What is Kintsugi (KINT)?

Kintsugi (KINT) is a project built on the Kusama network that aims to allow Bitcoin holders to participate in the increasingly diverse DeFi ecosystem that is built on this network and its different parachains, all through tokenization. of your Bitcoin and various financial strategies.

Ehe Kusama blockchain project is home to many new projects in the DeFi field that use its capabilities to bring us new products, including Kintsugi.

Kintsugi is a project that seeks to bring Bitcoin to the DeFi world that is being formed in Kusama, Polkadot and Ethereum, in a totally decentralized way, also including such interesting parachain projects as Karura, Shiden and Moonriver. To do this, Kintsugi uses Substrate's technology to create a huge network capable of interoperating between these networks quickly and easily.

Story behind Kintsugi

The beginnings of Kintsugi date back to 2017, when Alexei Zamyatin and Dominik Harz met at Imperial College London. Both share a great interest in the crypto world, having a huge bibliography and participating in different specialized spaces (such as DevCon IV, EthCC, Building on Bitcoin and Breaking Bitcoin).

With a view to expanding their participation in the crypto world, both decide to create Interlay, a small company focused on bringing the DeFi world to the business sector. Interlay has created its own network using a parachain over Polkadot and at the same time they have launched Kintsugi, their canary product using the Kusama network.

The Kintsugi network began its operations on October 13, 2021 in Kusama and, for this, the community behind the project had to collect a total of 200.000 KSM (about 24,5 million dollars) in order to win the crowdloan that would give them access to the parachain.

With the launch of the parachain, Kintsugi went live with the goal of issuing 10 million KINT tokens for the first 4 years, and then issuing more KINT with 2% annual inflation. Of those initial 10 million, 1 million was dedicated to the rewards of those who participated in the crowdloan, accessing 30% of the reward immediately, while the remaining 70% was distributed in a drop with a duration of 48 weeks. .

Since then, Kintsugi has had a clear goal: to be a 1:1 Bitcoin-backed asset on Kusama. The system works under the MC scheme (Multicollateral, like the one implemented in DAI). The best thing is that this entire system is completely decentralized, giving Bitcoin holders the opportunity to participate in a DeFi ecosystem on the Kusama network.

How does Kintsugi work?

Kintsugi works as a blockchain network capable of creating a bridge between Bitcoin and the DeFi system under construction in Kusama. To achieve this, Kintsugi has designed two tokens with very clear functions within their protocol. In the first place, we have the KINT token, the utility token of the Kintsugi network, whose function is to serve as a reward and guarantee currency for system participants, maintain the security of the parachain and serve as a platform for the deployment of its second token. and the rest of the DeFi functionalities of its proposal: the kBTC token.

For its part, the kBTC token is the token that the Kintsugi vaults create through smart contracts and that have a 1:1 relationship with BTC. The intention of this token is to allow BTC holders to transfer their BTC to this blockchain and be able to use them in Kusama without intermediaries and safely. kBTC is created through a MC or multi-collateral system, in which KSM, BTC and KINT tokens can be used.

KINT token, Kintsugi's utility token

The KINT token is the utility token of the network. His main functions within Kintsugi are:

1. Self-management by risk takers. The vision is for Kintsugi to be governed by its decentralized network of users from day one, and for this KINT is vital. Vaults, kBTC users, developers and protocols that integrate kBTC must be able to vote on changes to the system to protect their interests, and KINT is key in all this scheme.
2. Liquidity bootstrapping. Vaults face capital costs from locking in insurance collateral to secure BTC. While Kintsugi's fee and collateral model provides competitive APY over the medium term, a bootstrapping mechanism is needed to reward early liquidity and accelerate growth.
3. Support transaction fee payments in KINT tokens.

KINT issuance follows a fair release scheme. KINT tokens are distributed among network participants and collators in two ways: airdrops and block rewards. This means that it is not obtained by public sale or ICO. In this first issue, the KINT tokens are distributed in two ways:

1. 70% of the initial 4-year KINT supply is distributed to the community as airdrops and block rewards.
2. The remaining 30% of the initial 4-year supply of KINT is distributed to Interlay's team and early investors, who financed the initial development of the company.

In the following table you can see the broadcast of KINT scheduled for the next 6 years:

Governance in Kintsugi

Governance within Kintsugi is inspired by Polkadot's governance structure, but introduces two important modifications:

1. Liquid and optimistic governance.
2. Participation in the vote.

The first serves to promote a more active governance process and avoid the problem of the "lazy voter", Kintsugi applies "optimistic governance". This means: There is no Council, only public proposals from the community. The community can elect a Technical Committee to expedite proposals. Referendums are supermajority against (negative turnout bias) by default.

Likewise, in this governance system, any holder of KINT has the right to vote. To participate in the votes, it is necessary to block the KINT and obtain voting power for this action. Among the options for participation within the protocol are:

1. Propose and vote basically any possible modification of the system.
2. Propose runtime improvements (code changes for bugs, substrate/library updates, new features, …)
3. Vote for parameter updates (collateral whitelists, liquidation thresholds, accepted oracles, …)
4. Treasury expenses and development of the protocol.

kBTC, bringing BTC to Kusama's DeFi

kBTC is Kintsugi's token that is backed 1:1 by Bitcoin and can be used to participate in the Kusama DeFi ecosystem. kBTC has a sibling, known as interBTC, which is part of the Interelay deployed on Polkadot (the Polkadot version of Kintsugi). Both kBTC and interBTC work in the same way, through collateralized vaults that ensure the stability of the system, using a scheme similar to the one that MakerDAO maintains with DAI.

The system guarantees the following:

1. Security for BTC. Kintsugi vaults lock collateral (BTC) within the Kintsugi parachain without custody. If the vaults suffer from any problem, the users are refunded. As a user, you only have to trust that Bitcoin and the DeFi platform you use are safe.
2. Anyone can use the vaults, you can even create your own vault and receive rewards for it.
3. You can always exchange kBTC for BTC, or be reimbursed in the desired collateral currency at a beneficial rate (ex: KINT).

Future of Kintsugi

Kintsugi is a very recent proposal and still has a long way to go. However, the building blocks of your system are already in place. The parachain in Kusama will allow this project to finish building everything necessary to become the Kusama MakerDAO, especially attractive for those who have holdings in BTC and want to enter the new DeFi ecosystem that is being built on this network.

In any case, the future of Kintsugi goes first through the expansion and start-up of all its services, something that the developers plan to complete in 2022. Until then, it is an excellent project to take into account due to its scope and capabilities.

Links of interest