Community Currency

Learn how to use the Kolektivo Guilder

Table of Contents

Introduction

A community currency is a currency exisiting in parallel to national fiat currencies, typically issued by private entities or community organizations for use at local participating businesses. Community currencies are useful to keep the money circulating in local communities, as it encourage spending at local businesses. Community currencies are particularly useful in environments where the national currencies have a low liquidity.

In the context of Kolektivo CuraΓ§ao, the community currency is the Kolektivo Guilder (kG): A stable coin that is pegged to the local fiat currency (the Netherland Antillean Guilder) and backed by kCUR. The fact that kG is a collateral backed community currency permits it to be easily exchangeable and scalable.

kG is minted by a version of the well-tested Mento system by Celo, which insures the community currency's stability.

How does Mento keep kG stable?

Mento’s stability mechanism works such that if 1 kG is valued below 1 ANG, users can burn 1 kG (worth e.g., 0.9 ANG) to obtain kCUR worth 1 ANG, which when sold on the market for 1 ANG, earns a slight profit. Due to this, the supply of kG is reduced, bringing the price up to 1 ANG again; inversely if kG is valued above ANG, users mint 1 kG by depositing 1 ANG worth of kCUR, market selling the resulting kG to earn a profit.

In the context of the Kolektivo Mininum Viable Product (MVP), the Reserve's parameters such as the setting of the Tobin Tax or the Inflation Rate are managed by the Kolektivo multi-sig.

Who is the Kolektivo Multi-Sig?

A Multi-Signature wallet is a common means to manage shared resources and enable collective action. The Kolektivo Multi-Sig is a Celo Safe managed by four core builders of the Kolektivo Framework. The Kolektivo Multi-Sig is responsible of the governance of a certain number of parameters such as the setting of the Tobin Tax or the Inflation Rate.

How Do I Get kG?

There are two ways to acquire Kolektivo Guilder:

  1. Get in contact with the Kolektivo team in CuraΓ§ao

  2. Swap crypto for kG on the Kolektivo Wallet.

Get in Contact with the Kolektivo CuraΓ§ao Team

  1. If you are interested in the Kolektivo Guilder, you can send an email at luuk@kolektivo.co by stating "Kolektivo Guilder" in the subject line.

Swap on the Kolektivo Wallet

  1. Before starting, make sure that you have downloaded and set up the Kolektivo Wallet.

  2. You'll first need to fund your wallet with some CELO to pay for transaction fees, as well as another asset to swap against kG, such as cUSD. New crypto users will furthermore need to acquire CELO or assets like cUSD, utilizing a fiat ramp, such as Ramp, which allows for an initial exchange of fiat to supported cryptocurrencies. Bittrex and BitCaribe are examples of fiat ramps supported in CuraΓ§ao. Please note that most fiat ramps have KYC processes (i.e. your identity will be verified).

  3. Follow the instructions on the fiat ramp of your choice to exchange fiat for CELO and cUSD.

  4. When your Kolektivo Wallet is funded with CELO and cUSD, press "Swap" in the Service menu category of the Kolektivo Wallet. You will be sent to Symmetric DEX. There, you can swap some or all of your cUSD for kG. Click here to learn how to swap currencies on Symmetric using the Kolektivo Wallet.

kGuilder

On the kGuilder page, you may track some of kG's key parameters, enabling you to understand the performance of the community currency that circulates in Kolektivo CuraΓ§ao.

The "blue card"

Simple Parameters

In the blue header card, you are able to track the following values:

  • Current Price is the current price of 1 kG expressed in USD.

  • Total Supply is the total supply of all kG, regardless of location.

  • Market Cap measures the relative size of a cryptocurrency: It is calculated by multiplying the current market price of the token with tokens in circulation.

Advanced Parameters

Under the blue card, you can track advanced parameters such as Spread, Inflation Rate, and the Tobin Tax for kG.

See Advanced Parameter Definitions
  • Spread is the difference in price between two markets for the same asset, typically expressed as a percentage. Displayed on the kGuilder dashboard, it enables you to understand how much profit an arbitrageur can make by buying an asset on one market and selling it in another.

  • Inflation Rate is a stability fee that can be set through Mento. The inflation rate is the multiplier by which the "inflation factor" is adjusted each period. The "inflation factor" describes the units/value ratio as each account's kG balance is stored as an unit.

  • Tobin Tax is a transaction tax applied to all kCUR-kG and kG-kCUR trades, paid with the "from" token in a "from-to" trade. A Tobin Tax disincentivizes users from making rapid arbitrage trades that would otherwise negatively impact the peg and other users.

Value Ratio

The kCUR-kGuilder Value Ratio expresses the relationship of kCUR in terms of USD value with kGuilder in terms of USD value. $1 worth of kG should normally be worth of $1 of kCUR as kG is minted by depositing kCUR to Mento. Deviations from this implies that the currency is depegged.

Being able to track the kCUR-kG Value Ratio over time provides notice of arbitrage opportunities in which experienced users can engage. Prolonged depeg provides notification of an issue or threat to the functionality of Mento.

What's Next?

In the future, the following features will be released:

  • An interface for Mento.

  • Better fiat-ramping in the Kolektivo Wallet.

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