Category Archives: kin

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SEC Shoots Down Kik’s Defense in $100 Million ICO Court Case

The United States Securities and Exchange Commission (SEC) has been in an intense court battle with Kik messaging company over the USD 100 million Kin initial coin offering (ICO) that occurred in 2017. Apparently Kik spent so much money on the court battle that they had to close down their messaging app, which was the meat and potatoes of their business. Despite spending so much on this court case, Kik is now on their last stand, betting everything on the void for vagueness defense.

Essentially, Kik claims that its ICO does not count as a security, and therefore is not under SEC jurisdiction. However, the Howey Test, which is the rule that determines if something is an investment contract, states that if an investment is made in expectation of profit then it is an investment contract and therefore a security.

Now Kik is saying that the Howey Test should be voided because it is too vague, and allows the SEC to regulate the crypto space in an arbitrary and discriminatory manner.

That being said, it seems unlikely that Kik will be able to nullify the Howey Test since it has been the law since 1946. The SEC calls Kik’s void for vagueness claim “untenable”.

 

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Should Ethereum Be Worried About Token Migration?

Although Ethereum is the ICO favored go-to platform, there is a trend emerging towards migration away from its native ERC20 token to home-baked alternatives once projects get underway.

Despite Ethereum’s undisputed dominance owing to the ease of setting up ERC20 tokens to facilitate ICOs, issues such as scalability and transaction speed problems, along with network clogging, have had the effect of driving ICOs to look elsewhere for a better solution.

Ethereum’s ERC20 technical standard has essentially been used by startups as a kind of incubator, it being the primary tool that allows creating tokens for trading.

One of the latest to take this route is the Kin Foundation, which boasts some 300 million monthly users of its Kik Messenger app. A spokesman for the Kin Foundation has explained that the company has been talking to exchanges to allow users that transfer their tokens from wallets to exchanges to forfeit the original ERC20 tokens to Kin’s own native KIN token on its own blockchain, although users can still sit hold their tokens on Ethereum as long as they wish with no time restraint.

KIN’s promotional PR suggests “incredible speed and scalability” along with security and scalability after the shift to its own blockchain. The concept of migrating in this way, of course, is not new. Others who have made this move, notably EOS and Tron, also took the migration route away from the Ethereum blockchain which got them up and running.

Since the launch of the EOS mainnet earlier this year, EOS have scooped up EOSBet, Medipedia, Tixico, Billionaire Token, Insights Network, WAX and Sentinel Protocol. Justin Sun, Tron’s founder and CEO, said that their shift from ERC20 protects their user’s interests.

T-21 days until Mainnet launch! #TRON will be one of the most competitive mainstream blockchains with the most users. We graduated #1 from the ETH platform with 1.08M+ users, more than OMG and EOS combined. ETH was just a prelude. Now for the main act 🎵😎$TRX pic.twitter.com/Oyj4XN1T7l

— Justin Sun (@justinsuntron) May 9, 2018

Sun added, “We will compete face to face with Ethereum, and we have confidence we will build a large ecosystem; a much large ecosystem than the Ethereum.”

However, despite such fighting talk from Tron’s top man, the sheer size of the Ethereum blockchain means that it is unlikely that any sleep will be lost just yet for Ethereum backers but migration from ERC20 is a space well worth watching.

 

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Kik to Create Zero-Fee Crypto by Forking Stellar

The popular Kik messaging app has announced it will fork the Stellar blockchain to create its own zero-fee cryptocurrency. Kik provides free instant messaging by using WiFi, which is very useful for people without phone plans and has hundreds of millions of registered users.

Kik initially launched its native cryptocurrency, Kin, in a successful initial coin offering (ICO) which raised USD 98 million. Kin was issued with an Ethereum ERC-20 smart contract, where investors deposited Ethereum and received the newly-issued token in return. ERC-20 provides an easy mechanism to create new cryptocurrencies that use the Ethereum blockchain, making them highly secure since there is an immense amount of mining power maintaining Ethereum, as it is the second most valuable cryptocurrency by market cap.

However, the developers of Kin decided to move their cryptocurrency off the Ethereum blockchain due to high transaction fees and slow confirmation times. Kik CEO Ted Livingston said that “Ethereum is the dial-up era of blockchain”. To solve this problem it was originally decided that Kin would be moved to the Stellar blockchain, where transactions are confirmed in only a few seconds and fees are much lower.

Stellar transactions cost a tiny amount of money which is paid in its own digital currency, Lumens, so if Kin were a Stellar token it would require paying Lumens for each transaction. The Kin team originally planned on subsidizing the Lumens needed by users to send Kin, and this was not a problem since Stellar transaction costs are so low. However, malicious spammers could attack Kin by spamming it with unnecessary transactions to burn off the subsidized Lumens.

Kin developers have now decided to fork Stellar and create a new blockchain with zero fees to avoid any issues associated with subsidizing transaction fees. This would allow users to send each other micropayments of a penny or even smaller, stimulating the growth of a digital economy where photos and stickers are exchanged between users. Zero transaction fees could also promote a tipping culture like that seen on the Dogecoin subreddit.

The Kin Foundation has set aside a large amount of coins for the Kin Rewards Engine which will reward entrepreneurs on a daily basis according to how much economic activity its app produces.

Since there are going to be zero transaction fees, there will be no reward for maintaining and securing the Kin blockchain. However, nodes will still be required for the blockchain to function. The Kin Foundation will maintain the first node, and it expects business partners to run nodes out of the shared interest of seeing the Kik economy succeed.

 

Image Source:  https://commons.wikimedia.org/wiki/File:Kin_Logo.svg – Wikimedia Commons under MIT License

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