentage is 10 times higher, and therefore he will receive 10 times more returns for his contribution and he will recover 10 times more collateral.
Logically, in the face of ever higher ETH, the situation becomes untenable, as new partners get ridiculous returns compared to older partners. And its potential return on collateral is also much lower.
This is a comparative grievance, which in practice means that it is practically impossible for new partners to take an interest in the product.
The solution that Kuailian has adopted to eliminate these imbalances is to use USDT instead of ETH as the basis of calculation.
The USDT is a stable coin that is 1: 1 parity with the dollar.
Therefore, it eliminates the problem of price changes that ETH had.
Thus, two people who buy 10 licenses (which are now called SPUs instead of kuais), in both cases will contribute 1000 USDT’s to the pool.
This will mean that the percentage of participation of both people is the same, regardless of the moment in which they acquired the licenses.
The process of change: From kuais to Multistrategy SPU
Users who purchase these new SPU (Staking Power Unit) licenses, which will begin to be sold in early March, will already do so using this new calculation base.
But what about current customers?
Current holders of Low and Medium Risk kuais have the option to choose whether they wish to transform them into SPU’s without any associated cost (High-risk kuai cannot yet be transformed) or if they wish to keep their kuais.
The benefits of the change are obvious:
- A more equitable calculation basis
- Clearer returns that are not distorted by eventual price changes of the payment token.
- A clearer pool value, for the same reason as the previous point
- Products with better returns, since the SPUs incorporate equal parts staking of low, medium and high risk tokens, so their potential return is higher than that of low risk kuais.
The change that Kuailian has made is a positive, necessary and very beneficial change for the ecosystem in general, which guarantees its sustainability and long-term growth, so there is no other choice but to applaud this decision.
But individually, does everyone benefit from the change? The answer is not obvious, so I recommend that you discover it in this other post.
If you want to join Kuailian, you can do so through this link.