August 20, 2020

Is the value of Ethereum important in Kuailian’s rewards?

To understand how the value of Ethereum relates to the rewards of Kuailian’s Smart Pool products, it is important to understand how those rewards are generated.

The Ether is used for its characteristics as a means of payment, since it has an intelligent contract technology that allows automating processes. This makes it possible to automatically disperse the flows in the different elements that make up the Smart Pool products, such as daily payment of rewards to the community and sending the Ether of license purchases to the respective wallets for each purpose.

With bitcoin, would be impossible because no Smart Contracts are available, in addition to the high transaction costs and confirmation times. Ether is the largest currency on the market, which in turn allows for the automation of processes and a very secure, decentralized system.

At the moment, Ethereum does not have staking technology, and we cannot participate in the verification of transactions. Therefore, we cannot generate rewards directly from the Ethereum network. To learn how proof of stake and proof of work technology works, please see the following article.

When the Ether is entered through the purchase of licenses called Kuais, the user obtains a percentage share of the pool, then these Ethers are automatically dispersed as we can see in the following illustration:

Kuailian flow diagram

The Ether are switched to bitcoin and then to other cryptocurrencies or tokens with POS technology chosen by the artificial intelligence, thus allowing the generation of rewards when verifying transactions. The generated tokens are sent to the exchanges to be exchanged mostly by bitcoin, since not all of them can be directly exchanged by Ether. Finally, the Ether are dispersed by the Smart Contract. For this reason, not only the price of the different tokens in relation to bitcoin, but also the price of the BTC/ETH pair must be taken into consideration.

Therefore, we obtain different rewards from many cryptocurrencies and tokens that when transformed into Ether, can generate a greater or lesser return on our contribution depending on the different cases:

  • If the average value of the pool increases more than Ether, we will receive more reward from Ether.

  • If the average value of the pool is maintained with respect to Ether, the reward in Ether will also be maintained.

  • If the average value of the pool is reduced with respect to Ether, we will receive less Ether.

Now, if we think of FIAT we have the following case studies regardless of the value in Ether

  • If the average value of the pool increases, the reward in FIAT will be higher

  • If the average value of the pool is maintained, the reward in FIAT will also be maintained

  • If the average value of the pool is reduced, the reward in FIAT will be lower

For more scenarios, you can consult the company’s official document on the Smart Pool by clicking here

To get into the situation, let’s take an example from previous days when there was high market volatility:

In the last 2 weeks of July 2020, Ether increased by 62% in value, while dash and zcoin, the currencies with the largest share in the pool increased by 33% and 29% respectively.

price variation chart of cryptocurrencies

The rest of the cryptocurrencies and tokens in the Smart pool, also did not accompany the great rise that had the Ether in these days, so it caused the community a reduction in the rewards of Ether. However, when the value of the pool increased, if we look at it in FIAT value, there was an increase in the rewards as we will see in the following example:

A person who participates in the low-risk pool with 10 ETH, and 10ETH at medium risk:

On July 19th he got the following rewards:

LR: 0.12% 🡪 0,012 Ether

MR: 0.31% 🡪 0,031 Ether

He received a total of 0.043 Ether which in dollar value was equivalent at that time to $10.27

On August 1st he got the following rewards:

LR: 0.1% 🡪 0,01 Ether

MR: 0.23% 🡪 0,023 Ether

He received a total of 0.033 Ether which in dollar value was equivalent at that time to $12.41

Summary:

  • The disproportionate increase that Ethereum has had with respect to the other cryptos and tokens of the different pools, has caused a reduction of the rewards in Ether of 23%.

  • The increase in FIAT that the cryptocurrencies and tokens have had in the different pools has led to an increase in FIAT rewards of 21%.

Conclusion:

If the cryptocurrencies or tokens that make up the pool do not all go up in harmony with Ether, the rewards on Ether will be lower, since by settling the rewards of the different coins against Ether we will receive less of it.

However, if we value it in FIAT, by increasing the value of the pools, the rewards have increased.

If, on the other hand, the cryptocurrencies and tokens that make up the pool grow mostly above Ether’s growth, we may find ourselves in a situation where by liquidating the rewards, we can receive more Ether.

In the case of a general growth of the market, and of the average value of the pool and not so much of Ether, we will receive a greater reward from Ether and also FIAT.

What we must be clear about is that if we increase the value of the different tokens that make up the pool, the value of our collateral increases, and this benefits us in that, at the end of the contracts, the return will be greater. In other words, not only can it benefit us at a daily return level, but also in terms of the final return when the contracts end.

As we can see, there are as many cases as there are tokens working in the Pool, so it is important to know how the market and the different technologies work in order to correctly understand how Kuailian’s Smart pools work.