The Kinesis Monetary System is a unique and innovative approach to a digital currency that offers users an alternative to traditional banking systems.

The recent Silicon Valley Bank (SVB) failure created a situation where overnight it looked like we had lost all the money we had raised for our startup. We had enough for one, maybe two payrolls if all we got was our FDIC-insured $250,000 then we were dead as a company. In the end, the world’s most powerful and prolific money printer, the US government, took over SVB and made us, and every other depositor whole. This is, as a friend of mine put it, the startup equivalent of an asteroid skimming earth’s atmosphere. We were close to catastrophe, but made it in the end! 

This near-death experience got me looking into our banking system and the monetary system as a whole more in-depth. Was there anything I could do to protect against this kind of fragility in the system? What could be done to protect against inflation?

The Kinesis Monetary System (KMS) (referrer link) is a system that allows for the creation of a new type of currency, called KAU and KAG, which are backed by physical gold (Au) and silver (Ag). What follows are some of the reasons I think KMS is cool, and some drawbacks as well.

Pros:

1. Backed by Physical Gold and Silver: Kinesis offers a currency that is backed by physical gold and silver, which means that it is a stable and secure investment. The value of the currency is tied to the value of the precious metal, which provides a level of stability that is not found in traditional fiat currencies. Because I’m currently living in a big inflationary environment here in the US, this is so much better than watching my hard-earned money decrease in value each month.
2. Yield-Generating System: Kinesis offers a yield-generating system for its users, which means that they can earn a return on their investment in KAU and KAG. This is achieved through a system of fees that are collected on transactions, which are then distributed among the users of the system. So you get the inflationary benefits of holding gold and silver, and you get to earn a yield for using it and holding it. Better than a bank!
3. Low Transaction Fees: The transaction fees for Kinesis are significantly lower than those for traditional banking systems. This is because the system does not rely on intermediaries or third parties, which means that the costs associated with these services are eliminated.
4. Decentralized System: The Kinesis system is decentralized, which means that it is not controlled by a central authority or government. This provides a level of security and privacy for users, as their transactions are not subject to government oversight or interference.

Cons:

1. Limited Adoption: The Kinesis Monetary System is still relatively new, which means that it has not yet achieved widespread adoption. This limits its usefulness, as it may be difficult for users to find merchants who accept KAU and KAG. That said, you can always sell your gold and silver for US dollars and then use USD to pay for things. This year, Kinesis plans to roll out the Kinesis Physical card program in the US. “The highly-competitive, US-specific card program will provide our expansive US customer base with real-time, point-of-sale transactions of their gold, silver, and cryptocurrency assets.” This should help with adoption in a big way.
2. Limited Liquidity: The Kinesis system is still relatively small, which means that there may be limited liquidity for KAU and KAG. This can make it difficult for users to buy or sell their currency, which can be a barrier to entry for some investors. In practice, I’ve always been able to sell my KAU or KAG on the Kinesis Exchange, but it’s not as fast as on the stock market where millions and millions of people are participating. That said, there are exciting plans for this year: Kinesis has been working hard to secure the listing of KAU and KAG on a selection of highly reputable, external cryptocurrency exchanges like Bittrex and Emirex.
3. Volatility: While Kinesis offers a stable investment option through its backing of physical gold and silver, the value of KAU and KAG can still be subject to volatility. This is because the value of gold and silver can fluctuate over time, which can impact the value of the currency. This is true of all money, but it’s worth calling out.
4. Regulatory Uncertainty: The regulatory environment for digital currencies is still evolving, which means that there is some uncertainty around how governments will view Kinesis. This could potentially impact the system’s ability to operate in certain jurisdictions. While always a challenge, the Indonesian government is going to start using Kinesis this year and another government is looking into it as well. These private/public partnerships bode well for chipping away at this regulatory uncertainty

In conclusion, the Kinesis Monetary System offers a unique and innovative approach to a digital currency that is backed by physical gold and silver. While there are some limitations to the system, such as limited adoption and liquidity, the low transaction fees and decentralized nature of the system make it an interesting and useful option for anyone who is looking for a stable and secure investment option. Of course, you should be aware of the risks associated with volatility and regulatory uncertainty when considering investing in KAU and KAG.

If you are looking for a good place to hedge against inflation, the Kinesis Monetary System might be right for you.