Investors, Crypto, and Mineral Treasures

Progress or regress?

Can a progress move backward? Yes, it can, but in such a case we call it a regress. However, a lot depends on who considers the process. Institutional investors, for example, would hardly call the current situation on a stock market a regress since neither indices nor volumes steadily decline over decades.

Tokenization: assets for the masses

Cryptocurrencies and tokenized virtual assets constitute a viable investment alternative for those common people whose modest savings could be transformed into a means of getting some passive income. Bitcoin has proved its capability of keeping value safe over a decade of its existence. The procedural simplicity of both purchasing and holding of Bitcoin when passing through KYC (know-your-customer) is not necessary on many crypto exchanges makes Bitcoin along with the other crypto coins as affordable as accessible for the majority of small singular investors. Moreover, a recent remark of a Federal Reserve’s chairman Powell who describes Bitcoin as a speculative store of value similar to gold can encourage many people to give up hesitation in owning crypto. Besides, the top 10 altcoins such as Ether, Litecoin, or quite recently emitted Ripple demonstrate how decentralized crypto assets can survive volatility storms.

Instability of stable coins

What can grant stability to stable coins? Tether (USDT) coin, for example, is seemingly backed by “real” dollars deposited at bank accounts of Tether Company. But the amount of USDT in circulation exceeds its USD deposit many times over. Tether claims that in addition to USD, some other reliable assets such as Bitcoin stay behind their stable coin. One crypto backed by another crypto looks like a dog chasing its tail.

Virtual securities

Another promising trend in a contemporary crypto economy comes to various tokenized securities. The main and only difference of security tokens from the traditional securities is in the carriers and protocols they run on. Security tokens offer a fraction of the ownership of a company but not in a “paper” standard. They provide a share of some business in the form of crypto assets running on a blockchain. Such assets look reliable being the closest analogy of the conventional “paper” securities. When buying security tokens investors are exposed only to the risks inherent in the very nature of a tokens’ issuer — it’s legal status, business environment, corporate structure, size of its token holders’ community, growth potential etc. The problem is that companies providing STOs (Security Token Offerings) are oftentimes far from being business leaders in their industries having nothing but a “great solution which guarantees a future dominance over the market”. In such a context, any STO does not differ too much from any IEO or ICO remaining a lottery, truth be told.

Hybridization of tokens

The most interesting model of crypto assets nowadays is represented by a hybrid solution when something in between security tokens and stable coins appears. Such a crypto seems taking the best from both worlds: it is backed by a material asset while its issuer undertakes some “serious” real-sector business. For example, look at what Norilsk Nickel Corporation is going to issue by the end of 2019 — a stable crypto coin backed by the nickel reserves produced by the Company. It seems that the growing demand for one of the most popular energy metals, a stable market value of nickel, and a more than reputable status of NorNickel all make the future coin infallible. However, an iron-concrete confidence in the asset can come only after its model of application is examined in detail. What is the coin to be issued for? How well will the coin’s features declared in its white paper correspond to its actual practice of using? Only time will tell.

Defining a killer token

This is where we can define the principles upon which an “ideal” crypto asset could be built. We are going to focus on a prospective model of a hybrid token to show a huge mass of singular investors the way how to obtain a combined power of a contemporary crypto economy and a real-sector business. Let it be a different way around to reach a lucrative mineral-mining industry with the help of a specific crypto instrument. It will demonstrate how a direct democracy in a financial sector can work through an easily accessible decentralized crypto asset.

Accessibility

First of all, any crypto asset pretending on a mass adoption should have little to no restrictions with regard to who and where can purchase it. It means that a free circulation of the crypto asset (for brevity, hereinafter as token or KGT when it comes to the particular token of Krypton Group) should not be limited with anything beyond the standard KYC procedures available on crypto exchanges. In case of OTC (beyond exchanges) transactions, the issuer of a token should care of both the privacy of token holders’ data and compliance with a local anti-money-laundering regulation. Sometimes, maintaining such a balance is not too easy due to immaturity of regulation on crypto in many Countries. However, more than enough exemplary cases of how it can be executed are available on the Internet. Krypton Group will establish a special startup-like company in Estonia to issue the KGT once Estonian crypto regulation significantly outperforms the Ukrainian one (Krypton Group is initially a Ukrainian enterprise).

Financial promise

The ease with which tokens can be acquired does not, nevertheless, guarantee a sufficient interest of an audience to the asset. People should recognize some clear economical promise going far beyond trivial exchange speculations. Of course, the lion share of all emitted crypto coins belongs to that sort of assets the only purpose of which is bringing profits to crypto traders through the so-called “pump-and-dump” movements. However, crypto trading constitutes only a fraction of a crypto economy. In accordance to stats, a much bigger amount of crypto assets is deposited on the so-called “cold” wallets than the one circulating in trading. It means that the class of “hodlers” (those crypto investors who prefer to accept crypto as an aggregator of value) surpasses the class of crypto traders in size.

  • Network effect — an extent of public trust invested in a crypto asset by its users’ community. The larger number of users one or another crypto has, the bigger value the asset is endowed with. This factor is probably the strongest indicator of the people’s trust which makes a crypto asset either valuable or worthless. Such superstars in crypto as Bitcoin and, for example, Litecoin keep their values basing on nothing but a huge network effect. The value of KGT, on the other hand, will rely mostly on other factors leaving the network effect to natural consequences of people’s understanding and acceptance of the token’s functions.
  • Utility. An effective usability of a crypto in certain practical activities makes an asset valuable in the eyes of users that, in its turn, attracts the users’ audience gathering a large network effect. The second largest crypto Ether is valuable due to the functions (smart contracts, decentralized applications etc) its blockchain protocol Ethereum represents to users. This is the reason why KGT will be issued in accordance with the most popular Ethereum-based token standard ERC20. Besides, KGT will perform some specific functions within a specially designed decentralized application. For example, KGT will represent an access to a closed database of Krypton Ocean Group where real-time quantitative and commercial reports about all aspects of seabed mining will be reflected. Besides, the size of a KGT holder’s deposit will determine a percentage of a discount the holder can get for the minerals mined by Krypton Group. It means that KGT should be accepted mostly as a utility token despite its hybrid nature having some features from both the stable-coin and security-token paradigms.
  • Backing with real commodities. When a virtual crypto asset is backed with something valuable in the real world, the value of such a crypto is considered securely grounded. Both stable coins and security tokens imply backing with either some traditional value aggregators such as gold and fiat money or shares in the ownership of some business. This model makes both a large network effect and a utility of a crypto asset highly optional once some real-world value stays behind the crypto. KGT will be backed by the products of Krypton Ocean Group beginning from mineral deposits on the ocean floor and up to pure battery metals produced from the minerals after mining. In addition, a unique mechanism of a progressive adding of a notion mineral weight to each token will be available. Such a token model has some similarities with a stable coin of Norilsk Nickel (see above) being, however, in addition supplemented with some specific utility functions.
  • Innovations. In contrast to a conventional stock market, a crypto environment appreciates technological innovations very much. It’s a peculiar feature of a crypto economy to be hungry for novelties. Since the entire crypto started from Bitcoin which revolutionized online transactions with a blockchain technology, crypto activists always expect newly issued assets representing something unprecedented. Proof of Stake, sharding, off-chain and multi-chain interactions as well as many other newly invented features and technologies make the assets carrying them highly attractive for crypto investors. It is safe to assume that if a newly emitted crypto is unable to offer even a tiny innovation, a chance to be left unknown for such a crypto is pretty high. The novelty of KGT is in the very hybrid nature of the asset when certain utility functions inherent in a special application are accompanied with backing by real minerals which is executed in a unique mode of multiplying of a notional weight of each token.

Reasons

Even if a clear understanding which of the above-mentioned factors provides the value of a token is available among its future holders, the most important task for the issuer is to be able to answer the question “what current problems of a crypto community the asset can effectively address”. If your token provides a crypto community with no solutions, why do people need your token after all?

  1. KGT provides its holders with a unique investment tool capable of combining crypto assets with real metals. Once battery minerals on which Krypton Group is focused constitute “the blood” of the upcoming “green-electric” economy, those who will have access to such minerals in one or another form can benefit a lot in a similar way to how the contemporary holders of hydrocarbon-based assets benefit from a dying petrol era. This is about the global economic dominance arriving together with a paradigm shift to a post-carbon world. The question, however, is not in whether the shift is to happen or not. The question is about who will share the profits of that shift. KGT will be issued to provide common people with such shares. Everyone from the world population who has both an access to the Internet and a couple of hundreds of dollars to spend on KGT will be able to participate in the “world battery revolution” through holding and trading the Krypton’s crypto asset backed by the battery minerals. Krypton Group believes that the true equality in sharing profits from the oceanic mineral treasures is possible thanks to a decentralized nature of crypto. KGT is not just one of many available crypto tokens dealing only with virtual commodities. KGT links crypto investors with a real world of battery metals produced from the seabed minerals available on the ocean bottom in abundance. Hence, the unique approach of Krypton is rather in quite specific real-world commodities — seabed minerals to be offered to the widest possible audience of singular crypto investors than in backing tokens with metals.
  2. In addition to a basic task of representing crypto investors an access to real minerals, KGT will offer a “backward” opportunity: both producers and owners of battery-metal deposits will be able to mortgage their metals for a crypto asset — the KGT. Why? The thing is that nobody from a real-sector metal industry can participate in a crypto economy without issuing their own crypto coin backed by their own metals. The future stable coin from Norilsk Nickel, for example, will be backed by the metal produced by the NorNickel Company. The other nickel manufacturers will have nothing in it. In contrast, KGT will offer a share in its notion weight for those battery-metal manufacturers who mortgage their metal deposits for the Krypton’s tokens. It means that a particular amount of metal stored at some third-party storage area can be included in KGT as a portion of its mineral backing. In such a case, an owner of the mortgaged deposit will benefit from a participation in the KGT project without having to issue its own crypto. Each new portion of the third-party metals included in a KGT’s backing will add value to the asset. The ones who have even a general idea of how a crypto trading works can easily grasp what such a value adding means for the asset’s holders. When an owner of some metal deposit is going to include a particular storage capacity in a KGT’s mineral backing (in other words, to mortgage some metal for KGT), both the exact date when it happens and the exact value to be added to KGT will represent a chance to have a certain advantage in upcoming trading deals. Besides, such “depositors” will have a significant discount for KGT that can let them earn some money automatically when their deposits are bought back from Krypton once Krypton pays in accordance with an average market rate. An opportunity to monetize a metal deposit without having to sell it on a traditional metal market is what KGT offers to the various owners of a real-world battery metals.
  3. A clear understanding for what reason one or another crypto asset costs as it costs is not easily achievable in the majority of cases. Some crypto coins have a value that can be accepted as a pure convention since neither utility nor real-world assets are inherent in them. Many crypto investors are confused with such a mess. Besides, the very mechanism of both gaining and losing of an asset’s value remains unclear even for those crypto assets that are widely accepted as “true delivers”. Being backed with real minerals, KGT offers a coherent algorithm of figuring out of its value for each particular moment. To put it in the simplest possible manner, the larger amount of seabed minerals is mined and processed by Krypton Ocean, the bigger value KGT gains. However, the sequence of steps in such a process requires quite specific explanations of various stages through which seabed minerals pass beginning from exploration and evaluation of the deepwater mineral deposits and up to transformation of the processed minerals into pure metals. For example, at the stage of a precise quantitative estimation of a total weight of polymetallic nodules available at a particular mining area on the seabed, a notion weight of minerals in one KGT token will be equal to 10 grams of ferromanganese nodules. Hence, one KGT will cost approximately 0,07 USD at the stage of the token’s emission. Once KGT will be put into a public circulation in a portion-by-portion manner, the next round when the second portion of KGT is released for a public trade will correspond to the next stage of Krypton’s mining process. At such a stage, a certain amount of polymetallic nodules is delivered from the bottom to the surface of the ocean. The notion weight of KGT at such a stage will be equal to 20 grams of nodules per one token. That’s why a conventional value of one KGT will reach 0.14 USD. Consequently, passing through the next stages of Krypton’s mining-and-processing project KGT will progressively gain its notion weight in grams per 1 token. The road map of the entire project of Krypton Ocean will show crypto investors how much KGT will cost at every stage of the project. The total emission of KGT is limited with 5 billion tokens. They will be released for a public circulation during 5 years in 5 sessions of 1 billion KGT each. While the emission is limited, the available mineral reserves of the world oceans count in hundreds of billions of tons that implies hundreds of years of seabed mining not just for Krypton Ocean’s fleet but for dozens and hundreds of other seabed-mining companies. It means, that the value of KGT is limited neither in monetary equivalent nor in time.

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