As one of the projects joining Kusama parachain auction, Kintsugi can be considered as a bright candidate for achieving a parachain slot. Aiming to bring trustless Bitcoin to the Kusama network, Kintsugi is receiving a lot of attention from the community. PolkaWarriors community is very happy to host our 35th AMA with Kintsugi. The participation of Alexei Zamyatin has made the community very excited, during the AMA, he has responded to a lot of interesting questions as well as revealed about the project's upcoming plan and strategies.
Below is a summary of the outstanding questions and answers from the AMA session.
1. Can you introduce the operating mechanism and technical implementation of Kintsugi products?
kBTC is a 1:1 Bitcoin-backed asset on Kusama, following a similar design as MakerDAO’s DAI.
The process of minting and redeeming BTC for kBTC is as follows:
- Issue: Lock your BTC with a Vault. Pick one, or run your own. Your BTC is always safe and insured by Vault collateral.
- Mint: Get kBTC at a 1:1 ratio to your locked BTC.
- BTC DeFi: Earn on your Bitcoin. Use kBTC as collateral, for lending, yield farming and more across the DeFi ecosystem.
- Redeem: Redeem kBTC for actual BTC on Bitcoin - trustless and anytime you want.
What makes kBTC unique is the strict dedication to being trustless and decentralized.
Secured by Insurance.
Vaults lock collateral on the kBTC parachain in various digital assets- in a MakerDAO-inspired multi-collateral system. If Vaults misbehave, their collateral is slashed and users reimbursed. As a user, you only trust that Bitcoin and the DeFi platform you use are secure.
Anyone can become a Vault and help secure kBTC, anytime. Yes, you can run your own Vault!
2. How are the Tokenmetrics of Kintsugi designed? What are the utilities of its token?
Kintsugi will be governed by its community from day 1 - via KINT, Kintsugi’s governance token. KINT tokens will be distributed to network participants, builders and early backers as airdrops and block-rewards. No public sale or ICO is planned.
The KINT token’s main purposes are:
Governance. KINT holders vote on governance proposals and elect council members to make operational decisions. To vote, KINT is locked and users earn staking rewards.
Utility. Kintsugi will support transaction fee payments in KINT and other digital assets, in addition to KSM.
Outlook. Long-term, Kintsugi governance may also decide to activate fee sharing among KINT holders, distributing the revenue earned by the network from bridging BTC, other assets, as well as BTC DeFi Dapps built on top of the EVM (yet, Kintsugi is adding EVM support with BTC specific functions!)
Supply and Emission
KINT features an unlimited supply. The emission schedule is defined as follows:
- 10 million KINT emitted over the first 4 years (4:3:2:1 million)
- 2% annual inflation afterwards, indefinitely.
KINT will be controlled by the community:
- 70% is distributed to the community
- 30% is airdropped to the Interlay team (current & future), and early & future investors, who funded development of the protocol - subject to 48 weeks lockup, followed by 48 weeks linear vesting.
Important: starting in year 5, only the community receives new KINT from the annual inflation.
Read more in the token economy whitepaper released by Kintsugi Labs (https://raw.githubusercontent.com/interlay/whitepapers/master/Kintsugi_Token_Economy.pdf)
3. BTC is locked at which address? We know BTC doesn’t have a smart contract, so it will hold a secret key-controlled address, right? Who will have that secret key? RenBTC has a set of people signer, but it is not perfect. So how will Kintsugi do better?
BTC is locked with a Vault.
Anyone can become a Vault by locking collateral (e.g. in KSM, DOT, USDC, …) on the parachain and registering with their BTC public key.
The Vault in theory has full control over the BTC - but if it tries to steal it’s collateral will be slashed on the parachain and users will be reimbursed at a 110% rate.
RenBTC holds BTC in a centralized multi-sig, which seems to be controlled by the team, according to reports published online. Here the problem is (1) you cannot join the multisig and (2) if BTC is gone there is no insurance to reimburse users.
A good comparison to other approaches can be found here:
4. Revenue is a key factor for all projects to survive and keep the projects running. What is Kintsugi' way of generating profit and revenue? What is Kintsugi' revenue model?
Kintsugi is community owned - so Interlay does not charge any fees for operation. Vaults earn fees from issue & redeem and earn KINT tokens as block rewards. We are also adding an EVM which will allow BTC DeFi products, such as trading the original NFTs such as Pepecash, or building Bitcoin derivatives. In the mid-term, the system will activate fee sharing: a part of the trading fees will be routed back to the network.
5. People are always worried about the transaction speed because they worry about their transaction going to fail. How fast and secure is "Kintsugi' platform? If the number of users spikes, will transactions on "Kintsugi' get congested?
Kintsugi benefits from Kusama’s / Polkadot’s performance: we anticipate over 1000 tx/second. This means: the issue and redeem process will be slow because Bitcoin block times are slow - but once you’re in the KSM/DOT ecosystem you benefit from high performance.
Just like any system, KSM/DOT have a limit - but it is much much higher than that of Bitcoin or Ethereum.
6. DEFI is evolving too fast and the ability to break is very high. What do you think about this and can you be sure that Kintsugi's products will be demand in the long term? What is Kintsugi planning to contribute to DeFi's growth?
Bitcoin is the largest asset in terms of market capitalization (846 billion USD). It is also the asset that is most known outside of the crypto space and is being used as alternative investment by many.
As time progresses, we will see more and more regulations targeting USD stablecoins - with KYC requirements etc.
More and more users will switch to crypto-only starting with Bitcoin (e.g. we already have governments accepting BTC).
Kintsugi & Interlay are pioneering how BTC (and other assets) can be used in DeFi - as such we believe that we will contribute to on-boarding many new users into DeFi.
7. What are the key features of Interlay that sets it apart from other projects and what competitive advantage do you have? How has the experience and background of the Interlay team been effective in the project's success so far?
Key features: full decentralization and game theory to make sure that users are insured against theft. Interlay is the only project that has managed to build a fully decentralized way to bring BTC to DeFi - basically, the MakerDAO of Bitcoin DeFi (if looking at the tech).
Also, this shows why we need decentralized BTC
Interlay was founded by ex-Imperial College PhDs who have been doing R&D on Bitcoin since 2015. We are experts in cross-chain communication and DeFi mechanisms (e.g. stablecoins) and work with leading projects and research labs to constantly improve the status quo.
Fun fact: my PhD was on cross-chain communication. Dom's PhD on game theory, stablecoins and DeFi.
Interlay combines these two in practice :)
8. A strong community not only brings interesting ideas to the project but also attracts larger partners. So how is Kintsugi planning to build its community? And is there a plan to recruit people with Blockchain experience to the Kintsugi team?
In September we launched our Ambassador program that aims to integrate and involve its growing, vibrant community of coders, researchers and early Bitcoiners, Polkadot & Kusama followers & spokespeople, DeFi natives and anyone who is passionate about changing the centralized status quo.
Anyone can apply for the program. It is not a recruitment and is totally on a volunteer basis. Once accepted, a member starts as an Apprentice and based on his/her performance and value added to the community, is promoted to an Ambassador and eventually to Senior Ambassador.
Currently we have 3 Ambassadors and 40 Apprentices and every week we are adding more members to the program.
Interlay is also actively hiring across all fronts: engineering, marketing, and business development.
In the live questions section, Alexei did answer several short questions from the PolkaWarriors community.
1. Since NFT is popular nowadays, is there a plan for NFT integration?
Yes! We are adding EVM support and in this way want to bring some of the very first NFTs to Kusama - for example Pepecash. You can then build DApps for these NFTs, or trade these potentially on RMRK.
2. Non-crypto users are very important for mainstream adoption. How are you planning to attract non-crypto users towards your project? Is there any upcoming partnership that will bring non-crypto users and real-use cases?
BTC is the asset that is known best outside of core crypto. By making BTC available on DeFi, we hope to onboard many new non-expert users. And, then there is interBTC 2.0...
Imagine if you could lock BTC in your wallet e.g. for a year.... and start earning yield!
--> coming in 2022, a new way for BTC DeFi - for pro's & newbies alike.
3. As the cost or fees of BTC change to WBTC is about 0.25% or so, how about the cost of iBTC change to interBTC in Ethereum? Are there any other fees for BTC change to interBTC?
wBTC currently can charge high fees because they have a monopoly. We will change that :)
interBTC will have
- a small fee for minting/redeeming
- the Kusama transaction fees (but these are much smaller than on Ethereum)
- the fees for the BTC transaction as part of the deposit
Long term, we expect to have a free market among Vaults, as they compete for BTC of users.
4. Do you have tutorial videos so we can get to know your project more clearly or do you have a YouTube channel or something? can you share it with us?
All the info can be found at docs.interlay.io -- we will keep this up to date with all new features!
You can also follow us on Twitter for latest updates:
5. Can you tell us more about potential partnerships with other Polkadot projects and how interBTC / kBTC will be integrated with other parachains?
kBTC can be integrated into any parachain via XCM. Obvious targets are Karura, Moonriver, Basilisk, Shiden, ...
We already integrated with Bifrost's SALP.
We started out "Featured Use Case" blog post series: https://medium.com/interlay/featured-use-case-chaotic-btc-defi-with-kintsugi-karura-8b1a62b430d9
Keep an eye out for the next updates!
6. In the next 3 years, what is your orientation for the Interlay & Kintsugi project? What difficulties are you going to face in the near future?
Over the next 3 years...
- We will launch on Kusama
- launch on Polkadot
- expand to Ethereum, Cosmos, Solana etc.
- add EVM support for BTC defi contracts
- add some OG Bitcoin NFTs
- Launch interBTC 2.0
- Integrate with top 20 DeFi projects to allow 1-click BTC DeFi
Challenges: it's a David vs Goliath battle with wBTC. We will need a lot of support from our community - but we are sure we can win because we have the better product and community
7. What did you learn from the early versions of Interlay product or services? What are some of the major roadblocks on Interlay?
We started working on this in 2018. We learned the hard way that a paper =/= product when we actually built interBTC - we fixed many bugs and solved many problems to get here. One of the main challenges was capital efficiency and a sensible token model - but we managed to solve that too by doing a lot of research.
One major learning was that community is the most important thing for interBTC. We received so much good feedback that allowed us to make the product better - this is why we made sure that the community is in charge of making decisions.