The Big Misunderstanding: Confusing Yield Allocations with Interest Rates

One of the most frequent points of confusion around the Kinesis system has to do with how the yield percentages are actually assigned and what they truly represent. 

For instance, KVT holders are entitled to 20% of the Master Fee Pool. This figure is sometimes incorrectly interpreted as a fixed annual return of 20% on the value of a person’s KVT investment: “If I buy $1,000 worth of KVT, I’ll earn 20% per year,” or “If I hold $1,000 worth of KAG, the 15% Holder’s Yield guarantees me $150 every year.”

This misunderstanding naturally gives rise to the question: How can Kinesis guarantee such returns?, which, in turn, often leads people to wonder whether the system constitutes some form of unsustainable investment.

In reality, Kinesis does not guarantee any specific returns. The yields are variable and depend entirely on the fees generated by actual network activity.

Returning to the KVT holders’ allocation, the 20% percentage only refers to the portion of the overall Master Fee Pool that is allocated to the group of KVT holders as a whole, it does not translate into a guaranteed or fixed rate of return for any individual holder.

To illustrate this more clearly, consider how the actual amounts distributed would work in different scenarios based on the size of the Master Fee Pool in a given month:

• When the Master Fee Pool contains $500,000, KVT holders collectively receive 20%, which equals $100,000.
• When the pool is $100,000, KVT holders collectively receive $20,000.
• When the pool stands at $10,000, they collectively receive $2,000.
• And if the pool is $0, then KVT holders collectively receive $0.

Throughout all of these cases, the allocation percentage itself remains constant at 20%. However, the total value being divided fluctuates from month to month because it depends entirely on the actual fees generated through network activity. Once that 20% share of the Master Fee Pool is allocated to the KVT category, it is then divided among the individual KVT holders according to the number of KVT tokens each person holds.

The same underlying principle applies across every other yield category in the system. For example, a Holder’s Yield allocation of 15% does not mean that every participant automatically earns a 15% return on their gold holdings. Instead, it indicates that 15% of whatever revenue is present in the Master Fee Pool during that period is directed toward all eligible holders. This portion is then distributed among them following the established rules of the system.

Each Kinesis currency holder will receive their specific part of this allocation based on the amount of KAG and KAU they hold, as well as the length of time they have maintained those holdings.

In other words, the allocation percentages serve to determine how the available revenue from the Master Fee Pool is shared out among the different participant groups, they do not represent or guarantee any particular level of return for an individual investor. The actual yields remain variable and are always tied to the real economic activity happening within the network.