A crypto token on two different blockchains?
While it may sound unlikely, the social messaging app Kik has announced that it will do just that with its “Kin” token, which enabled the company to raise $ 98 million in an Initial Coin Offering (ICO) in September to collect. After some back and forth over which blockchain the company wanted to host its crypto token on, Kik decided to use Ethereum (which the tokens were first introduced on) for liquidity and stellar for transactions.
The decision comes just months after CoinDesk reported that Kik was considering moving its crypto token entirely from Ethereum to stellar due to high transaction fees and slow confirmation times plaguing the Ethereum network.
Back then, Kik CEO Ted Livingston referred to Ethereum as “the dial-up era of blockchain,” but today the company has pulled back a bit from its complaints about the second largest blockchain by market cap.
As such, users can imagine their kinship token split into two equal parts – one that runs on Stern and one on Ethereum. With Atomic Swaps, a technology in the works that will allow cryptocurrencies to be traded across blockchains, the company will lock the outstanding half of a kinship token when its ERC-20 (the Ethereum standard for crypto tokens) the app leaves and vice versa.
“Creating a bi-directional blockchain with Stellar will drive mass adoption by relatives by offering faster confirmation times, lower transaction fees and scalability,” Livingston said in a press release.
Stellar founder Jed McCaleb endorsed that, telling CoinDesk:
“Kik will be one of the first mainstream projects to make meaningful use of cryptocurrencies. It will bring millions more people to this technology and we are very excited to be the platform on which this will happen. “
As previously reported, Kik saw 10,000 people in 117 countries participate in its token sale. In terms of popularity, the messaging app ranks 15th on Mac iOS in the social networks category and 14th on Android in the communications category, according to SimilarWeb, a third-party app usage tracker.
For Kik, the crypto token is about enabling users of its platform to buy digital goods and even physical goods in the future, and according to many industry stakeholders, the launch of kin will be an early test of whether this works out.
“Users who have an exchange media have a better overall user experience,” said Tanner Philp, director of corporate development at Kik.
Lock it down
To make these two blockchain systems work, Kik uses Atomic Swaps, a technology that has been a hot topic this year as developers look for ways to make it easier for users to trade tokens through blockchains.
The technology essentially involves locking tokens on one network and creating tokens on the other. Therefore, every ERC 20 Kin token – total supply is 10 trillion tokens – that Kik has created in its ICO will have a corresponding outstanding token.
If some of these ERC 20 Kin tokens never make it into the Kin app, the corresponding number of outstanding Kin tokens will never be unlocked either. That way, the new stellar tokens shouldn’t have any impact on the price of the kinship.
Still, committed to using the best blockchain, Philp said, relatives could be completely moved back onto the Ethereum blockchain should the protocol scale.
He said to CoinDesk:
“There is the flexibility to use the best protocol available.”
But at this point, McCaleb said, the stellar protocol was specifically designed to represent non-native assets and to exchange with other protocols, “so it’s super-fast and efficient.” Plus, stellar is in the middle of implementing the Lightning Network, which is moving transactions to off-chain payment channels and touting it as a way to scale blockchains without adding overhead or fees.
However, both Philp and McCaleb said the current demand for kinship transactions – a January report showed 18,000 crypto transactions were made during initial product tests (either by earning kinship through surveys or spending on sticker packs) – for Stellar shouldn’t be a problem to handle as it is built today.
As mentioned, currently selected Kik users can earn and spend Kik tokens, the latter only for sticker packs or digital art that people can use in chats, so far.
However, Kik expects more digital and even physical content to be available in the future. For example, there could be games, private chats, and / or collectable digital art (along the lines of CryptoKitties) at some point. And on the physical side of the goods, sunglasses manufacturer Shivas announced in February that it would accept relatives as a means of payment.
However, scaling challenges have so far prevented Kik from developing more complex applications for the token.
While Kik’s crypto token wallet is available, it won’t be activated until it is previewed when Kin loads for the first time. According to Philp, the company chose not to pay too much attention to the new feature because of its technical limitations.
Still, Philp said: “We will continue to develop more experiences on the platform to act as a beacon.”
Kik is committed to completing the integration by the second or third quarter of 2018, which will be in two phases. First, 900 billion stellar-based kinship tokens will go live for Kik users to earn and spend. In the second phase, users can move these stellar kinship tokens out of the Kik app to create ERC-20 Kin tokens to be traded on secondary markets for other cryptocurrencies and crypto tokens.
Summing up his thoughts on what family brands will ultimately make up the messaging app, he concluded:
“Overall, we see Kin is a great force multiplier as a powerful product experience for users in these experiential digital services.”
Image of the Kik app via Shutterstock