Kucoin Fundamental Analysis

Kucoin Fundamental Analysis 2

Today we look at Kucoin, a promising exchange based in Hong Kong and hosted on Amazon Web Service.  Kucoin is made prominent by its unique operations strategy that rewards you for trading on the exchange. The exchange has unique ERC20 tokens, Kucoin Shares (KCS), these generate Kucoin bonuses and function to reduce transaction fees. Kucoin cryptocurrency exchange platform maintains a total issuance volume of 200 million KCS. KCS is based on the Ethereum blockchain and supports all Ethereum wallets.

Kucoin bonus payouts are calculated by the amount of KCS you hold on the exchange. You are credited with a split of 50% of the total trading fees charged by the exchange. This payout will occur daily at 00:00 UTC +8, over the course of several hours. The payout will be divided amongst all coins trading on the exchange, paid out in order of coin popularity. The bonus will adjust as volume grows and will never be reduced below 15%, the current 50% bonus is applied until April 2018. Current dividend holding rates please click here.

  • kucoin-shares
  • KuCoin Shares
  • Price
  • Market Cap

So how exactly do you earn bonuses by holding KCS? Let’s dive in; say you have $10K to invest, current price of KCS = $16, amount you can buy is: $10,000/$16.0 = 625, daily volume: $260,520,242, fees collected: ($260,520,242/100) *0.2 = $521,040.484, dividends paid out: $521,040.484*50% = $260,520.242, circulating supply of KCS: 100,000,000, your share of dividends: $260,520.242*(625/100,000,000) = $1.63 per day, $594.3 per year. Roughly 5-6% return per year. Find the bonus calculator here. Daily market cap obtained from coinmarketcap.

This may look like small potatoes, but KCS is correlated with the popularity of the exchange. If volume increases, expect KCS price and bonuses to increase also. E.g. a $2.5bn volume would see a 10X gain on your original bonus, using the above as an example would net a $6,000 p.a. return. Currently Kucoin is ranked as the 17th largest exchange.

Since Kucoin’s inception on November 6th, KCS has grown from a market cap of around $60 million to well over $1.5 billion. Equating to 2500% growth in two months. If this growth continues, KCS could become a top 10 worldwide crypto exchange by 2019.

Two key factors are driving this growth; Crypto currency listings and the Kucoin invitation bonus. Kucoin trades 80+ coins and is on track to reach a listing of 1,000 crypto currencies by December 2018.

The Kucoin invitation bonus is a referral compensation program to increase volume and traffic on the exchange. You simply invite others via your invitation code, and a share of all future trading fees from that person will be your bonus. There are three levels; 1. 20% bonus from directly invited users. 2. 12% bonus from first tier indirectly invited and 3. 8% from second tier indirectly invited users. Keep in mind these bonuses stack, equating to a maximum 40% from Kucoin invitation bonuses and 50% from Kucoin bonus payouts therefore 90% in total bonuses. Invitation bonus infographic available here.

Some may view this as a pyramid marketing scheme or MLM, so I want to point out that by doing this Kucoin loses 90% of its potential profits. It’s simply a clever marketing tool, we have nothing to lose – the more friends you invite, the more potential income you earn. On top of this the 100M KCS owned by founders and angel investors does not receive the Kucoin bonus.

There is a KCS Lock-up period for founders and angel investors, 70 million KCS issued by the founders in the first phase is subject to a four-year lock-up period from September 2nd, 2017 to September 2nd, 2021. Founders can sell their KCS holdings after September 2nd 2018 and team members can only sell 25% of their largest historical exchange volume in 365 days from this time until the end of the lock up period. 30 million KCS issued by the consultants and angel investors in the second phase is subject to a two-year lock-up period from September 2nd 2017 to September 2nd 2019. Holders can sell 50% of their largest historical exchange volume from September 3rd 2018 to the end of the lock up period.

Buy-back mechanism is a unique feature to Kucoin, 10% of Kucoin’s quarterly net profit will be applied to the buy-back of KCS every quarter. The KCS received will be immediately destroyed. This will continue until 100 million KCS is destroyed. Essentially doubling the value of KCS upon completion. The buy-back record will be released to the public, so that users can review legitimacy of destruction via the blockchain explorer.

KCS’s underlying utility lies within the ability to reduce trading costs of shareholders by up to 30%. For every 1,000 KCS you own a 1% reduction in your trading costs is applied. E.g. you own 40,000 KCS, maximum of 30% reduction is applied. KCS must be held on Kucoin.

You might be worried that by storing your KCS on the exchange this will leave you open to malicious hackers, well let’s break down their security.

At a financing level, Kucoin core exchanging system uses a multi-layer and multicluster architecture combined with disaster proof deployment across two locations and three centers. These locations and centers can handle multiple tasks in several locations simultaneously. These redundancies ensure system stability in situations such as hardware failure and natural disasters.

On a system level, Kucoin follows financing level standards. Transfer encryption protocol is applied to data transfer layers, meaning that sensitive data is stored through bank-level data encryption. Multi-factor dynamic authentication is also used to provide additional security during sensitive operations such as transactions or withdrawals.

At an operational level, Kucoin has dedicated departments for internal risk control and operation process. Each department has its own strict data operations and usage standards. A multi-level review and approval process is installed to check and use all online data. Core data will undergo desensitization.

Wallets within the platform have differing security levels. Micro-withdrawal wallets are stored on the private network architecture built on Amazon Web Services Cloud (AWSC). AWSC has a multi-layer firewall based on security isolation. Within the wallet document, industry level multi-layer encryption storage has been adopted. The cipher code for this will be preserved by a special person and code will be altered on a regular basis. A strict review and approval process has been put in place for any operation to the wallet. This process is carried out by two people deciphering simultaneously with the key. Essentially the Kucoin wallet includes offline storage in a bank safe, funds escrow and regular auditing by the bank.

Kucoin has a couple of key features that separate it from the rest.

  • Supports infinite trading pairs, i.e. BTC/ETH, BTC/USDT, ETH/USDT etc.
  • ‘Trading View’ UI that currently offers more features than most cryptocurrency exchanges.
  • Competitive withdrawal fees.
  • Dedicated 24/7 customer service team across multiple platforms. Telegram and Email being the dominant ones.
  • Powerful API interface.
  • Fast processing, claims of block-chain based assets added to your account within 2 minutes of your transaction and withdrawals completed in 10 minutes.
  • High performance engine, order making peak value is 2 million+/second and order processing peak value 1 million+/second. Therefore, guaranteed no delay or lag even during peak periods.

Founders of Kucoin started there blockchain research in 2011 and successfully built Kucoin’s technical architecture in 2013. In 2017 the exchange was launched.

Overall the team has a relatively high level of experience dealing with large financial projects. CEO, Michael Gan, is a former technical expert from Ant Financial (Alibaba Group), this provided him with an understanding of financial solutions like Alipay. He has also successively held positions of senior partner at several internet giants, including MikeCRM and KF5.com. COO, Eric Don, has successively held posts of CTO and senior partner with famous IT companies YOULIN.com, KITEME and REINIOT. Top Lan, is the open source community technical expert that designed and deployed the Kucoin financial exchange system. Kent Li, operations and maintenance director, held this position for Stanford University’s REAP project. Marketing director, Jack Zhu, is currently the
operations director for IBOX pay Southwestern China and manages a team of over 300 employees. Finally, John LI, president of the business operations group, currently the president of Jianbang Communication and former project director of a group-purchase magnate where he managed 30+ group purchase service centers.

After talking about mostly solid upsides there are a couple of downsides to Kucoin. Kucoin doesn’t offer margin trading and only excepts cryptocurrencies to trade, no fiat.

Upcoming in Kucoin you can expect a dashboard/report page that will display your portfolio and daily gains & losses. An upgraded UI, including night mode that will enhance the trading experience and ability to self-register crypto currency pairs. Finally, Kucoin will become a decentralized exchange (DEX). A DEX doesn’t rely on a third-party service to hold the customers funds. Instead trades occur directly between users (peer to peer) through an automated process.

Kucoin has placed an emphasis on their R & D to ensure a world-class stability and service quality. Exclusive user rights, will be offered in the future to provide oneon-one investment consultations as well as customer service fast passes to shareholders with greater holdings of KCS.

Kucoin also has a working mobile app for both Android and IOS, available at the bottom right hand side of there website.

Kucoin news via Telegram, Facebook, Reddit and Twitter.

If you have any questions, please feel free to leave a comment.

Alexander Sly does not by any means encourage or persuade the investment/purchase or trade of cryptocurrency of any form and is not liable for any financial gains/losses that may occur in the Cryptocurrency Economy or World Economy. As an investment class, cryptocurrencies are speculative investments and investing in cryptocurrencies involves significant risks – they are highly volatile, vulnerable to hacking and capital loss and sensitive to secondary activity. Historic performance is no guarantee of future returns. Alexander Sly is free from any liability, including financial responsibility for personal decisions associated with personal finance. Before investing you should obtain advice and decide whether the potential return outweighs the risks. The ideas and opinions discussed here will change over time as more knowledge is accumulated.

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About the Author: Alex Sly

Aspiring Financial Analyst with a Drive for Private Equity and Digital Assets.

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