Kowala kUSD becomes first stablecoin with Ledger support

Posted: 10 August 2018 10:00 am

The stablecoin just got much more storable, spendable and useable. But how viable is still anyone’s guess.

Kowala’s kUSD stablecoin is the first stablecoin with Ledger Nano hardware wallet support.

kUSD is coming to the ledger as one of the first waves of third party apps supported by the wallet. The app itself was built by Kowala in line with publicly available guidelines, and then rigorously checked by the Ledger team before going live.

This might be a small but significant step for cryptocurrency as a whole, bringing a spendable and useable price-pegged cryptocurrency closer to viable real world use.

“The full potential of this technology is tied to consumers’ ability to make actual use of it in their daily lives,” said Kowala founder and CEO Eiland Glover. “It is our hope that this hardware accessibility will increase crypto inclusion for those living in highly inflationary economies who require usable currency, rather than speculative investments.”

Kowala is a paired stablecoin system, consisting of a mining network token (the mUSD), and the stable kUSD. Users can now store both tokens on a Ledger Nano S or Nano Blue.

Full instructions on how to use it can be found here, but it’s generally as simple as finding the Kowala app in the app catalogue and installing it.

“The importance of Ledger’s decision to publicly support kUSD as the first stablecoin with an app on its platform cannot be understated,” Glover said. Although he may have meant to say overstated. “This move is a huge signal for industry confidence in our price-stabilising mechanisms, which employ unique money supply minting and burning features to eliminate the need for cash or gold reserves.”

The significance of having a stablecoin available on the Ledger probably can’t be overstated, but the amount of industry confidence it indicates is debatable.

The point of third party app support and Ledger’s #FirstTuesdayCrypto monthly initative is that anyone can develop a third party Ledger app, and as long as it’s sufficiently safe and high quality it might be supported by Ledger. Ledger’s support of the Kowala app probably shouldn’t be taken as an endorsement of the project’s price stabilising mechanisms themselves.

That’s an entirely different and highly experimental can of worms that no one’s 100% sure about.

In the case of Kowala, prices are maintained by automatically expanding and contracting the kUSD supply based on its current price. The idea is that the circulating kUSD supply will dynamically adjust to be a perfect match for existing demand.

All newly minted kUSD coins will be distributed among the miners who hold Kowala’s other mUSD stablecoin.

This model is similar to other dynamically adjusting third generation stablecoin systems, but small quirks and pros and cons set each apart. But because it’s mostly all about behavioural economics, these small differences might have an unpredictable impact.

For example, Kowala slightly raises transaction fees to more quickly burn away the surplus supply when supply is higher than demand. This might have the unintended consequence of discouraging people from transacting with kUSD when the supply is high, thereby making it more difficult to contract the supply as needed.

There might also be downsides to a system that funnels all newly minted coins through miners who might have little engagement in the system beyond just staking their mUSD. These miners might develop a tendency to sit and wait until they’ve amassed a large amount of mUSD before trying to spend it, which could yank kUSD values around more drastically than needed and lead to unpredictable transaction fees.

But competing stablecoin projects also have to contend with downsides in their own systems.

For example, Kowala automatically adjusts its supply by minting new coins and burning transaction fees while Havven (another paired stablecoin system) went with a system geared to create profit incentives for its users to control the supply, rather than automating the system. This is a different unpredictable balance of pros and cons.

Disclosure: At the time of writing the author holds ETH, IOTA, ICX, VET, XLM, BTC, ADA

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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