Navigating the Uncharted Waters of Monetary Stability: Kelp’s Innovative Approach
In a world grappling with the challenges of traditional fiat currencies and the volatility of cryptocurrencies, Kelp emerges as a novel solution. Cointelegraph recently had the opportunity to sit down with Edward Bishop, the CEO and co-founder of Kelp, to delve into the unique monetary policy-based approach that underpins this innovative project.
“We’re neither a traditional fiat-backed stablecoin nor an algorithmic coin, but rather a flatcoin,” Bishop explained, capturing the essence of Kelp. “It’s a hybrid of the two that adjusts its supply to inflation in the real economy and maintains its purchasing power over time. We use a monetary theory called the quantity theory of money, which is codified in our protocol to monitor economic activity and predict the ideal circulating supply to maintain price stability.”
At the heart of the Kelp ecosystem lies the Kelp Protocol, which leverages various economic indicators to understand market conditions. This allows the protocol to make timely adjustments to the supply, mitigating volatility when Kelp experiences rapid price increases.
Currently, Kelp is in a seed phase, which Bishop described as “very experimental.” The primary goals during this phase are to reach parity with the U.S. dollar and ensure a minimum amount of coins are in circulation. Once these objectives are achieved, the price is expected to find equilibrium and fluctuate naturally, with the potential for the price range to adjust based on market demand.
To reach these goals, Kelp employs several mechanisms, including staking, which temporarily locks up the supply, and a variable taker fee tied to the liquidity pool, which increases when the price declines. Bishop also discussed the Liquidity Guard, a smart contract that allows users to sell their Kelp holdings at an optimal time, bypassing the variable taker fee and prioritizing user needs.
Compared to traditional central banks, Kelp’s on-chain data-driven approach enables quicker adjustments, though Bishop acknowledged the need for a delicate balance to avoid overreaction. In extreme market volatility, Kelp can leverage collateralized assets as a backstop, similar to how central banks conduct open market operations.
Kelp’s ambitious target is to onboard 1-2 million users for its official launch, with 25 billion Kelp tokens allocated through the Kelp Reservation Program. The Kelp app serves as a self-custodial Web3 wallet and will soon feature K.A.T.E., an algorithmic trading engine that analyzes user profiles and investment goals to create personalized portfolios.
Notably, Kelp avoids traditional VC funding and prioritizes raising funds through pre-sales and its user base, aligning with its “money for all” philosophy. Bishop emphasized the importance of reaching a substantial liquidity threshold to facilitate the various functionalities, including K.A.T.E. operations and overall collateralization.
Kelp’s approach, as Bishop explained, is not about controlling the market but rather making it “behave a certain way.” Unlike projects like Luna and Terra, Kelp avoids brute-force supply control and instead utilizes various levers, such as interest rates, variable fees, and supply increases allocated to different programs. The ultimate goal is for Kelp to become a reliable unit of account for everyday transactions.
As the world navigates the complexities of monetary stability, Kelp’s innovative approach offers a promising alternative, blending the strengths of fiat and cryptocurrency to provide a more stable and accessible financial solution.
Learn more about Kelp
Disclaimer. Cointelegraph does not endorse any content or product on this page. While we aim at providing you with all important information that we could obtain in this sponsored article, readers should do their own research before taking any actions related to the company and carry full responsibility for their decisions, nor can this article be considered as investment advice.