In November 2022, due to many requests from SOs and SOMs who wanted to receive more rewards, a policy discussion to change the inflationary issuance rate from 2% to 6% was conducted through the forum and passed through a governance vote in February.
However, with the upcoming listing of KSTA, the newly established key currency, we received many opinions that increasing the inflation rate to 6% will pose a significant risk to K STADIUM. After an internal review, we have determined that in the current situation, this risk could act as a serious consequence, so we would like to hear your opinions.
Currently, K Stadium is in a case requiring growth in qualitative, not quantitative. Over the past year, many users have transferred their assets to the community pool, and we now have over 10 times than our original goal. We believe it is time for K STADIUM to focus on preserving and increasing the value of our coins rather than increasing the number of coins in the community pool. Since the most important factor in maintenance value is circulating supply, we have received many opinions that we should inform and communicate with all community members about the risks of the inflationary increase.
Below contents are the minimal risks that we all need to be aware of before an inflationary increase, and the K STADIUM team would like to ask SOs and SOMs to think about them from a long-term perspective.
RISK1) KSTA depreciation due to rising inflation.
โRising inflation will eventually lead to a devaluation of the KSTA as the base currency.โ
While the discussed 6% inflation adjustment may increase the number of KSTA rewards deposited. However, the increased rewards mean to imply a potential risk of increased supply in the market, and in the absence of deflationary factors, the increase in supply is expected to lead to a depreciation of KSTAโs value. As a result, a decrease in the value of KSTA means eventually a decrease in community membersโ reward, even if the number of KSTA increases.
- K STADIUM is about to change the ticker of KSTA and list it on exchanges. Both the KSTA in your wallet and the KSTA given as rewards are your assets. However, the inflation increase we are discussing may lead to increases in the number of rewards, but also leads to a decrease in the value of KSTA.
- A critical concern is that while the increase in the amount of rewards is capped at 4%, the depreciation is unlimited. * If the value of 1 won decreases based on 600 million community pools, it can cause a loss of 600 million won in an instant.
RISK2) Reduced project rewards due to reduced investment size.
โA decrease in the value of KSTA will reduce the size of the investment in K STADIUM, which will reduce the project rewards to the community.โ
As you know, one of the greatest benefits of investing in early-stage projects through K STADIUM is receiving Project Token (PT) rewards with high discount rates and other incentives. The amount and type of PT rewards are determined through discussions with the project team and are directly influenced by the size of our investment. However, itโs important to note that if the value of KSTA is low, the size of the investment fund paid out to us will be smaller, leading to a decrease in community rewards.
- Since the size of the investment is based on the dollar exchange rate, a decrease in the value of the base currency (KSTA) leads to a decrease in the size of the investment.
- The resulting decrease in project rewards (PT) will reduce the amount of investment rewards distributed to investors. Moreover, since PT is also listed on the exchange, opportunities for investors to earn profits, such as market price differentials, may also be lost.
- We have already received project tokens (PT) as a reward from our first investment project, XenoDragon, on K STADIUM. The scale of this reward is determined through negotiations with the project based on the amount we invested. Therefore, as our investment amount decreases, our bargaining power regarding investment rewards significantly decreases as well.
- In addition, the opportunity to invest in various projects is reduced. If the value of the community pool where the investment is executed decreases, the number of projects that can be invested will also decrease. VC investment may vary in size of return on investment depending on the performance of the investment project. Therefore, it is important to hedge risks by investing in various projects, and a decrease in the value of KSTA may result in the loss of this hedging opportunity.
- As a result, a butterfly effect may occur in which the rewards to investors are significantly reduced due to the rise in inflation.
RISK3) Risk of losing future value with infinite potential
The essence to investment is to improve returns, and project tokens received through community pool investment can create a huge increase in value later. This is because investments that have been meticulously reviewed based on the growth potential of the project from proposal to investment decision will continue, and the potential that project tokens can bring is infinite. However, if the exchange value of the funds gathered in the community pool decreases, this leads to a reduction in investment, which in turn results in a decrease in the rewards of the project tokens to be distributed to you.
โด A sharp rise in inflation leads to a decrease in the value of KSTA, a decrease in the investment amount, and furthermore, a loss of opportunity to generate profits, so we ask all K STADIUM users to make a careful decision.
โThe core of the K STADIUM reward is to use the power of the platform to invest in projects with high potential for upside and share the rewards together.โ
The rewards of K STADIUM, which is still in the growth stage, may not be sufficient compensation for SOM. Of course, a change of 6% from the existing 2% can generate more than 600,000 rewards per day, which can have the effect of receiving 300 rewards for those who received 100 rewards every day. However, the risk of depreciation that you will have to bear will be much greater than raising inflation against its effects.
On the other hand, project token rewards are expected to be much more valuable than inflationary rewards. We must increase the breadth of profit through investment in various high-quality projects, increase the value of rewards distributed to SOs and SOMs, and expand the ecosystem we want. To that end, preserving the value of the community pool will be our biggest mission right now.
The history of K STADIUM has just begun. We have gathered here to create greater value, and we are confident that we are writing a new history by gathering each otherโs strength to the best of our ability. Also, we promise that our history will never be short.
In all of that history, the value of your precious assets will have to be preserved and grow without limit.
Therefore, it is necessary to engage in long-term thinking aimed at greater leaps forward, rather than seeking temporary rewards to quench momentary thirsts. We would like to ask your opinion on โmaintaining the existing inflation rate of 2% without any changes.โ
