I have written here extensively about Kinesis, and I’m toying with doing a video this week for newer people out there to introduce them to what this is, what it is not, and how I intend to use it. There’s some confusion out there amongst some of the die hard stackers, and I’d like to lend my voice to the conversation as a power user to explain what this is, a little further.
In my writings, I have disclosed that I am a KVT holder and do vaulting with them. I am NOT PAID by Kinesis. have a vested interest in them being successful, but my total allocation of all of my investments to them is about 3%. Over the course of the next year, I will be gradually bringing this number higher.
This past week, the first of its kind “Vault Side Chat” took place between C4SM and Kinesis, and in this conversation, they were talking about a lot of the big questions out there and peeling back some layers further on what it is they are doing. I’m going to try and go point by point here why I am excited.
Because of my extensive writing about Kinesis and advocacy for them, I had a 90 minute chat with Mr. Coughlin a few weeks back. I am an idea guy and have tons of areas I wanted to try and give a nickel’s worth of insight from the power user perspective. I’m not going to share the contents of the conversation – but I was humbled to be invited to discuss one of my favorite things in my life right now – Kinesis.
With me being an ideas guy, I grew up around people who always threw ideas out to bounce things off of each other. We didn’t say, “that’s stupid” – but rather the smart people in our clique might be like, “cool – how would it work?” One of those guys was Chad Hurley, the guy who invented YouTube. He was a pretty quiet and shy guy back then – but we shared a best friend and with this, ran in some of the same circles. He is the most well known of my friends, but others were PhDs in biochem (one teaches at MIT and his slacker twin brother also has a JD). One of the girls I was close with is a PhD in music therapy. Others went on to becoming high ranking members of the military. My point is that this is the type of people I feel comfortable with. And, while I think highly of myself with my measly two masters degrees, I always loved to try and surround myself with people who I thought were smarter than me. One of my closest friends ended up getting a meteorology degree and works in a hedge fund in CT and happens to be one of the leading race horse owners in the country. While I am a child of the 70s and 80s, by the time many of us went off to college, there was no email and we lost touch for years. Rumor was, the horse racing guy paid his way through college winning big on OTW.
I preface all of this with my childhood friends because when you recognize brilliance, you want to be around it. The design of this system, to me, is absolutely beautiful. It took me an hour or so to wrap my brain around it at the start, but once I really dug in, every layer further was another layer of brilliance. This chat also talked about some “verticals” which had my jaw dropping. Overall, I believe THIS system is destined to work hand in hand with the decline of fiat currencies. No, I do not mean with this that the USD will die tomorrow. However, as it become woefully apparent to most people in the world that fiat is being debased at an accelerated rate, people will scramble to park their financial energy into something tangible. Let me start with point one.
Point one here deals with how amazing this system is. Let’s just say you have 100 oz of silver in the Kinesis vault. Each oz is listed as a KAG – or Kinesis AG (silver). Imagine you go into the grocery store and use your debit card. At the Point of Sale (POS), it communicates with Kinesis to liquidate just enough silver to pay your bill. Meaning, up until the very millisecond you pay for something, you can store your financial energy in gold or silver. Apparently on the backend, you can tell what
ratios order (edit, got this wrong, it’s in what order) you liquidate at. I don’t know yet, because it’s not available in the US yet, but perhaps 60 countries at the moment. There’s right now a “virtual” debit card, where I guess you have the numbers or app you can use it – but in the summer they are looking to get the physical cards rolled out.
Why is this important? Imagine you collar cost average $20 to get silver in the vault over the course of a year or two. Perhaps when silver price is lower than your dollar cost average, you take your fiat to buy silver and groceries. At times when the value of silver is above your dollar cost average, you spend silver.
Consider in MANY countries around the world right now – inflation is high. I mean, like really high. Argentina, Lebanon, etc. You get your paycheck and you buy silver KAG. 100 dollars, for example. You can get 5 bags of groceries for 100 dollars. Several weeks later, inflation continues to go up, but that 100 dollars now only buys 4 bags of groceries. However, had you put your dollars into KAG, when you went to the grocery store weeks later, the KAG had appreciated in value and you could still get 5 bags of groceries with the KAG. It’s an extreme example of inflation, but history is littered with countries that have undergone hyperinflation.
For me, I want to seriously increase my silver vault holdings this year. I have a ton of money in miners, and I’d like to continue to just stack the shiny now. My goal with this is to perhaps stack 50% of it longer term and use 50% of it with the debit card. If my DCA is $24 and silver is $27 at the time of me going shopping, I will use my debit card to spend KAG. If silver is $21 at the time, I will preserve my silver and use USD.
I had been accused of being a Kinesis shill due to the yields I got. The yields are ONLY PAID if the SYSTEM IS USED. Meaning, there’s no dollar amount you are paid to vault. It is a slice of the total FEE POOL. The FEE POOL is a collection of small transaction fees to use the system. So the vaulting yield is tiny, but the big problem I had with traditional vaulting over the years was the cost to do it. I can tell you that the design of this system is going to be very disruptive to any traditional vaulting company who charges fees. Meaning, either people are aware that Kinesis will eventually put them out of business and they are adapting their business model, or they are aware Kinesis will put them out of business and they are trying to create FUD to get large groups of people to not trust them, or they are blissfully ignorant of Kinesis and will get rolled over inside of 5 years.
For those of you not understanding how this works – the total cost for a company like Kinesis to vault large amounts of gold/silver is – in respects to the size of the entire system – inconsequential. Meaning, Kinesis CAN AFFORD to take on that overhead with barely a sweat compared to the size of the revenues that are generated by the system. When I go to buy silver to put into the system, there’s a fee. If I want to send them silver to put in, there’s a fee. If I want to withdrawal 200 KAG, there’s a fee. The debit card friction is about to be insane, worldwide, as more people understand what this is. Every tiny little fraction of a transaction is pocketed by Kinesis. Let’s take a look at what this looks like.
So – banks falling down all around you? Don’t want to store financial energy in the USD in a bank? I don’t blame you.
The “purists” like to say, “if you don’t hold it, you don’t own it”. The only problem with that is once you get more than a few hundred dollars in PMs in the house, you start to realize that there’s a LOT of danger with storing any quantity of size in the home. I tell people to have SOME PMs at home – but too many and you are inviting a lot of problems.
To me, I now want to store every last dollar in metals. And, with the debit card coming, I will be able to liquidate it immediately to buy just about anything I want.
In this chat, they also talked about the bailee situation they are setting up. A lot of this goes over my head with terminology – but one question I had asked months ago had to do with…”if Kinesis, for some reason, were to have a horrible time with cash, and go bankrupt, how would we get our metals”? I think how I phrased some of that was clunky, but you get the idea. My interest was to understand a PROCESS. Kinesis has addressed this and are building out an entity that has stronger language of protection than any of your other standard vaulting companies. Ask them, “what happens if you go bankrupt”. Ask them how you are to get your metals. Check their agreements for the word “bankrupt”. I’m not insinuating they want to keep your metals, but what language is there to protect you from their balance sheets? Imagine the owner/company being sued. How are your metals protected from that? Imagine the owner dying. Who are you calling to get this metal?
KVT yields coming
One of you reached out to me to sell you his KVTs for $400 each. I was in between some investments and wanted to jump on that. I got the picture the owner was financially distressed or something. He had 12 I wanted to buy, but the clock ran out on me and someone offered him a better price. I was urging him at the moment to not sell, because all of Kinesis for months seemed to indicate the yields were coming soon. I believe they just announce that at the end of April, they will start. Anyone can do the math on the yield pool and figure out that up until now it is like $20 per KVT. I didn’t buy KVT for $20 a year. Neither did you. I got them with the FUTURE VALUE of the KVT in mind, not up until now. Meaning, I am anticipating massive usage in this system in the coming years, and KVT owners should get a nice slice of the pie. Additionally, I believe they will be freely traded on the exchange in the next few months so I am trying to load up KAG to buy as many of these as I can.
I think some of you saw this drawn out process and heard some of the recent FUD and got nervous. If any of you out there want to sell me KVT today for $400 each, let’s roll 🙂 Why? Because I’m buying for KVT yields today, I’m buying for the yields 5 years from now.
Load. Me. Up. Will work for KVT.
The vault side chat was nice also because Eric Maine spoke about the Indonesia project. This has been ongoing for years, but it serves as an amazing use case for lessons learned, implementation, regulation, adoption, marketing, user input, etc. Every single one of you today can go to a McDonald’s and get a coke with your burger. Coke did not invent their product and a year later it was worldwide. These things take time to grow from idea to worldwide phenomena. Indonesia also suffered countless COVID delays. However, Eric detailed out the absolute last hurdle they were at for regulation regarding the vault within a vault they have there.
I own properties as my main investment. I did a full rehab on a unit that took almost 2 years due to COVID. What is worse, is as I was ready to rent it out, I then had to deal with countless, countless hurdles regarding zoning, applications, licenses, re-work, re-inspection, finding new contractors for this, a leak with that. It was another YEAR before I could rent this out. This is lost opportunity cost of a year of rent revenue!! That being said, the amount of shit I had to go through for a single property, lawyer fees, paperwork – I would not wish that on anyone. Now, imagine trying to navigate a project in another country during COVID with regulations that do not exist, nor laws for the books.
My feeling is that Indonesia is going to be HUGE for participation. It is the 6th most populous country in the world, and many in this hemisphere do not know a ton about it. But Kinesis is borne out of Australia, where Mr. Coughlin is, and with this, they have a much different daily viewpoint of the countries in their region. Remember, southeast Asia is going to be a force to be reckoned with the next 25 years or so.
While Indonesia is a big deal, we are also looking at things like Kinesis Pay, Apple Pay, vouchers, etc as means of spending your vaulted metals on products. Remember, for me, I want to store financial energy in metals and ONLY use it at point of sale. If you are using traditional vaulting, how do you get access to spend that? With the debit card, remember, you can also spend/store fractions of an ounce.
But I’d also be remiss here if I did not point out that gold just had the highest quarterly and monthly close, EVER. As our banks are now stressed more than ever, you can see searches for “how to buy gold” are increasing. Many just don’t know about gold or silver, and as they do, they will want to understand how to LAYER their purchases. I have done a video for Arcadia on this I hope launches in the next few weeks, and if not, I’ll run it on my channel. Point is – there may be a LOT more people coming into the space. With this – these new people WILL of course run to the coin shops. Remember $20 premiums on silver eagles? Well, that’s a REALLY good time to buy vaulted metals with virtually no premiums, is it not?
The design of the system is beautiful
Imagine there are 1,000 oz in the vault and 10 participants. An oz of silver is about $25. Suddenly, a new story runs that vaults around the world are running empty. Those who WANT silver want to buy from those who have it. Suddenly, the price has to rise to entice people to buy. Maybe it runs to $27!! Well, the design also allows you to mint more silver, which might cost you $25.50 or something like that. Big picture, is it then enters silver into the ecosystem. This prevents the price of silver running too high, as members can just “mint” to bring into the vault. Likewise, if you bought silver at home for $20 and the price at Kinesis is $30, you can send your metal there to sell for $30 if you want. Meaning, there’s almost a governance switch to prevent prices from running to high.
Likewise, if prices run too low, there’s an arbitrage there. You see silver is $25 but the price in Kinesis is $23. You own 1,000 KAG. You can have it shipped to you and you can sell it at your local coin shop for $25. This removes metals from the system.
Meaning – the DESIGN of the system keeps metals within relative range of premiums. Running too high or low can create arb opportunities.
I don’t want to spend too much time on this, but I want to mention it because one of the FUD brigade attempted to dox me a few months ago. My impression of these individuals fall in one of several categories.
- Not bright. Many of these people didn’t take 5 minutes to understand the system. They cannot. The complexity here is beyond them and they are cave men wanting to beat anything with a stick they do not understand.
- Sheep – many of these people see their friends piling on to Kinesis and don’t understand it, but got their friend’s back without taking 5 minutes to understand the product.
- Paid talent. There’s a few out there who appear to be skilled at bending truth to their own narrative that appear to be paid operatives. It’s the only logical conclusion. These people hide behind anonymity and cast aspersions – and any attempt to engage these entities is simply met with “I don’t believe you”. Rather than understanding Kinesis is in year 5 of Coca Cola like development and can have minor missteps, they treat every typo and minor item like it’s the JFK assassination. No one person can literally sit there 40 hours a week picking apart these minor things without being funded.
- Physical only people. Well-intended people who advocate for physical in your hands, but don’t have a pot to piss in and cannot comprehend the security risk that having a thousand oz of any metals in their home is.
- Vaulting companies. These guys charge money to vault. These can be tremendously awesome people who try to do right by their customers, but a better mouse trap came along, and with this, if they do not create fear and mistrust, their life savings and company are gone. I feel for these people, but there’s a way they can adapt, if they want to. I designed a system they could use, but am not about to help these guys out as they have spent months trying to bankrupt a company I have holdings in. So, I feel for you, mostly. But, adapt or be left behind. You are the Blockbuster in 2004 that is fighting Netflix. You just don’t know it.
- Crypto guys. Their entire fortune is in hopium shit coins that are not backed by anything. More trust in a gold-backed token means, in reality, their shit coins will be worthless. This is their lottery ticket, and they bet on the wrong numbers. They must try to attack blockchain stuff in order to look intelligent, but lose the argument when they actually have no idea what a ledger system with no assets is actually worth. Those who are desperately trying to poke holes in an audit are casting aspersions on the auditing company, and not the company audited.
- Fiat backers. I don’t want to speculate on who, but if you are in this camp, you think gold is a relic paperweight. You want to do everything in your power to get people to not back gold. Kinesis offers the ability to spend a fraction of a fraction of a fraction of a gram of gold. The portability of gold is what lost to paper. Well, the speed and accuracy of digital will overtake paper.
- Crypto haters. They see FTX on TV, and lump all shitcoins and exchanges into one big basket without understanding nuance. The main difference between Kinesis and 20,000 other shit coins is that it actually is tied to gold/silver.
I wanted to at least touch on this because Kinesis came out swinging with this and the Spaces event a few weeks back. They had been a little dormant with communications, and with this, perhaps some troops grew restless. Well, with this, they came out hard. Touched on just about every big issue that could be facing the company.
I think here is the only weakness you might see with Kinesis from a risk spectrum. The big issue you run into with this with the FUD people are they may not grasp international law complexities – along with regulatory bodies.
In the last semester of my MBA, it was on international business and marketing. We spent a TON of time talking about emerging economies and the “BRICS+16”. So I have been attuned to this story for about 7 years now. But you learn with this, that when you are Coca Cola, it’s not just making a product in a plant in Wilmington, NC and shipping it all over the world. You might need to have some form of incorporation within each country you operate. Each country may different laws on labor, factories, unions, quota – you may even have to make a certain amount of your product in that company before you can sell it there in order to ensure locals are hired. I had recalled if you wanted to sell something in China, you needed to have a JV with a Chinese firm and share all intellectual property.
When you are talking about crypto to a general audience, they all think about bitcoin. But none of them consider a gold-backed cryptocurrency with their thinking. Because it is NEW. Part of this then is when Kinesis came about in 2017, there were no regulatory bodies discussing any of this. Then, you see things with FTX, and everyone just wants to ban anything crypto without understanding nuance. In this chat, Kinesis talked about their different levels of regulatory compliance with different countries, and erred on the side of caution to treat certain things in the event FIVE YEARS LATER someone might consider something a security. Remember, this was a new mouse trap. No laws. No regulations. This company acted IN GOOD FAITH building out an entirely new sector. With this, there will be speed bumps, no doubt.
Where FTX seemed to get into trouble was that there were billions pouring into the company, and there just was a complete lack of financial controls, auditing, etc. This is also different from other companies who do their due diligence and want to create an amazing product.
What I can see is that the US may lag the rest of the world on a lot of this because we cannot get anything done anymore. Our government now is mostly crony capitalism, and no one can agree on anything for legislation. This then has unelected bureaucrats creating policies and laws that run all of our lives, for better or worse.
Kinesis also talked about a Mint they are creating in Turkey and how they can refine metals at a refinery. In this, they also talk about getting ore from mining. This may cut out a lot of the middleman cost of getting bullion. Instead of buying bars at a premium from a wholesaler, they can buy metal from the miner, refine and mint it cheaper than if they bought wholesale.
I believe they had talked about some sort of payment into the fee pool from this, but they couldn’t commit to a percent yet. So perhaps they are able to sell this bullion then all over the world and stock their safes with it. Every sale may then have a small cut to the fee pools.
They had also talked about investment grade jewelry, and as much as I like the Mene page, I couldn’t help but think this would be a direct competitor to them. And – with this – for every sale, some kick back to the fee pools.
Wildly bullish. I think the biggest issue I had seen had been “on-ramps”. I wasn’t going to drive to the bank to “wire” some bank halfway across the world my bank could not find in SWIFT. Recently, I had heard about the TD bank and how you can use WISE. I did that, and then a week later TD bank pulled out due to regulatory stuff. I believe Kinesis now has a lot of different on ramps, and a friend recently used the WISE app to send a wire for $14 to the Indonesian bank listed. I’m going to do that in a few weeks when I’m caught up with stuff – but in the meantime would welcome Western-based banks into the fold.
I talked about how I was impressed with Mr. Coughlin as an individual. Two years ago, I had looked on their page to look at their org chart. Recently, I went back, and nothing has changed. Wow. This is also a company that at the top, has no turnover, at all. As a manager of 70 people in IT, having worked in the largest companies in the world – I live, eat, and breathe turnover every day. It’s part of my business model. For a leader to have no turnover like that tells me he not only has a great product all of these people highly believe in, but he must also be a really good person to work for. If ANY of these people had issues with him or the company, over two years, CERTAINLY there would have been some sort of turnover? One person?
The one complaint I would lodge would be that I wished they could do the Coca Cola thing of 100 years by next year. Meaning, I want them in every country. I want them to be a household name. I want everyone to see what I see. Half the fun of catching wind of something like this now will be watching it grow and mature. Someday, if my job goes away, THIS is the kind of company I’d want to work for. When you see the Coughlins of the world, you want to lean in and ask “what can I do to help”. From 50,000 ft view, there’s a plan there that will leave a legacy.
100 years from now, all of this will be in business text books. “How gold came back as money, and how Kinesis led the way”. Having read through hundreds of case studied in business school, this is by far the most favorite case study I have ever read.
A month ago, I thought the biggest obstacle they had in front of them was the avalanche of FUD out there from misinformed people who had agendas to protect their own interests. After hearing this vault side chat, I think their biggest obstacle right now is just executing a few things right in front of them to perfection and then dealing with how to scale up quickly. There was once a commercial here in the US of someone creating an online store, and a bell went off when a sale happened and she was so happy. Then another bell. Ecstatic! Then another…another….suddenly, her exuberance changed to sheer panic as the servers were overloaded and there was no shipping department, assembly line – or any way to service the millions of customers now buying online. To me, a lot of this over the last 5 years has been a slow cook as Kinesis has been organically scaling up and setting up a backbone to then be able to launch into orbit inside of 1-2 years. If we are seeing gold at $3000 USD and a mania here, the amount of people who will flood to Kinesis for free vaulting as opposed to having to pay a vaulting service will be astounding.
If they are looking for more of a US presence, dear God, sign me up. While I love my job and the satisfaction it gives me to make a difference, there’s nothing like working for a product and people you believe in 1000%.
April 12, 2023 at 7:04 pm
Great article on Kinesis, I too am 100% behind Kinesis succeeding as soon as possible. On ramping is my biggest issue now that TD Bank pulled out, I was sending 5 deposits a month to Kinesis via TD Bank until they pulled out. I would like to learn of the Wise way of on ramping too. Is there anywhere I can go to learn how do on ramp this way?