Kronos DAO
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# FAQ

## Why do we need Kronos DAO in the first place?

Dollar-pegged stablecoins have become an essential part of crypto due to their lack of volatility as compared to tokens such as Bitcoin and Ether. Users are comfortable with transacting using stablecoins knowing that they hold the same amount of purchasing power today vs. tomorrow. But this is a fallacy. The dollar is controlled by the US government and the Federal Reserve. This means a depreciation of dollar also means a depreciation of these stablecoins.
Kronos DAO aims to solve this by creating a non-pegged stablecoin called KRNO. By focusing on supply growth rather than price appreciation, Kronos DAO hopes that KRNO can function as a currency that is able to hold its purchasing power regardless of market volatility.

## Is KRNO a stablecoin?

No, KRNO is not a stablecoin! Rather, KRNO aspires to become an algorithmic reserve currency backed by other decentralized assets. Similar to the idea of the gold standard, KRNO provides free-floating value its users can always fall back on, simply because of the fractional treasury reserves KRNO draws its intrinsic value from.

## KRNO is backed, not pegged.

Each KRNO is backed by 1 KDAI, not pegged to it. Because the treasury backs every KRNO with at least 1 KDAI, the protocol would buy back and burn KRNO when it trades below 1 KDAI. This has the effect of pushing KRNO price back up to 1 KDAI. KRNO could always trade above 1 KDAI because there is no upper limit imposed by the protocol. Think pegged == 1, while backed >= 1.
You might say that the KRNO floor price or intrinsic value is 1 KDAI. We believe that the actual price will always be 1 KDAI + premium, but in the end that is up to the market to decide.

## How does it work?

At a high level, Kronos DAO consists of its protocol-managed treasury, protocol-owned liquidity, bond mechanism (minting), and high staking rewards that are designed to control supply expansion.
Bonding in the "Mint" page generates profit for the protocol, and the treasury uses the profit to mint KRNO and distributes them to stakers. With LP bond, the protocol is able to accumulate liquidity to ensure system stability.

## What is the deal with (3,3) and (1,1)?

(3,3) is the idea that, if everyone cooperated in Kronos DAO, it would generate the greatest gain for everyone (from a game theory standpoint). Currently, there are three actions a user can take:
• Staking (+2)
• Minting (+1)
• Selling (-2)
Staking and minting are considered beneficial to the protocol, while selling is considered detrimental. Staking and selling will also cause a price move, while minting does not (we consider buying KRNO from the market as a prerequisite of staking, thus causing a price move). If both actions are beneficial, the actor who moves price also gets half of the benefit (+1). If both actions are contradictory, the bad actor who moves price gets half of the benefit (+1), while the good actor who moves price gets half of the downside (-1). If both actions are detrimental, which implies both actors are selling, they both get half of the downside (-1).
Thus, given two actors, all scenarios of what they could do and the effect on the protocol are shown here:
• If we both stake (3, 3), it is the best thing for both of us and the protocol (3 + 3 = 6).
• If one of us stakes and the other one mints, it is also great because staking takes KRNO off the market and puts it into the protocol, while minting provides liquidity and KDAI for the treasury (3 + 1 = 4).
• When one of us sells, it diminishes effort of the other one who stakes or mints (1 - 1 = 0).
• When we both sell, it creates the worst outcome for both of us and the protocol (-3 - 3 = -6).
But we don't end up with 3,3. If you are curious about 4, 4, see the article below!

## What is 4,4?

If you understand 3,3 well, you will know that if two actors are staking, the result is 3 + 3 = 6. It is considered a very positive outcome for the actors and the protocol.
But 4,4 is better. If one actor stakes whilst another mints a 4,4 bond, the outcome value is 7 (3 + 4). This is also considered a highly positive outcome.
Therefore, an ideal scenario would be for all actors to Stake and Mint 4,4 Bonds. This allows the Protocol to build reserves and offer more attractive APYs whilst also allowing actors to increase their stake and reduce their cost basis.
For a more detailed explanation, go to Mint your KRNO (4,4)!

## Why is PCV important?

As the protocol controls the funds in its treasury, KRNO can only be minted or burned by the protocol. This also guarantees that the protocol can always back 1 KRNO with 1 KDAI. You can easily define the risk of your investment because you can be confident that the protocol will indefinitely buy KRNO below 1 KDAI with the treasury assets until no one is left to sell. You can't trust the FED but you can trust the code.
As the protocol accumulates more PCV, more runway is guaranteed for the stakers. This means the stakers can be confident that the current staking APY can be sustained for a longer term because more funds are available in the treasury.

## Why is the market price of KRNO so volatile?

It is extremely important to understand how early in development the Kronos DAO protocol is. A large amount of discussion has centered around the current price and expected a stable value moving forward. The reality is that these characteristics are not yet determined. The network is currently tuned for expansion of KRNO supply, which when paired with the staking, minting, and yield mechanics of Kronos DAO, result in a fair amount of volatility.
KRNO could trade at a very high price because the market is ready to pay a hefty premium to capture a percentage of the current market capitalization. However, the price of KRNO could also drop to a large degree if the market sentiment turns bearish. We would expect significant price volatility during our growth phase so please do your own research whether this project suits your goals.

## What is the point of buying it now when KRNO trades at a very high premium?

When you buy and stake KRNO, you capture a percentage of the supply (market cap) which will remain close to a constant. This is because your staked KRNO balance also increases along with the circulating supply. The implication is that if you buy KRNO when the market cap is low, you would be capturing a larger percentage of the market cap.

## What is a rebase?

Rebase is a mechanism by which your staked KRNO balance increases automatically. When new KRNO are minted by the protocol, a large portion of it goes to the stakers. Because stakers only see staked KRNO balance instead of KRNO the protocol utilizes the rebase mechanism to increase the staked KRNO balance so that 1 staked KRNO (sKRNO) is always redeemable for 1 KRNO.

## What is reward yield?

Reward yield is the percentage by which your staked KRNO balance increases on the next epoch. It is also known as rebase rate. You can find this number on the Kronos DAO staking page.

## What is APY?

APY stands for annual percentage yield. It measures the real rate of return on your principal by taking into account the effect of compounding interest. In the case of Kronos DAO, your staked KRNO represents your principal, and the compound interest is added periodically on every epoch (8 hours) thanks to the rebase mechanism.
One interesting fact about APY is that your balance will grow not linearly but exponentially over time! Assuming a daily compound interest of 2%, if you start with a balance of 1 KRNO on day 1, after a year, your balance will grow to about 1377.

## How is the APY calculated?

The APY is calculated from the reward yield (a.k.a rebase rate) using the following equation:
$APY = ( 1 + rewardYield )^{1095}$
It raises to the power of 1095 because a rebase happens 3 times daily. Consider there are 365 days in a year, this would give a rebase frequency of 365 * 3 = 1095.
Reward yield is determined by the following equation:
$rewardYield = KRNO_{distributed} / KRNO _{totalStaked}$
The number of KRNO distributed to the staking contract is calculated from KRNO total supply using the following equation:
$KRNO_{distributed} = KRNO_ {totalSupply} \times rewardRate$
Note that the reward rate is subject to change by the protocol.

## Why does the price of KRNO become irrelevant in long term?

As illustrated above, your KRNO balance will grow exponentially over time thanks to the power of compounding. Let's say you buy a KRNO for $400 now and the market decides that in 1 year time, the intrinsic value of KRNO will be$2. Assuming a daily compound interest rate of 2%, your balance would grow to about 1377 KRNO by the end of the year, which is worth around $2754. That is a cool$2354 profit! By now, you should understand that you are paying a premium for KRNO now in exchange for a long-term benefit. Thus, you should have a long time horizon to allow your KRNO balance to grow exponentially and make this a worthwhile investment.

## What will be KRNO intrinsic value in the future?

There is no clear answer for this, but the intrinsic value can be determined by the treasury performance. For example, if the treasury could guarantee to back every KRNO with 100 KDAI, the intrinsic value will be 100 KDAI. It can also be decided by the future DAO. For example, if the DAO decides to raise the price floor of KRNO, its intrinsic value will rise accordingly.

## How does the protocol manage to maintain the high staking APY?

Let’s say the protocol targets an APY of 100,000%. This would translate to a rebase rate of about 0.6328%, or a daily growth of about 2%. Please refer to the equation above to learn how APY is calculated from the rebase rate.
If there are 100,000 KRNO tokens staked right now, the protocol would need to mint an additional 2,000 KRNO to achieve this daily growth. This is achievable if the protocol can bring in at least 20,000 KDAI daily from bond sales. If the protocol fails to achieve this, the APY of 100,000% cannot be guaranteed.

## Do I have to unstake and stake KRNO on every epoch to get my rebase rewards?

No. Once you have staked KRNO with Kronos DAO, your staked KRNO (sKRNO) balance will auto-compound on every epoch. That increase in balance represents your rebase rewards.

## How do I track my rebase rewards?

You can track your rebase rewards by calculating the increase in your staked KRNO balance.
1. 1.
Record down the Current Index value on the staking page when you first stake your KRNO. Let's call this the Start Index.
2. 2.
After staking for some time, if you want to determine by how much your balance has increased, check the Current Index value again. Let's call this the End Index.
3. 3.
By dividing the End Index by Start Index, you would get the ratio by which your staked KRNO balance has increased.
$ratio = endIndex / startIndex$

## Is KRONOS Audited?

Kronos DAO is currently unaudited. However, it is a fork of Olympus DAO on the Klaytn chain, and audits will occur at a later stage.

## Is Kronos DAO team KYC'd?

Yes. The core members of Kronos DAO team is KYC'd by Assure. Assure is a platform focused on bringing a suite of unbiased informational resources to DeFi start-ups. Their offerings include compliant KYC services, Optix Audits & Due Diligence Reports all designed to help prepare projects for success and to help build investor confidence and relations.