1. Why a new currency?
K2 is a human-centric, decentralised, open source, non-profit cryptocurrency protocol that allows a transferable token to maintain value parity with an existing, publicly traded asset.
The first instance will be a cryptocurrency pegged to the Euro, provisionally named E2. E2’s global user base will be afforded instant, near zero-cost transactions without the interference of unreliable third parties like banks, and will effectively extend the economic strength of the eurozone to the entire world.
Economic stability is a major determinant of positive health and social outcomes for developing nations1. The current global growth of stability is often unsustainable in developing nations, with violent political instability frequently undermining currency values2. A globally available, stable currency would be a cornerstone to global social improvement3. Existing decentralized cryptocurrencies do not offer stability4.
With a Euro-centric global currency, those already in the eurozone will continue to lead the economic growth of the world, now at significantly lower cost. Instant, direct capital flows to and from emerging economies, growing since 20175, would mutually enrich all participating parties.
Smart contracts and public, well-documented developer interfaces will allow anyone to build sophisticated products and collaborative services which benefit from a stable currency as a first-class component.
K2’s free and open source mobile and web reference applications will lift the barrier to entry into cryptocurrency for ordinary people. Although details of the complex inner workings will be freely available, understanding them will not be necessary in order to use or acquire the currency.
Other attempts at value-pegging have treated their currencies as for-profit businesses, offered privileges to investors, locked their users into particular networks, or resorted to centralised fiat currency reserves. K2 is the only attempt to create an open source, non-profit protocol that exclusively benefits, and is directly owned by, its users.
- See Health and the economy: A vital relationship (Frenk, 2004), The Macroeconomic Determinants of Health (Subramanian, Belli and Kawachi, 2002) and Health Impact Assessment (WHO, 2019) [return]
- See Political Instability and Growth: Case of the Developing Countries (Jaouadi, Arfaoui and Ziedi, 2013) [return]
- The relationship between stable currency and social improvement has been understood for decades (Saeed, 1986), (Johnson, Compton and Giedeman, 2009). [return]
- See Economic Aspects of Bitcoin and Other Decentralized Public-Ledger Currency Platforms (Evans, 2014) [return]
- See World Economic Situation and Prospects 2018 (United Nations, 2018) [return]
2. Theory and implementation
We assert that a cryptocurrency can be autonomously stable relative to a centralised asset, that its network can be economically self-sustaining, and that the network can be constructed without the need for profit-seeking investors.
More details are found in the summary of position document.
K2 follows an initial pilot project that was in active development for three years. That attempt was a for-profit stablecoin network focused on the US dollar that launched a main net and garnered significant international interest before it fell prey to its investors and US securities regulations. The K2 developers ran the software engineering, behavioural economics and complexity theory departments of Kowala’s organisation.
The project source code, which advanced the state of blockchain engineering in several ways, is available under an open source license on GitHub.
The previous model was untenable because it sought to make its investors a profit. We are seeking funding to re-engineer this legacy system into a truly open source project, including a non-profit managing K2 Foundation. This will entail the continued development of a new economic model, some software engineering to adapt the changes, and the human-centralisation of the mobile and web applications.
The K2 system maintains the value of the token against its peg by autonomously both managing the token supply and holding a fiat reserve in a non-profit Foundation. The currency may be traded freely, and will hold its value in the market, but users may buy and sell from the Foundation at parity rates plus a very small fixed transaction fee.
The number of tokens that exist at any given time is a function of the demand for the token, measured by the market price of the token against its peg. When the market price of the token exceeds the peg value, more tokens are minted to saturate the market; when the market price of the token is less than the peg value, tokens are destroyed to increase scarcity.
The software system consists of the following broad components:
Token-issuing core. Produces, dispenses, manages and destroys tokens to maintain parity according to the market value of the currency. We intend to adapt this to a purely smart-contractual system.
Price oracle, which establishes the market price of the currency. This is an automated application run by moderately technical users, and is the equivalent of mining in other systems.
End-user mobile and web applications. This is where ordinary people interact with the currency in a simple and intuitive way. The focus is on ease of use, intuitiveness and wallet disaster recovery.
Extensive documentation and promotional material. In order to facilitate maximum adoption and utility, we will provide web-based material that explains how everything in the system works.
All the solutions are fairly well understood, and have had significant development time. The current challenge is redesigning the economic, behavioural economic and game theoretic models in a way that is appropriately and continuously testable.
3. Development process
We at Endian use an iterative process for our projects, wherein we work from the biggest concept (the ‘why’) through the design (the ‘what’) right down to the small details (the ‘how’). This is sometimes called outside-in design.
There’s quite a bit of theory to it which is outside the scope of this document, but the general procedure is to carefully test and workshop each concept with increasing granularity in a series of increasingly intensive phases, each of which is strictly and separately budgeted.
We only seek as much investment as we need to complete each phase, and we complete that phase before seeking budget for the next. This minimises investment on products that won’t work and maximises certainly in the products that will work.
In general, there are four phases - discover, define, develop and deliver - in two groups - doing the right things and doing things right - which we arrange into structure called the Double Diamond. It’s a pattern of divergent and convergent thought that starts with an idea and, if the idea turns out to be sound, ends in a product.
The concept can be visualised like this:
The process of development flows from left to right, with the vertical size of the diamond at any point representing the ‘divergence’ of the thought at that point in time. During a divergent phase, research is being done and ideas are being thrown around; during a convergent phase the research is being boiled down into actionable concepts or, in the final deliver phase, software.
Given the partial success of the pilor project, K2 started in the define phase: testing and proof of the algorithms and mechanisms. Our current work is building models and logical proofs of the system.
Following the define phase, we’ll be in a strong position to design a product that actually works. We’ll have a very good sense of the math, the goals and the constraints of K2. And since we already have a good sense of the cryptocurrency and quantitative finance terrain, we’d be able to push through the remaining phases far more easily than most teams.
The next phase will be develop: software and UX design. We’ll be iterating on user requirements and outlining acceptance tests for the software. This is where the work becomes much easier, because it will be informed by the UX research carried out by Kowala (all of which are in the public domain).
We’ll end the develop phase with a full delivery strategy and a solid, if flexible, specification for the final product.
Finally, we’ll enter the deliver phase, where the software is built and deployed. If we get to this point, all the wrinkles and problems will be ironed out, letting us quickly and efficiently implement the solution.
4. Contact and enquiries
We’re currently acitvely seeking investors for this project.
K2, as mentioned above, is a non-profit, non-inflationary currency. It’s not designed for speculators and has very limited utility for traders1. Becoming rich off E2 would be at best very difficult, even for its developers. Venture capitalist investors, though welcome, would not see monetary returns, and there’s no possibility of ‘selling’ the network.
There are significant social benefits to the K2 protocol and the E2 currency (and we’d be very happy to discuss them) but direct profit is not one of them.
If you’d like to know more or you’d like to help out, contact us at hello@endian.io.
- The only real value being the ‘parking’ of crytpo assets. Traders who want to protect their assets without liquidation often lament the lack of a convenient stablecoin with which to do so. [return]